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ABSTRACT
Airlines were 'big data' pioneers by establishing loyalty programs long before other sectors. Today, frequent-flyer programs (FFP) are among the most successful loyalty schemes in business history. However, their nature has substantially changed over time. On the one hand, instead of rewarding frequent flying in the literal sense, their main focus now is on linking access to advertised FFP benefits to their members' absolute spending. On the other hand, FFP were opened to non-airline businesses. As a result, not only have FFP members' opportunities to earn and spend FFP miles or points1 multiplied. Also, the airlines' access to data on their FFP members' purchasing behavior beyond air travel is now as broad-based as never before. As a downside to multiplying earning opportunities, the accumulated stock of FFP miles became a massive financial liability on the airlines' balance sheets, however. This development prompted airlines to continuously, and often substantially, reduce both the purchasing power of accumulated FFP miles for so-called awards and simultaneously to restrict, and partly even eliminate, earning opportunities at the same time. This is an ongoing 'disinflationary' process. In our paper, we explore the future role of FFP as a tool to generate and maintain customer loyalty.
Keywords: Frequent flyer programs; customer relationship management; revenue management; data analytics.
Received 13 Dec 2017 | Revised 9 February 2018 | Accepted 5 April 2018.
1.INTRODUCTION
Commercial airlines were 'big data' pioneers by establishing loyalty programs long before other sectors, in particular retailing. The airline industry's frequent flyer programs (FFP) have not only been among the most successful loyalty schemes in business history in terms of the amount of members. By trying to achieve profit-maximization by creating a loyal customer base in return for award travel opportunities and 'elite status' amenities, FFPs have become an industry standard worldwide. In the meantime, however, the term frequent flyer program has become somewhat misleading as earning and redemption opportunities have long transcended the airline industry; in fact, these are also offered by plenty of program partners from other branches. These include credit card companies and other financial service providers, rental car companies, hotel chains, media outlets and a large network of retailers, all of whom have paid for access to the leading FFP to tap the enormous...