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Airlines' Loyalty Programs

The document summarizes a research article that examines how personalized rewards impact customers' perceptions of value and loyalty in frequent flyer programs. The study found that extrinsic rewards aimed at getting a reward undermine loyalty, while intrinsic rewards that match customers' interests enhance loyalty. However, individual customer behaviors make broad conclusions difficult. The study suggests loyalty programs personalize rewards and better segment customers to provide appropriate rewards.

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Maria Smith
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40 views1 page

Airlines' Loyalty Programs

The document summarizes a research article that examines how personalized rewards impact customers' perceptions of value and loyalty in frequent flyer programs. The study found that extrinsic rewards aimed at getting a reward undermine loyalty, while intrinsic rewards that match customers' interests enhance loyalty. However, individual customer behaviors make broad conclusions difficult. The study suggests loyalty programs personalize rewards and better segment customers to provide appropriate rewards.

Uploaded by

Maria Smith
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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The impact of reward personalisation on frequent flyer programmes’ perceived value and loyalty

Frequent flyer programs and different methods of rewarding a loyal customer


have become really popular among airlines and are nowadays increasingly
important part of the customer relationship management. The aim of Lars
Meyer-Waarden’s research article is to chart how customers experience the
frequent flyer programs and how the loyalty programs effect on customers’
buying behavior since only little research work has been done regarding this
topic.

The article defines loyalty to consist of three different characteristics: trust,


commitment (to maintain a customership with company X) and resistance to
counter-persuasion from competitors. Frequent flyer programs were created
to provide loyal customers stimuli to maintain the customership and build
their trust towards the airline even more stable. The stimuli can be anything
from a feeling of being valued and honored as a customer to a concrete dis-
count or better seat in the airplane. One of the main hypotheses of the article
is that providing customers rewards that do not match their personal pur-
chase goals will even have a negative impact on the customers’ loyalty after
the reward is redeemed. This theory is based on the self-determination theo-
ry (SDT), which indicates that if the customer engagement is founded on the
aim of getting the reward instead the desire towards the activity, the reward
tends to have undermining consequences to the loyal customership.

The research was implemented first as a qualitative study that consisted of


experiences and insights of 30 French loyalty program managers. Loyalty
programs were not only aviation-related but also from other sectors, such as
perfumery, hotels, car-rental companies and grocery. The final survey was
distributed at the airport to frequent flyer members of AAdvantage, the loyal-
ty program of American Airlines. The results suggested the truthfulness of
hypotheses: extrinsic rewards encourage customers to act in order to get the
reward but the process does not enhance their loyalty towards the company,
since their only target is to get the reward. Vice versa, intrinsic rewards have
a positive influence on customers’ loyalty because of customers’ interest and
pleasure towards the activity and process itself. The positive experience is a
result of a fact that a reward is in accordance with their purchase orienta-
tions.

However, the biggest challenge in a study of this kind is that gathered results
are correlated with customers’ individual purchase behavior and therefore
black-and-white guidelines and conclusions are hard to make. Also the fact
that all the respondents of the final survey were members of the same loyal-
ty club has to be taken into account when exploring the results. Yet the study
gives loyalty program managers a motive to develop the system more per-
sonalized and take more advantage of the customer segmentation in order
to be able to provide loyal customers appropriate rewards.

Sources Meyer-Waarden, L. 2013. The impact of reward personalization on frequent


flyer programmes’ perceived value and loyalty. URL:
http://www.emeraldinsight.com/doi/pdfplus/10.1108/08876041311330681.
Accessed: 8.12.2015.

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