Five Reasons for low cost airlines to take loyalty seriously

Note: This is Part 1 of a three-part series on LCCs and loyalty. The first part offers five compelling reasons to start thinking about loyalty. The second provides three easy ways to track loyal customers. The final part will offer five no-cost (nearly!) solutions to driving loyalty.

Before you raise your eyebrows, let me declare that yes, I do know why you might be slightly surprised to read the title of this article. You might say that LCCs exist to carry customers cheaply from one point to another without offering peripheral services or caring about customer loyalty because everyone will come if your price is low, right? You might say that LCCs themselves couldn’t care less about cultivating loyalty or building loyalty programs because that would be an unnecessary investment of time and resources. Right? Wrong! This article will build on the premise that while LCCs have been doing one L (low-cost) well, they need to start thinking about an equally important L – loyalty!

Before I go on to my thesis, let me state upfront that I am not talking about creating loyalty programs. I’m only concerned with creating loyal customers or, to put it in the simplest and most compelling terms: driving repeat business for LCCs. There are some compelling reasons for LCCs to start thinking about building a loyal flyerbase. Five of them are listed below.

1. First, and perhaps the most easily identifiable reason: it has been known since long that getting a new customer is much more difficult and resource-consuming than keeping a customer loyal.
2. Second, with the growth in the number of LCCs in markets, a number of carriers are fighting for their share of the pie. With fuel costs (and consequently, operating costs) rising much faster than passenger numbers, carriers that have the highest load factors will win the battle for survival.
3. Third, given that fuel costs are hurting all carriers, a battle to fill capacities based on price-cuts will not just hurt the carriers but the industry and wider economy. No example for this can be better than that of the Indian market where the troubled national carrier Air India indulged in heavy price-slashing leading to a domino effect of reduced profits (in fact, heavy losses) industry-wide.
4. Fourth, given that most major markets have multiple LCCs in competing closely (including on prices), there is a need for secondary differentiation factors that would help in customer retention.
5. Fifth, and perhaps incidentally, the present state of the economy has compelled many price cuts within businesses. As a result, many companies have taken to flying LCCs for short-haul travel. Agreed that this might not be a huge population, but a seasoned business traveller flying on a no-frills airline for the first time would definitely look to fly the LCC that offers the most value even at the low-cost.

So what can you, as an LCC do to actually drive repeat business via loyal customers? First, think like a person who’s flying you multiple times a year. Even though the frequent-flyer concept is not applied to the LCC market, it is undeniable that there are people who do fly you frequently. (I have a relative who flies the same LCC twice a week just because its on-time performance is impeccable!)

Small things matter. Work on the small ways you can make a difference to your loyal customers. Second, understand from the example I just gave that even though small things make a big difference to customers (eg. on-time performance) they will not be enough to drive repeat business until loyal customers are identified and told specifically that they are being rewarded for being loyal.

So here’s my golden tip for today: Make those who fly you frequently feel special in small ways.

P.S. If you’re an LCC and have the understandable question of how on earth you’ll track loyal customers without setting up a loyalty program and going through an IT headache, watch out for the next part in this series that’ll show you three easy ways to track loyal customers.