Since the pandemic, airlines and hotels have taken a huge kick to the stomach. But now, it seems they can’t get out of their own way. Delays, poor service, and inadequate staffing, all in the face of massive demand and booming revenues. The result? Record low customer satisfaction and defections.
Joining us from Singapore is Mark Ross-Smith, founder of Travel Data Daily and CEO of Status Match. Mark has 20 years of experience leading loyalty programs in telecom and travel, most recently at Malaysian Airlines. In this episode, he explains why loyalty programs are not only hugely valuable to airlines, but are in some cases THE value, with important lessons for marketers everywhere. Listen in as Mark explains the extraordinary power of loyalty programs, and the financial benefits of “selling the dream.”
Ruth Stevens: Why is the airline industry as bad as it is today? Is there any hope of emerging out of this from a marketing perspective?
Mark Ross-Smith: Obviously the last few years have been pretty challenging for airlines. But let’s look at the airline loyalty programs – collecting the miles, getting your points and free seats. A few years ago, they published their financials from the loyalty programs and this was the first time the world got a glimpse inside how it all works. What we discovered were that these loyalty programs were worth more than the airlines themselves. Suddenly, it’s not some little marketing division within the airline itself. It’s a marketing company with a flying metal tube division.
Cyndi Greenglass: Can you give us some good examples of good loyalty programs?
Mark Ross-Smith: Airline loyalty programs have been referred to as the greatest marketing invention of all time. In airline loyalty they make a lot of their money from selling miles to banks. Every time you swipe your credit card, a bunch of people are making money. Very small amounts on every transaction, but you know effectively your bank is buying miles off the airline and putting as miles into your account. The airline sees that as cash up front as revenue straight away. That just sort of sits in their back pocket for a while. Basically they have working capital. They got the cash up front, but you might not redeem these miles, for you know what two, three, five, ten years. Some of these miles never expire anymore. You think from a loyalty perspective, “how do you keep people engaged if the points never expire? There's a lot of aspirational logic in this way. You’re going to redeem these points for a first-class ticket to Paris one day. It's that romance around collecting miles, but actually they just want you to spend on your credit card.
Cyndi Greenglass: How are airlines doing using data about customers to manage their business?
Mark Ross-Smith: I’ll give you a real world example. I booked a ticket a couple of days ago with a well-known airline, and I'm a gold member with this airline. I get a bunch of perks like priority boarding, free seat selection and free bags. I'm booking this ticket, and I'm halfway through the booking process, and I'm keeping in mind the airlines talk big game when it comes to big data and AI and personalization. I’m logged into the website at this point so they know who I am. They pre-filled my name and my email, and then I get to this page and it says you can pay to select the seat. I'm like hang on I get free seat selection, and it was trying to upsell me to a slightly better coach seat. The next upsell below was would you like a lounge access for your children? I'm thinking, hang on a sec. My five-year-old doesn’t count as a guest in the lounge, because five-year-olds don't go into lounges and start drinking champagne. On top of that, this was a connecting flight through one city to another, and the next thing they asked was if I wanted to hire a car for my destination? But they got the destination wrong. It's actually my layover of a city. I’m sure everyone has gone through a similar scenario where you're tired of being sold something that makes no sense. Instead, the airline could have been selling me triple miles for this flight.
Ruth Stevens: Does that mean that the loyalty program managers who are fundamentally marketers have more status internally than they used to have? Is this an area where careers are built?
Mark Ross-Smith: Loyalty has saved the airlines, right? It makes so much money, and it's actually sustained revenue and profits. If these programs are so important to these brands, why are they not represented on the board? Why is it there not a CEO of loyalty or chief loyalty officer? These people should be promoted with the organization. They have had more of a voice definitely in the last few years.
Ruth Stevens: Do you recommend to young people that they go into this field as a career?
Mark Ross-Smith: Think about travel in general, because that's what airline loyalty marketing does. It inspires you to think beyond your city or your town. It gets you to dream big. You start looking at night markets in Hong Kong, at the Great Wall of China and the pyramids in Egypt. As humans, we have this desire to explore and see and do things. The world of travel is never going away. If anything, it's only going to grow. This is a fabulous industry to be in, because ultimately, when you're in a travel marketing space or role, you're bringing magic to people's lives. You're bringing new experiences. You're bringing spark to something new.
Key Takeaways/Three Little Piggies
- The lives of today’s consumers blend business and leisure, resulting in a solid new trend known as Bleisure. The world of travel is only going to grow bigger since it brings joy and magic into our lives and creates stronger human connections.
- During the downturn caused by the pandemic, airlines were forced to reveal the financial details of their loyalty programs in order to secure government loans. For the first time, the world discovered that frequent flyer programs are hugely profitable and in some cases worth more than the airline itself.
- Loyalty programs are examples of the Pareto principle in practice. As the 80/20 rule says, a small number of your most loyal customers are responsible for the majority of your profitability. Use this information to augment and enhance your own loyalty efforts, whatever your industry.
Marketing Communications Today presents Horizons, it’s forward-thinking, looking ahead, through the front windshield and beyond, into the marketing future. Join Cyndi and Ruth bi-weekly for new ideas, technologies, tools and strategies that are emerging to help marketers navigate over the marketing horizon.
Meet our guest
Author, Founder of industry news site “Travel Data Daily”, and CEO of Status Match, Mark Ross-Smith who has published over 50 papers and articles on airline loyalty, which dive deep into airline economics, big data, and cutting-edge loyalty material.
His unique approach to loyalty has received industry acclaim and his work is referenced in major media including CNN, BBC, South China Morning Post, The Star, The Economist, Financial Times, Executive Traveler, Skift and many more. Recently, Mark also won the Global Aviation Travel Startups Award on October 2022 at the biggest aviation event in the world.
Meet the hosts
Cyndi W. Greenglass is a founding partner and president at Livingston Strategies, a data-informed, strategic consulting firm that helps clients develop, execute, and measure their customer communications with a close focus on results. Cyndi has razor-sharp strategic skills matched by impeccable on-the-ground savvy and tactical abilities. She is an Adjunct Instructor in the Data Marketing Communications online master's degree program from West Virginia University.
Greenglass has twice been named into the Top 100 Influential BTB Marketers by Crain’s BtoB Magazine and was the 2012 CADM Chicago Direct Marketer of the Year. She is a member of the Board of Advisors for BRAND United and has taught, trained and presented at over 50 conferences throughout the world.
Ruth P. Stevens consults on customer acquisition and retention, for business-to-business clients. Ruth serves on the boards of directors of the HIMMS Media Group, and the Business Information Industry Association. She is a trustee of Princeton-In-Asia, past chair of the Business-to-Business Council of the DMA, and past president of the Direct Marketing Club of New York.
Ruth was named one of the 100 Most Influential People in Business Marketing by Crain’s BtoB magazine, and one of 20 Women to Watch by the Sales Lead Management Association. She serves as a mentor to fledgling companies at the ERA business accelerator in New York City.
Interested in growing your career with a master's degree in Data, Digital or Integrated Marketing Communications? Request more information today!
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