News
A Case of Corporate Profitability before Customer Loyalty?
AVIOS - The coming together of three air travel reward schemes no doubt sounds like a sensible plan if you are a senior manager within IAG (International Airlines Group), but will it really work?
Loyalty schemes are a must have marketing tool if you are an airline of any real size and ambition. All the competitors have one and the underlying business case for most schedule airlines is the frequent flyer; providing the backbone of any airline's revenue stream, supplemented by tourism and leisure flyers.
Avios brings together the BA Executive Club, Iberia Plus and Airmiles. We are sure that the cost case was compelling; there must be some significant cost savings associated with the merger of these three schemes, but what about the customer, what's in it for him/her?
The statements from IAG have made it clear that the motivation behind the merger of these schemes was simplicity and more choice for the customer combined with the advantages of lower flat fees to cover taxes and surcharges that BA Executive Club and Iberia Plus members have to pay. But what about Airmiles members?
Disgruntled members of Airmiles launched an action group to fight the merger (www.fighttheairmileschange.co.uk). Clearly they are unconvinced about the Avios development. The major change for Airmiles is the removal of the "free flight" - you were previously able to collect enough of the Airmiles currency to fly entirely for free. No more, this has been withdrawn. However, IAG dress this up and try to justify the changes, they have lost sight of the fact that they have broken a golden rule of best practice, they have broken the promise the scheme made to its members! In our opinion, this is one of the most fundamental errors to be made when changing the basics of a loyalty scheme.
Airmiles is at the end of the day a business, generating profits for IAG and not directly catering for the needs of consumers who necessarily care to fly with IAG airlines, other than for the reward flight, but some do! It is therefore an income generating business born out of the fact that travel unites many of us as it is a desirable activity that many of us daydream about. As such it is a potent reward for organisations looking for a loyalty currency with which to tempt us to change our behaviour and buy more from them.
At LCUK we understand the need for balance in the loyalty equation, the operator of a loyalty scheme must see a commercial gain for the investment in rewards. Whether or not the introduction of Avios at the expense of Airmiles was fair, it is bound to impact those organisations that depended on the attractiveness of the rewards currency such as Lloyds TSB, Shell and Tesco. Very interesting that Tesco launched an arrangement with Virgin Atlantic at about the same time as the launch of Avios, not a clear vote of confidence in Avios from Tesco.
In conclusion, we can only deduce that this major development in the UK loyalty market is driven purely by the need to reduce cost at the expense of the Airmiles membership. The changes bring about marginal gains and some losses for BA Executive Club and Iberia Plus members and as such are acceptable to the management of those airlines.
So it's goodbye Airmiles, hello Avios and Adios from many of the Airmiles membership.
