Loyalty Cards – What value?

There have been a growing number of reports recently about airlines reducing the number of ‘ex gratia’ cards negotiable within corporate agreements and I have no doubt whatsoever this will increase in future. There are a few possible reasons for this trend.

These cards started as a way of keeping the loyalty of regular travellers by giving a range of benefits from comfortable lounges and ‘free’ flights to priority for upgrades. They became a major instrument for wooing business people away from their competition, and possibly company policy by making the travellers feel special in a rapidly comoditising market.

Some corporations hated them and went to great lengths to try and cancel out their allure. A few tried with little success to confiscate the travel element (miles) for company use. Others took a different view and used the attraction of these loyalty clubs to underline and support the use of their chosen policy carrier. It was then that such awards became a significant beneficial component within corporate deal negotiations.

So all of a sudden airline loyalty clubs became valuable to corporates and a tool to sweeten a change in policy. This whole change thing became a great deal easier if you were able to hand out membership cards with substantial benefits to key travellers. As important were the top tier cards which appealed to status conscious senior executives. These Platinum/Black/Premier cards were usually allocated in very small numbers and linked to the company’s volume potential. Often you would see joint CEOs scrapping like alley cats as to who should get ‘The Card’ and TMCs being pestered to broker more of them.

Much of the above still happens now but the mood of the airlines is changing for a number of key reasons. Firstly the number of cards at high status (gold etc) has grown alarmingly causing lounges to become too full for comfort. The cost of these lounges and other benefits has risen correspondingly whilst their exclusivity has declined. I have been in some lounges which are busier and noisier than the seats outside them.
Equally there are fewer seats available for purchase with loyalty points which can cause problems.

The airlines in their quest to reduce distribution costs are now looking very closely at the value, and importantly, the cost of these schemes. They have gone from seeing these clubs as less of a marketing ploy and more of an out of control overhead. As a result they have identified the value and put a budget cost against it. This means that every time an airline salesman gives a card their budget gets debited accordingly. They now have to manage this cost in the same way that they do discount pricing and other overheads.

This state of affairs has reduced the number of cards being awarded within deals. Incidentally the same thing works within the airlines themselves. Senior airline management are having their own travel cards downgraded too and they are probably just as aggrieved as the corporate buyer. The problem is that if you take something away from someone it has at least twice the effect as giving it to them in the first place. What you never have you never miss!

I guess what everybody will have to realise is that if you drive mainstream airlines to behave like, and compete with low cost carriers you will see the continuing decline in such ‘luxuries’. Also, if you manage to finally be successful in mandating policy to your travellers then the need for such loyalty inducements disappear anyway.