Disruption in the traditional loyalty industry
The loyalty landscape is constantly changing. Recently, we have seen two great examples of huge changes in the loyalty industry happening at both a global and local level.
The first example comes from the airline industry. The airline industry is considered the birth place of the modern day loyalty programme. American Airline’s AAdvantage is the oldest surviving frequent flyer programme, launched in 1981. Loyalty in the airline space grew from strength to strength as companies also pioneered what we call the coalition programme. Coalition programmes incorporate multiple earn and burn partners across an array of different industries, as opposed to closed loop programmes, which only allow customers to earn and burn points/vouchers at one brand. This model became extremely important to airline loyalty so much so that in 2006, American Airlines earned more revenue selling AA miles to its partners like Citibank than it did selling airline tickets. Airlines have used the flexibility of these loyalty currencies to also earn revenue through alliances (such as the oneworld Alliance) which allows earning and burning of points across airlines within a pre-defined group of airline brands.
Today, coalition programmes offer a complimentary partner network such as car rentals and hotel booking, thus completing the entire travel experience. Even considering the airline industry’s tendency for disruption, Air Canada’s decision to launch its own loyalty programme and separate itself from the Aeroplan coalition programme still comes as a huge shock to the market. Aeroplan has been the loyalty programme for Air Canada since 1984 and currently has approximately 5 million active members. Air Canada have not taken this announcement lightly however, as they have already highlighted exactly what the new programme will look like and how and when the change will occur. The new programme will launch in 2020 and as for the structure of the new programme, Benjamin Smith, Air Canada’s President of Passenger Airlines, is quoted as saying:
“The new program, launching in 2020, will offer additional earning and redemption opportunities, more personalized service and a better digital experience for Air Canada customers. Similar to all of Air Canada’s North American peers, by managing our own loyalty program, we will be able to take better care of our customers by making decisions in real time that address specific needs. We’re excited to take this next step that delivers on our promise for continued investments in the customer experience.”
At the heart of this quote, the message is that personalisation and customer’s specific needs will be the focus of this new programme. This is perhaps one of the greatest loyalty trends we’ve seen lately and we’ve discussed it extensively in our 2016 Whitepaper and previous newsletters. Personalisation and bespoke loyalty offerings are becoming the new norm, with less and less emphasis being placed on using an enormous breadth of partners to hopefully satisfy every customer’s needs.
Being able to offer customers more personalised offers was also the reason cited for the other major loyalty shift which occurred a little closer to home. This is, of course, Pick n Pay’s recent change to the earn rate of Pick n Pay Smartshopper points. Many customers were shocked when hearing that instead of earning 1% of their total spend back in Smartshopper points they would now earn only 0.5%. However, when probed, Pick n Pay responded by explaining additional customer value would be achieved by offering more frequent and relevant vouchers / discounts off the products they purchase. This is indicative of the larger shift towards personalised offers as opposed to the ability to earn more points.
“Loyalty is still extremely relevant however; the old rules are beginning to no longer apply.” – Accenture