Loyalty Programs as a Tool for Building Relationships with B2B Customers: the Airline Industry
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Loyalty practices and programs have traditionally been associated with engaging individual consumers. In various industries, we see a growing trend to leverage well-known loyalty mechanisms in engaging enterprise customers too. Loyalty/incentive programs have become a powerful tool to engage enterprises of different sizes, business models, and domains. Below, we will take a closer look at the motivation factors and frequent flyer program loyalty practices used by very mature businesses in addressing small and medium-sized enterprises and, in some cases, even large corporate customers through dedicated company programs.
The key market shifts for the airline industry concerning enterprise customers are:
| 1. | The substantial growth of propensity to travel among SMEs, due to economic globalization, which translates into travel patterns that have, in past decades, been reserved for the largest international corporations. |
| 2. | SMEs are a relatively new form of airline business customer, so have, to a certain extent, not been unaddressed by airlines from the CRM and contractual relationship perspective. |
| 3. | Airline business customers have traditionally been addressed by corporate agreements, which obliged airlines to maintain substantial sales teams. It also required business customers to become deeply involved in negotiations and allocate resources accordingly for contracts that may run to many pages. |
| 4. | From an airline cost perspective, addressing a broad base of SMEs through corporate deals would not be feasible, as carriers would need to expand their expensive sales teams. On the other hand, SMEs do not have sufficient resources to engage in the necessary negotiations. Given the volume of business and potential gains from such negotiation, there is insufficient motivation for companies to get involved. Also, the volume of business generated by an individual SME does not justify the time and effort required by airline sales staff. |
| 5. | The entry barriers for SMEs in terms of corporate deals are too high. When an airline has no means of lowering those barriers, for example, by automating the business customer relationship management process, SMEs are left behind by the carrier. |
| 6. | SMEs do not have any loyalty to any particular carrier, so select individual flights by schedule and price preference. In Europe, airlines, especially the low-cost ones, took significant advantage of this situation and made substantial gains in the business customer sector, primarily among SMEs. |
| 7. | There is substantial demand for stimuli in the market for medium-sized enterprises that do not qualify for airline corporate deals but may prove lucrative for carriers. |
Among small and medium-sized enterprises, there are several relatively common and generic preferences in terms of the kind of proposition they would perceive as valuable and engaging – and which could motivate them to focus more on a particular airline:
- SMEs would like to be recognized, using direct channels while carrying out transactions. This means having an online account, storing with relevant information that can be reused during bookings, modifications, or any self-service interaction with the airline, including via their call center.
- SMEs naturally have high expectations of being incentivized for the volume of business they generate for airlines. Incentives may include points, discounts, cash equivalents, and so on.
- SMEs behave as corporate-consumer hybrids in terms of loyalty. They expect different forms of benefits and engagements, beyond monetary incentives, and are very often run by independent entrepreneurs who encompass aspects of the individual traveler and the enterprise customer.
- SMEs also expect direct channels through which they can manage their business travel, including strong reporting and information visualization.
Loyalty programs based on traditional consumer frequent flier programs and tailored for the specific behavior of companies are effective tools for engaging SMEs and building affinity with an airline brand. The foundations include recognition, status management, rewards, and experience:
- Recognition - SMEs should be able to set up an account for transactions and interaction with an airline. Such accounts should be personalized and user-friendly.
- Status management - Enabling tier-tracking, and assigning different statuses to companies, depending on their activity (such as the total number of flights, revenue, or distance). Status management introduces an emotional component to the SME program (which has a limited impact on companies focused on monetary value but is more engaging for independent entrepreneurs). It is also a means of tracking the volume of business with particular SME, which then translates to meaningful rewards and discounts automatically granted upon fulfillment of certain transactional criteria.
- Rewards & discounts - Rewarding SME members with loyalty points, to drive behavioral loyalty, driven by the monetary value of the program. The usual practice involves volume-based discounts (achieved through tier-tracking, usually based on revenue spent). A similar model is applied in corporate deals.
- Experience – this primarily refers to the experience in transacting and interacting with the airline. The focus should be on appealing, engaging, user-friendly digital channels that enable companies to manage business travel effortlessly. This can be achieved, for example, by making a web channel available and ensuring it contains meaningful information for different personnel within an organization, especially travel managers, personal assistants, and travel agents.
Loyalty programs can be powerful tools for engaging not only consumers but also enterprise customers. Airlines around the world commonly run loyalty/incentive programs for B2B customers. The potential of leveraging loyalty mechanics to drive affinity among enterprise customers applies in many sectors beyond the airline industry. It is worth considering whether such practices, properly tailored to your business, could add value to your company performance and drive customer loyalty.
