Consulting to Cloud Troopers as the Interim Head of Loyalty Products & Programmes – Renier directed the design, software development and implementation of the points based Allegiant Airlines Loyalty and Rewards Programme to fully leverage the Allegiant services and brand strength to provide new revenue streams and increase the effectiveness of others. The Allegiant Rewards programme is based on a co-branded credit card provided by an American Bank.
Guest Blog by Brian Sumers – 1 Sep 2016
Allegiant Air knows less about its most loyal customers than it would like. Its new co-branded credit card could help change that. But will anyone apply for it?
Despite being among the world’s most consistently profitable airlines, Allegiant Air knows relatively little about its customers, though it has learned, through surveys and from Mastercard that they have an average household income slightly above $100,000 and prefer to eat at Olive Garden and shop at TJ Maxx.
The problem is that Allegiant’s customers fly the airline infrequently, with about 80 percent booking one or two tickets per year. And since Allegiant has not had a frequent flyer program, it has fewer opportunities than other airlines to learn about its customers.
But Allegiant, which has reported 53 consecutive profitable quarters, believes it has finally solved its problem. Almost two decades after its first flight, the airline on Thursday launched a co-branded credit card — a Bank of America Mastercard — the first for Allegiant, a niche carrier that prefers routes other airlines avoid, such as St. Cloud, Minnesota to Phoenix, Minot, North Dakota to Las Vegas and Belleville, Illinois to Jacksonville. Allegiant will enter a market saturated with travel-themed cards from nearly every airline and hotel company, but it is hopeful the new card will give it more insights into its passengers.
“I am surprised it has taken them this long,” said Jay Sorensen, president of IdeaWorks Company and an authority on airline ancillary revenue schemes. “But what is unique about Allegiant is their base of business is probably very distinct from the traditional airlines. It is an interesting position.”
Credit card deals can be lucrative, and when American re-upped deals with Barclays and Citi in July, it said they could produce $1.5 billion in pre-tax revenue over two and a half years. Allegiant is tiny compared to American — the discounter had 85 aircraft at the end of June — but its deal should be lucrative, too.
“We think it is going to be valuable piece of business,” said Brian Davis, Allegiant’s vice president for marketing and sales, declining to give exact numbers. “We see our peers and the revenue generated from programs like this.”
The card comes as Allegiant, long an iconoclast in the U.S. airline industry, starts to look more like its competitors, all of whom have long had co-branded credit cards and loyalty programs. Allegiant, which had bought only used planes, recently placed its first order for new aircraft from Airbus. And, despite mostly flying between small and medium sized markets for most of its history, Allegiant is expanding at larger ones, including Newark, New Jersey. It is even starting to compete with larger airlines on some routes after having long avoided direct competition.
Still, with its co-branded credit card, Allegiant is trying something different. Unlike every other U.S. airline, Allegiant will not award points for travel. Instead, only card-holders, who will pay a $59 annual fee, will earn them. They’ll receive three points for each dollar they spend on Allegiant, two for spending on dining, and one for all other purchases. They can use points for discounts on travel, and the 15,000 points that come as a sign-up bonus can be redeemed for $150 off the price of any ticket. As sweeteners, cardholders receive a free drink when flying Allegiant, as well as discounts on hotel packages. (Allegiant hopes this will help it sell more packages.)
There’s no chance for travelers to redeem for business class airfare to Asia, but Davis said Allegiant’s customers have little interest in complicated redemption schemes.
“Those are built around travelers who travel a ton, and it is worth their time to learn about the rules,” he said. “If you only travel once a year, you’re not going to tolerate a lot of rules and conditions.”
Monitoring customer habits
When card members start spending, Allegiant will have access to more data about its core customers. Bank of America will not share information about individuals, but it will give the airline macro-level insights it does not have today.
“To the extent that people use it as their primary card, you have opened up the window to a lot more data,” Sorensen said. “That data can include, ‘Are they buying products from your competitors? And where are they using the card?”
This is a big deal for Davis. If a customer books a ticket using any credit card on Allegiant, he can learn some details about where else those customers shop, but a branded credit card will give Allegiant access to more aggregate data about what key customers want.
“If through this card, we learn our customers have a really strong affinity for a particular chain of restaurant, then I hope in the next year or two I would hope we would reach out to that restaurant chain about a [tie-in,]” Davis said.
Sorensen said an airline can use data to tailor offers to customers. Allegiant makes considerable revenue on vacation packages, but presumably many of its customers buy hotels independently on Orbitz or another site. If Allegiant can learn more about where its card-holders are staying, it will know more about which hotels to show in prominent positions on its website.
Allegiant also expects to use the card to maintain a year-round relationship with its most loyal customers. Today, it emails customers with deals, but it wants to have other reasons to contact them.
“For the first time, many customers will have a reason to stay connected with us for the other 51 weeks of the year,” Davis said. The goal is to “expand the company’s relationship” with customers, he said.
A challenge to attract card members
Many airlines first start a frequent flyer program and then add a credit card. They create the programs in this order because a carrier with millions of customers in a database has a natural market for its cards.
“It will be a handicap,” Sorensen said. “A general rule of thumb is that once you have a million or more people in a frequent flyer program, then you can start talking to a bank.”
But Allegiant expects to have something other airlines do not — motivated flight attendants. On every flight, they will make announcements and give out paper applications. They will ask passengers to fill them out and will collect them before landing. The on-plane collection is important, Davis said, because the airline fears customers will forget to mail them in.
With the card, Allegiant expects to the same people who buy the bulk of the airline’s tickers — the female head-of-householders. The airline says its core customer is Christie, 48, a married former school teacher with two kids living in Sioux Falls, South Dakota. Her husband is co-owner of the local insurance company. “Christie has always been in charge of booking vacations for the family and hates wasting time and money,” Allegiant says in internal documents.
Ultimately, though, the card’s success may on how aggressively flight attendants sell it. Other airlines also ask flight attendants to promote cards with limited success, but Allegiant is optimistic its employees, who already earn commissions for other on-plane sales, will be motivated. The flight attendant responsible for each credit card approval will receive a $30 commission.
“At legacy airlines, there is almost always pushback,” Sorensen said. “Flight attendants say, ‘We’re not sales people.’ Hopefully, Allegiant is an airline where the flight attendants understand they are sales people.”
Original Article from Skift click here