The lack of understanding of “how to earn and “how to redeem” is the result of airlines switching away from simple mileage totals, says Mike Taylor, Travel Intelligence Lead at J.D. Power.
As the complexity of air travel mirrors rising demand, as 45 percent of airlines’ loyalty members can’t figure out how to earn or redeem rewards, a study by J.D. Power finds.
People who participate in frequent flier programs are increasingly expressing confusion and exasperation with the fading away of fixed pricing for earned miles and toward models that employ dynamic pricing.
Over the past four years, loyalty members have gradually found more airlines reducing their ability to plan trips by paying with mileage rewards they’ve accrued.
In general, airlines respond that dynamic pricing actually benefits their most regular fliers, since they’ll often be charged at a lower rate for flights with less demand. In the carriers’ view, these new models decreases airlines’ liability when attempting to capitalize on sudden peak booking periods.
Similarly, a dynamic response allows airlines to quickly lower rates to drive more reservations when purchases are suddenly slower.
Still, the report does find some airlines getting rewards more right than others. From a customer satisfaction perspective, JetBlue Airways’ TrueBlue loyalty program ranks highest with 821 points out of 1,000 in overall member satisfaction for the third year in row. Southwest Airlines Rapid Rewards (812 points) ranks second and Alaska Airlines was third (810 points).
Lack Of Communication
"This is the third year in a row that we’ve seen airline loyalty program customer satisfaction hampered by a widespread lack of understanding of how to extract the most value from the programs," says Michael Taylor, Travel Intelligence Lead at J.D. Power. "Many airlines are evaluating the success of their loyalty programs based on dollars spent by travelers rather than on miles flown. That’s a significant shift away from rewarding frequent travelers and toward rewarding high spenders."
Among J.D. Power’s topline findings from its airline rewards study:
· Lack of understanding program details negatively affects satisfaction: While overall industry satisfaction increases to 789 (on a 1,000-point scale) from 776 in 2018, airline loyalty program member satisfaction climbs 135 points when members understand how to redeem points and increases 129 points when members understand how to earn points. Yet, nearly half (45 percent) of general loyalty program members say they do not completely understand how to redeem rewards and 43 percent say they do not fully understand how to earn miles/points
· Recognition goes a long way toward building customer loyalty: Overall satisfaction scores increase 102 points when passengers’ names are used by airline staff, yet this occurs just 35 percent of the time. Similarly, overall satisfaction climbs 68 points when a member of the airline staff recognizes a loyalty program member’s status during the booking, check-in, departure or flight. However, this happens more than half (53 percent) of the time.
· Most important perks: Among specific benefits and rewards used through airline loyalty programs, discounts on airport and limousine services drive the most significant increase in overall satisfaction (+102 points), followed by waiving same-day change fees (+95) and lowest rate guarantee (+94)
· Increased mobile app use associated with higher satisfaction: Mobile app usage among loyalty program members has increased 10 percent during the past year, with 56 percent of program members reporting that they have such a mobile app on their smartphone or tablet. Loyalty members with mobile apps are more satisfied overall (+70 points) than members without the mobile app
The 2019 Airline Loyalty Program Satisfaction Study measures member satisfaction with airline rewards and loyalty programs based on four factors (in order of importance): earning and redeeming rewards (34 percent); program benefits (27 percent); account management (24 percent); and member communication (15 percent). The study is based on 3,188 responses from rewards program members and was fielded in August-September 2019.
“The lack of understanding of ‘how to earn’ and ‘how to redeem’ is the result of airlines switching away from simple mileage totals (e.g., you flew 588 miles, you get 588 points) to either revenue-based calculations or a hybrid of ‘qualifying’ miles/segments/ticket costs/fare classes,” J.D. Power’s Taylor tells Kambr Media. “There is some movement toward simpler calculations based on dollars spent but it’s still not as straightforward as it used to be.”
Keeping Loyalty Simple
JetBlue is either first or second in all the factors that make up the J. D. Power study: Member Communication, Earning/Redeeming, Benefits and Account Management.
“JetBlue also has a ‘relatively’ simple points accumulation structure that may be easier for members to understand and this gives JetBlue a good deal of its winning margin,” Taylor adds. “United is moving to a ‘simpler’ system as well.”
Among the improvements JetBlue has made to TrueBlue experience is the addition of “Points Pooling” last year. The feature promised a “more flexible and user-friendly way” for TrueBlue members to pool points, together.
The simplicity that JetBlue strives for in its TrueBlue program reflects that offering’s importance as a revenue driver, as evidenced in executives’ comments to analysts during the carrier’s Q3 earnings call in October.
“Our efforts include a second year of network reallocation and ancillary initiatives, innovations from JetBlue Travel Products, our progress in loyalty as well as the contributions from Fare Options 2.0 launching this quarter,” JetBlue CEO Robin Hayes said on the company’s analysts call. “In 2019, the ancillary network and loyalty initiatives we put in place are helping us outperform domestic [revenue per available seat mile] growth on a stage-adjusted basis for the second year in a row.”
Later in the call, JetBlue President COO Joanna Geraghty added that ancillary revenue ancillary revenue was up 17 percent in Q3 year-over-year – and dollars derived from loyalty were a big reason behind that gain.
“We're now at $33.60 per customer,” Geraghty said. “Loyalty is the biggest component of that. It's the fastest and largest growing component. We've seen our co-brand portfolio more than double in the last 2 years and we are very optimistic about the future of our loyalty program.”