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Managing Loyalty Program Liability Best Practices
Managing Loyalty Program Liability Best Practices

Managing Loyalty Program Liability: Best Practices for the Airline Industry

The airline industry is arguably one of the biggest players in customer loyalty programs via their Frequent Flyer programs (FFPs).

Regardless of the industry, however, a winning customer loyalty program is financially sound and delights customers. Financial robustness of a loyalty program is a balancing act between several key metrics.

See how this is done through the lens of the billions dollar airline industry.

Best Practices for Airline Industry Loyalty Programs

Best Practice #1: Never Pass Up a Chance to Gain Customer Insights

An effective airline loyalty program should include an array of incentives and offers to help gain more insights about the customer.

Often times that means offering a choice of treatments and additives that reveal more about the customer’s likes, dislikes, booking habits, and personal preferences.

For instance, an airline can offer miles, rewards or points to their customers who decide to give feedback, respond to inquiries or complete surveys.

This is an area where the use of AI and data science can help airlines better understand their typical customer.

Best Practice #2: Ramp up Referral Marketing

According to QSRWeb, 65% of members of a loyalty program say that they’d recommend the business if they deem their program to be good. Here are two ways airlines can boost their referral programs:

● Create “out-of-the-box” referral messages that customers can share with ease.

● Offer lucrative and valuable rewards to both the sender and the receiver

Best Practice #3: Incentivize Your Loyalty Program with Hard Benefits

Hard benefits are economic rewards that showcase to the customer that they are appreciated and that they get exceptional value every time they buy a ticket/do business with the airline.

These are not typical discounts and dollar-value awards; they should be unique and creative.

Best Practice #4: Provide Opportunities to Earn Points without Spending

The primary goal for most airline loyalty programs is to boost customer engagement. That’s why they should offer a diversity of opportunities for the customer to accumulate rewards without having to fly/buy tickets.

For example, the airline can award points to customers who read their blogs or completes surveys.

Best Practice #5: Host Exclusive Events for VIP Members

Most airline Frequent Flyer programs have top-tier offers for their VIP members. They can take it to the next level by hosting exclusive events for VIP members, such as fully-paid getaways.

Airline Loyalty Program Financial Benchmarks to Measure

Here are key financial metrics that airlines need to measure in order to effectively calculate their loyalty programs ROIs:

Customer Future Value (CFV): with this metric, loyalty program managers have to measure the expected future free cash flow generated by every member.

Customer Potential Value (CPV): This is a metric that can come in handy when it comes to identifying and therefore targeting customers poised to deliver the most value in the future within the loyalty program. In other words, it helps identify new or existing members that have the potential to convert into high CFV customers.

Customer Lifetime Value (CLV): this metric tells how much free cash flow a particular customer creates in the course of their lifetime being a member of a frequent flyer program.

According to Kyros Insights, CLV is calculated as follows:

Revenue generated by the member to date + expected future revenue – costs of acquiring the member – point redemption cost to date – expected future redemption costs.


Today, there’s no shortage of the so-called Frequent Flyer programs.

However, if airlines want to know which customers to engage, they must use benchmarks like CFV, CPV, and CLV, as well as predictive “future value” metrics.

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About StephanJ

Stephan J is the founder of Monetize.info and is making a living exclusively online since 2004. He tried and managed to make good profits on everything from Forex trading, options, website flipping, adsense, affiliate websites.His passions are cycling, fitness and he is spending a small fortune on watches and fine cigars

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