How Rewards Programs Can Benefit Both The Customer and The Business In The U.S.

Airline rewards programs, which are also commonly referred to as ‘frequent-flyer programs’ (FFP), are an offering of several mainstream airlines in order to increase customer retention and profits. These reward programs are nearly the same regardless of the airline, with members able to earn miles which equate to redeemable points for discounts and other benefits when they next fly.

These reward programs are woven into U.S. airlines to such an extent that they played a pivotal role in the recovery of the air travel industry during the fallout of the COVID-19 pandemic. Furthermore, since the rewards gained from these programs have been specifically designed to further connect all components of the air travel industry, it allows the whole industry to benefit from loyal fliers.

How It Benefits Customers

Guaranteed Discounts

One of the primary benefits of these reward programs is the guarantee of deals they provide on specific products. Customers are attracted to these deals in particular as, unlike most, there are few conditions to worry about being satisfied in order to achieve eligibility.

In fact, these reward programs actually provide an opportunity to obtain pretty amazing discounts. One reward program, InterMiles, provides direct discounts for other flights (and sometimes even hotels) with any of their associates to all reward program members.

The same is also true for booking hotels with InterMiles, with the opportunity to receive lucrative discounts at their partnered hotels. On top of all of this, InterMiles has its own proprietary store where program members’ flight points can be redeemed to shop many popular brands, often with great discounts too.

Additional Advantages

Alongside the main perks of discounts on flights, hotels and other popular brands, reward programs also bring a plethora of periphery benefits to the table as well. While the owners of cards associated with these programs have specific benefits that they are entitled to just through their ownership, they can also obtain other deals released as universal by the company as well.

To go back to the InterMiles example, their reward program primarily revolves around benefits for flights and hotels, whereby program members can use the points they’ve earned from miles to use on their next flight or hotel booking. That being said, there are a number of secondary, quality of life benefits to this reward program.

Some of this secondary quality of life benefits include extended access to the business lounges at that reward card’s associated airports, preferential treatment from hotels with breakfast included and perhaps gym access.

Shrinks the Cost of Traveling

Perhaps the paramount reason frequent fliers opt for such reward programs in the first place is the reduction in the cost of travel, which certainly adds up when flying often. Flights, especially international ones, can very quickly empty a traveler’s wallet.

This is why travelers will often try to buy tour packages in order to minimize the amount they spend abroad. Experienced travelers, however, will take advantage of these reward programs to sort out their entire flight booking for a surprisingly small fee.

The primary incentive for program members to try and earn miles and points is so that they can then later use them to pay for (and thus reduce the cost of) flights or hotels later. These program owners represent a great opportunity to save money as the majority of the cost of the outbound flight could cover the cost of a return flight too.

How It Benefits the Business

Customer Retention

The most important benefit of these reward programs for businesses is the increased customer retention they provide. Programs that are well-designed will almost completely mitigate the risk of customers moving to competitors as they will have invested too much with the original company in the form of flight miles and points.

If the traveler feels their needs are being satisfied by the airline, and then grants them advantages they would have to invest a lot of time with another airline in order to unlock, why would they ever opt for a competitor over their original provider. This has a secondary monetary benefit for businesses as customers are more likely to spend more money if they feel they are being rewarded for it.

The president of a major airline, Delta Air Lines, holds the belief that customer experience loyalty and two coalesced ideas that lead the airline’s revenue. Furthermore, revenue has a positive correlation with these factors, which are essentially equal to each other; this means that revenue will come and go in line with both of them.

Glen Hauenstein notably stated that if an airline can “get [their]customers to fly with [them] often, and they will like [them]”, and if “the customer likes them, they will join their programs and like them even more”. This is an example of a positive affirmation loop: if the customer likes an airline even more, they will continue to fly with them.

Delta Air Lines has reaped the rewards of sowing a good reward program into its offerings. By designing their loyalty program well, they have managed to successfully grow their revenue by nearly 20% in the space of a mere quarter.

Furthermore, through the renewal of its partnership with American Express, the company has set a target of increasing its revenue of three-quarters till 2023. This is a perfect example of how a reward program is beneficial for both customers and businesses, and can in fact offer lucrative returns for the latter.

Closing Remarks

On balance, the benefits for both the customer and business of airlines incorporating reward programs are quite self-evident. Customers benefit from savings on their travel and some significant quality of life improvements to their journey, inducing them to fly more, which results in increased customer loyalty (and thus revenue) for the airline.

To read more about this topic, as well as how you can incorporate your existing frequent flier miles into your estate, please refer to the linked resource for additional information on the topic.

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