The news earlier this week that Air New Zealand would pull out of Fly Buys led to a stream of commentary on what this meant not only for the nation’s largest loyalty programme but also for the loyalty industry in general.
Air New Zealand’s departure was understandable, given its desire to focus on Airpoints, which now commands a massive membership of 2.2 million Kiwis.
Over the last few years, Airpoints has grown quickly and the airline has invested in technology to manage the customer base efficiently enough to negate any reliance on an external loyalty provider.
Basically, Airpoints had become so big and so effective that Air New Zealand no longer saw any great advantage in its partnership with Fly Buys.
On the other hand, Fly Buys seemed to have lost an important partner in Air New Zealand. A company trading with the word ‘fly’ in its name had essentially had its wings clipped—and this was particularly significant, given Air New Zealand had been with the organisation from the start.
However, much has changed in the airline industry since Fly Buys first launched in 1996.
Over the past few years, we’ve seen a significant increase in competition in this space with the introduction of a range of new players, offering new direct routes and competitive fares.
Kiwi travellers have welcomed the increase in competition, picking and choosing from a host of providers and benefiting from more competitive prices.
Loyalty New Zealand chief executive Stephen England-Hall sees this as a major opportunity.
He says Fly Buys is by no means cutting ties with Air New Zealand entirely, and that members of the loyalty programme will still be able to purchase Air New Zealand flights with their points.
The difference now is that Fly Buys will be able to strike partnerships with other airlines also interested in collaborating with the programme.
England-Hall points to Canada’s Air Miles programme as an example he hopes Fly Buys could potentially emulate.
“Air Miles is one of the most successful coalitions in the world and they don’t have an airline partner,” England-Hall says.
Instead, he argues, Air Miles collaborates with a wide array of airlines, giving consumers more choice about how to spend accumulated miles.
Fly Buys already works with travel agent HelloWorld, and England-Hall plans to expand this to give consumers more freedom to spend their points how they choose.
He says the change is really about choice and “making the shopping experience as rewarding as possible” for consumers.
England-Hall says this emphasis on consumer choice extends well beyond air travel to other areas of the business as well.
Fly Buys recently re-launched its catalogue, giving it more of a magazine feel, and the company is also moving into the e-commerce space by allowing consumers to buy directly from its website (with points, cash or a combination of both).
“There’s a lot of change going on at the moment,” says England Hall.
All this might be true, but the strength of the Air New Zealand brand—and what it meant to the partnership—cannot be underestimated. And there is a risk its departure could potentially result in a knock-on effect, leading to other major businesses following the airline through the exit door to focus on their internal loyalty plans.
JustOne managing director Ben Goodale admits while this might seem a viable option for some larger businesses, marketing managers should consider a few factors before jumping ship.
“A lot does depend on visitation metrics,” Goodale says. “A co-op scheme is particularly valuable to aggregate visits across many retailers and deliver combined benefits, where your own individual offering may not deliver enough reward value because the consumer simply doesn’t visit you often enough. Individual reward programmes don’t work if you only need to shop with someone very occasionally.”
Goodale adds that those who want to take things in-house need to have a generous appetite for investment in IT, marketing and operations. He says a major advantage of a co-op is that it fast-tracks the loyalty process and removes the need for a massive investment from an individual brand. But Goodale also advises brands against simply leaving everything to the co-op and then focusing on other areas of marketing.
“If I was critical of some brands with co-op programmes, it’s that they have too easily ‘set and forget’ in terms of thinking the programme will look after itself and everyone will be instantly loyal,” he says.
“This simply isn’t the case, whatever programme you are in, whether your own or another co-op programme, you need to be active and engaging around customers with it.”
Fly Buys, like any organisation, has a limited marketing budget, which in turn means part of the onus rests on partners to spread the word and drive interest.
The final point Goodale makes that we shouldn’t read too much about what the departure of Air New Zealand from the Fly Buys scheme means for the overall loyalty industry.
“I wouldn’t take the Air NZ/Fly Buys shift as signalling too much except that loyalty works well in New Zealand,” he says.
“Air New Zealand isn’t ‘going out on its own’. It has long had its own programme. So what it’s doing is creating an alternative network of partners focused around their own reward currency. Other companies will decide what is best for them.”