My list of 10 trends to watch for in 2022, like most of these lists, looks like a shopping list. But if I pause and look closer, I see a lot of interconnectedness, creating synergies within the list and trends begin to emerge. I see four hot topics converging in 2022:
- Loyalty programs
- Data & analytics
Let’s connect the dots.
The first trend is customer-centricity. While Amazon made it clear that the focus on the customer is an obsession and declared itself “Earth’s most customer-centric company”, the airline industry is still debating the benefits and needs of customer-centricity, loosely defined as making the life of customers easier.
For example, the refund process of Amazon or Uber is very simple for their customers, especially compared to what most airlines offer in case of disruption.
"Your 'dream airline' would aim at getting both right: making it easy for customers (to book, to change, to refund, etc.) and flying on-time (which requires aircraft, pilots, simulation tools, etc.)."
At the airline industry level, we can visualize a spectrum, with on one end being the “customer-centric” airline leaders who want to delight their customers with a unique, tailored experience – and on the other end, the “process-centric” airlines who thrive in the operational nature of air travel and focus on the processes enabling on-time performance, assuming that passengers want safety and punctuality at the lowest price.
Your “dream airline” would aim at getting both right: making it easy for customers (to book, to change, to refund, etc.) and flying on-time (which requires aircraft, pilots, simulation tools, etc.).
This airline would in theory be less profitable, due to the extra costs of its convenience and performance. But the extra service and quality may create genuine loyalty from customers, in a virtuous cycle impacting profitability.
The basis of a frequent flyer program is to reward customers who fly frequently with your airline by giving them an incentive to choose the same airline repeatedly.
The principle of “buy 10, get 1 free” works for flights and pizzas equally. Unlike your favorite pizzeria, airlines may be more or less generous with the points allocation, and more or less strict on the redemption for flights.
"Beyond the co-branded cards, airlines have the opportunity to provide payment methods to their loyal customers."
The point-accumulation side of loyalty programs is currently facing headwinds. The flight restrictions due to the pandemic make it more difficult to accumulate miles. The “decarbonation” of the world is hardly compatible with a program rewarding frequent flying.
But there is another side to loyalty programs: the status. Depending on the airline, the status may sound like precious metals: gold or platinum. Status relates to the experience (seating, boarding, etc.) which has become more relevant in a stressful Covid travel experience.
The largest airline loyalty programs have become very profitable entities, selling miles to credit card companies. The credit card users receive points when paying. Beyond the co-branded cards, airlines have the opportunity to provide payment methods to their loyal customers.
Other industries, from travel and tourism to retailers, have implemented successful loyalty programs too, giving more earn and redeem options to customers, as well as tier-matching options. Customers feel special and treated with privilege, regardless of credit card usage.
Credit cards have been the preferred payment method of airline customers for decades, from online payment with travel agencies to corporate travel. But the digital revolution is changing the payment landscape, and new technology – Fintech – makes it easier and safer to pay using mobile apps and scanning QR codes.
Customers find it seamless to make one-to-one instant payments using apps like Revolut or Lydia and will soon find it normal to pay for travel with the same apps, rather than entering their credit card details and doing the 3D secure checks.
"While some airlines are contemplating evolving from credit cards to digital payments, other businesses have already embraced digital payment and are ready for the next wave, read cryptocurrencies."
All these financial services are now available to customers regardless of their use of a credit card. By the way, payment apps have their own loyalty programs, from the 1% cash back to special discounts and special offers.
While some airlines are contemplating evolving from credit cards to digital payments, other businesses have already embraced digital payment and are ready for the next wave, read cryptocurrencies.
In most cases today, if I want to pay for an airline ticket, I need to sell my BTC or ETH, transfer them from my crypto wallet to my traditional bank account and make a payment by card. Tomorrow, airlines will accept my cryptos (probably stable coins) like any other currency, as soon as payment gateways are ready.
Data & Analytics
The trend in data is the access to unlimited amounts of data and to unlimited computing power to handle the data, virtually. AI, loosely defined as programs learning from history or rulesets to improve their outcomes over time, leverages the data and computing power to provide new capabilities, from personalizing offers at scale to dynamically adjusting schedules.
"I’m curious to see the evolution of digitalization for airlines and the new kind of customer experience that a 'digital airline' will be able to offer, in terms of customer-centricity, loyalty or payment."
This digital trend applies to customer-centricity – with the anticipation of customer needs along the journey and the creation of relevant offers, to loyalty – with the understanding of customer profiles beyond the travel experience, and to payments – with the risk management of the customers.
Digitalization has already created a gap in the customer experience between traditional banks and new banks, or between traditional TV networks and streaming players.
I’m curious to see the evolution of digitalization for airlines and the new kind of customer experience that a “digital airline” will be able to offer, in terms of customer-centricity, loyalty or payment.
Connect the Dots
If I summarize, a customer-centric airline will make it easier for customers to travel. The loyalty program will provide special status with features valuable to the regular travelers.
This status will be exchanged between partners who will recognize valuable customers. The payment option that customers prefer, e.g. pay later or crypto, will be accepted and link into the status.
All the data about the customer preferences and experience will be collected to improve the service and shared with partners to make the entire journey safer and more pleasant. Let’s catch up at the end of 2022 to see who’s made the digital move.