This article aims to analyze how China Eastern Airline’s “Weekend Pass” enhance customer loyalty, and points out an viable way for future FFP macro strategies.
Introduction to FFP and its long-lasting problem
How “Weekend Pass” aims to solve them: on the macro level.
Outlook of future FFP program.
1.Introduction & Long-Lasting Problem
Frequent Flyer Program (FFP) dates back to 1980s. In its long history, FFP has changed from a cost center to a revenue center. According to IdeaWorksCompany’s statistics in 2019, United Airlines yield 73% of its total ancillary services, a stunningly 5.8 Billion USD revenue in 2018. Same trends observed in a great deal of airlines.
But in such a mature segment where numerous experts done solid researches, a problem lasts for decades: how to grasp customer loyalty. According to a recently conducted survey by the author, among high school seniors and college students, after a period of 15% incentive on price, only 7% of the responder says they will have a more than 20% brand premium. Thus, if solely subsidizing by cash, little loyalty could be gained.
2. Weekend Pass’ way to deal with it
The “Weekend Pass” is not the official name. The direct translation of this product should be “fly as you wish”, but as the regulation that the ticket can only be used in weekend, unlimited, the “Weekend Pass” coveys the message clearer.
As many experts have already analyzed, from supply side, the “Weekend Pass” create more demand that “may happen” if no such product occurs; it provides a surge of cash flow, increase the liquidity. Speaking of customer loyalty, on supply side, the “Weekend Pass” increase the frequency of travelers interact with airlines, thus put airlines in their lifestyle, to increase loyalty.
The marginal cost for flying in weekend after buying the weekend pass is only the fuel price and airport development fee, totally 50 RMB currently. Making decision based on marginal cost, the possibility of traveling by plane in weekend will increase sharply. In China, air travel is something of low frequency. In 2019, the annual travel per person is less than 0.5. As an aviation enthusiast, the author travels by air about monthly, which can be concluded as “frequent flyer” among people in my age. But that frequency is far less than other types of transportation. I ride bike to school 5 days a week, the frequency traveling by bike is 40 times more than that of air travel.
f a brand wants to earn customer loyalty, the first step is to let their target segment know the brand better. China Eastern uses stunningly low marginal cost to stimulate more travel in weekends, which not only will create more demand. It will also let the travelers know more about the brand.
When the interaction is getting more, and leisure connotation is brought, customer will get to know the airline. For business travelers, the connotation was a delayed flight after the long working day, and the halo effect will put airlines into the stereotype as well. But when they fly in the weekend, business traveler will associate it with family time and fun. The change in attitude is crucial for loyalty.
For a conventional leisure traveler, the idea of low cost will be in their mind for a long time, for sure, and the positive connotation will push he or she keep booking, with a brand premium.
3. The Future of FFP?
As the main way of gaining customer loyalty is by increasing frequency, same logic can use in the FFP, by pushing one step further: make travel with the airline as a part of travelers’ life, more than something “rare.”
To increase frequency, one way is to amplify the usages of miles as a type of currency, and put in context of everyday. If the “interaction” changes from weekly flights to daily payment of the morning coffee with miles? Airlines can cooperate with convenience store to use their miles as currency and gives some discount. Different from how mileage program has done with high-end hotel and premium red wine, where interactions will only happen on the scale of year, these daily actions can bring more with less cost.
In short, the “Weekend Pass” increases the frequency of travel and change prototype in order to gain customer loyalty. The concept of make Frequent Flyers more “frequent” is forecasted to be the future trends of FFP development. One step further, if FFP can be a part of travelers’ life, the effect will be even better.
Sorensen, Jay. (2019. Jul.24). 2018 Top 10 Airline Ancillary Revenue Rankings. IdeaWorksCompany.