Tourism and Hospitality Marketing: Case Study on Frequent Flyer Programs

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Tourism and Hospitality Marketing
Group Assignment
(Case Study on Frequent Flyer Programmes)

Group Members: Mary Tan Seok Gek

Date: Sep 09, 2009


Introduction to Airline Frequent Flyer Programmes

Two events contributed to the emergence of Frequent Flyer Programmes (FFPs) in the airline industry. First, deregulation of the industry in 1978 created a more customer- oriented marketing strategy. Second, the growth in information technology precipitated the ability of the airlines to process and store large amounts of data on their frequent travellers. ( Winship, Tim, 1999).

Today there are over 70 FFPs in existence worldwide. Large carriers such as American, United and Delta have FFPs with about 20 million members each. About 10 million awards are given out each year, which translates into 5 percent of all seats being occupied by award winners. ( Winship, Tim, 1999). The first programme was introduced by American Airlines in 1981. Its immediate success was soon followed by all the other major airlines in the USA. (Shaw, 2004).

“As a marketing tool FFPs have proved highly successful. Mainly aimed at the business traveller, they attract the high-yield passengers which are the profit-generating ones. They also enable seats on low-load flights, which would otherwise remain empty, to be filled as rewards to frequent flyers”. (Seaton, Bennett, 1996, p.387).

Star Alliance Vs Oneworld Alliance

Frequent Flyer as Tactical Marketing

Tactical marketing is concerned with short-term programmes. These are usually either reactive in nature or may focus on a specific segment of the market. The frequent flyer programme in the airline industry is a main tactical marketing programme that is supposedly solves the problem of customers' brand loyalty.

Each airline developed a unique core set of tactical marketing materials in their frequent flyer program scheme to address each member of a target market. In achieving brand loyalty, frequent flyer programmes are generally provided under an alliance to expand their marketing product. Some even develop exclusive membership to increase the value of programme members.

With dozens of rewards offered from frequent flyer programmes such as rental cars, hotels, holiday packages and passes to tourist attraction, it might be difficult for consumers to make the most of these reward points. Although almost all airline have a frequent flyer programme, airlines seem to constantly add more rewards and continue to offer more way just to gain consumers’ first mileage point and win their initial loyalty. For example, such as credit cards with two years annual fee waived or extra bonus miles just for applying are some of the marketing tactics used to entice consumers to participate in the programme during a limited promotional period.

“The volatility of tourism markets frequently demands short-term tactical adjustments necessitated by the need to generate rapid demand shifts in order to overcome unused capacity arising from seasonality, sudden market fluctuations and competitive activity”. (Seaton, Bennett, 1996, p.145). FFP mileage promotions such as bonus miles, special rewards and benefits can be very effective in maintaining short term loyalty and prevent consumers from switching to competitors. However, with so many airline loyalty programmes in the market offering similar rewards, it has become a challenge for airlines to use this as a competitive tool to retain customers’ loyalty and to sustain sales over the long term.

Promotions may only build loyalty to the discounts and benefits but not to the brand. Thus in order to sustain a competitive advantage, airline also has to focus more on the improvement of the quality of their in-flight service, product quality, value perception, branding and image and ongoing marketing. For example the success of Southwest Airlines has been attributed to their dedication in delivering highest...
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