Kingfisher Airlines A Case Study on Loyalty Program

Submitted to: Prof. Amit Mookerjee Submitted By:

Group 5 Amit Kumar Prachi Vimal Pratibha Dabas Samir Ranjan Saurabh Kukreti IPMX04005 IPMX04037 IPMX04042 IPMX04048 IPMX04052

Kingfisher Airlines A Case Study on Loyalty Program

Table of Contents
1.0 2.0 3.0 4.0 5.0 6.0 Introduction ........................................................................................................................................................... 3 Evolution of Loyalty Programs ....................................................................................................................... 4 Kingfisher Loyalty Program ............................................................................................................................. 9 Assessment of Kingfisher Loyalty Program ............................................................................................ 12 Conclusion........................................................................................................................................................... 14 Bibliography ....................................................................................................................................................... 15

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Kingfisher Airlines A Case Study on Loyalty Program

1.0 Introduction
A frequent flyer program (FFP) is a loyalty program offered by many airlines. Typically, airline customers enrolled in the program accumulate frequent flyer miles (kilometers, points, segments) corresponding to the distance flown on that airline or its partners. There are other ways to accumulate miles. In recent years, more miles were awarded for using co-branded credit and debit cards than for air travel. Acquired miles can be redeemed for free air travel; for other goods or services; or for increased benefits, such as travel class upgrades, airport lounge access or priority bookings. The primary method of obtaining points in a frequent flyer program until recent years was to fly with the associated airline. Most systems reward travelers with a specific number of points based on the distance traveled, such as one point per mile flown, although systems vary. Many discount airlines, rather than awarding points per mile, award points for flight segments in lieu of distance. In Europe, for example, a number of airlines offer a fixed number of points for domestic or intra-European flights regardless of the distance (but varying according to class of travel). With the introduction of airline alliances and code-share flights, frequent flyer programs are often extended to allow benefits to be used across partner airlines. The calculation method can become complicated, with additional points awarded as a 'cabin bonus' (usually as a percentage multiplier over the standard economy-class mileage) for flying first or business class, and often fewer or zero points given when flying on many economy tickets sold through travel agents, online vendors, or the airlines' own web sites. Additional bonus points are sometimes granted after members reach specific levels of flying activity. Programs differ on the expiration of points. Some expire after a fixed time, and others expire if the account is inactive for an extended period (for example, three years). Many programs also allow points to be obtained not only by flying but by favoring airline 'partners' on the ground. This includes staying at participating hotels, or renting a vehicle

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Kingfisher Airlines A Case Study on Loyalty Program from a participating company, or shopping at a particular department store. Other methods include credit and debit cards that offer points for charges made to the card, and systems which allow earn miles by eating at participating restaurants and charging the meals to registered cards. Using credit and debit cards to earn points, as well as taking advantage of special promotional offers, can allow some people to earn an exceptionally high frequent flyer points with relatively minimal outlay.

2.0 Evolution of Loyalty Programs

Before there were frequent-flyer programs, there were Raleigh cigarette coupons and S&H Green Stamps. The idea was similar: encourage repeat business by rewarding customers for their loyalty. Before such primitive loyalty programs could develop into what we now know as FFPs, two events had to occur: Deregulation (1978) created the marketing environment. Computerization created the necessary systems infrastructure.

The Beginning In May 1981, American Airlines (AA) introduced AAdvantage, the first FFP. The goal: retain AA's most frequent customers by rewarding them for their loyalty. The tactic, specifically, called for tracking members' flown miles as a measure of their revenue contribution to the company, and awarding members free tickets & upgrades (the rewards). A little background AA had compiled a database through its Sabre computer reservations system of 150,000 of its best customers. These frequent flyers were identified by computer-searching Sabre bookings for recurring phone numbers, which were correlated with the customers' names. They were the first members of AAdvantage. To cover the full array of travelers' needs, AA included Hertz and Hyatt in AAdvantage, offering mileage accumulation and awards on both.

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Kingfisher Airlines A Case Study on Loyalty Program Within days of the introduction of AAdvantage, United (UA) introduced its own program, Mileage Plus. In many respects, Mileage Plus was a mirror image of AAdvantage. The "Plus" referred to the few (but significant) elements in UA's program, which distinguished it from AAdvantage - a 5,000-mile Enrollment Bonus and no mileage expiration. Later that same year (1981), both Delta and TWA introduced their programs, creating the critical mass necessary to make FFPs a necessary element in any and all airlines' marketing arsenals. The FFP battle had begun...

Enter the Hotels In the beginning, hotels were partners in airline programs. As they discovered the power of FFPs, and the costs of participating in the airline-hosted programs, they naturally considered launching their own frequent-stay programs. Holiday Inn was the first to launch its own program, in January 1983. Marriott followed with its Honored Guest Awards program in November of 1983. In hindsight, it is obvious that Holiday Inn's Priority Club program was too generous in its original form. After 75 stays, a member could expect the following: 2 airline tickets to Europe 1 week's hotel stay in Paris 1 week's free car rental

So Holiday Inn discontinued the program in February 1986, and re-launched it with less generous award conditions later that same year. While all of the major hotels today have their own frequent-stay programs, most hotels feel that the greatest marketing benefit derives from their participation in airline FFPs. Conclusion: air transportation is the primary attraction of the programs.

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Kingfisher Airlines A Case Study on Loyalty Program The Converts Although all major U.S. airlines, and most hotels and rental car companies, eventually joined the FFP parade, many did so reluctantly. Their concern was twofold: They were not convinced the programs were effective marketing tools They were concerned about the costs of operating such large operations

The examples of Southwest and Hilton are typical. Both hesitated to introduce FFPs. They were (a) afraid of the costs, and (b) suspicious that the programs were short-term marketing gimmicks which would disappear in the short term. Both subsequently realized that they had underestimated the power of FFPs when they suffered significant losses in market share, particularly troublesome losses because the affected segment of the market was the most lucrative: high-frequency high-yield business travelers. So both entered the FFP game late, and had to work extra hard to make up the competitive disadvantage they had allowed to accrue. Rental Car Companies It was not until March 1987 that National Rental Car introduced the first car-rental program, the Emerald Club. As with the hotels, rental car companies' first exposure to FFPs was as partners in airlinehosted programs. Specifically, Hertz was the first car rental company to join an airline FFP - they were one of the first partners in AA's AAdvantage program in 1981. The Hertz experience is telling. They were a charter member of the first FFP, and subsequently joined several other airline programs. But by 1990, they decided the costs were too high and backed out of all of their FFP relationships. (The costs are considerable: as a group, the rental car companies pay hundreds of millions of dollars per year to

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Kingfisher Airlines A Case Study on Loyalty Program participate in FFPs.) They discovered, however, that their market share dropped dramatically without the FFP tie-ins. So today Hertz participates in 20 airline FFPs. Although a few frequent-renter programs survive, most rental-car companies concentrate their marketing efforts on participation in the airline FFPs. FFPs Today Today, frequent flyer programs (and loyalty programs generally) are everywhere. There are more than 70 FFPs worldwide. While the programs were introduced in the U.S., by U.S. airlines, they are now a fact of marketing life globally. Many foreign carriers were reluctant entrants. As was the case with the late-entrant U.S. airlines, foreign carriers initially viewed the growth of FFPs as a marketing fad, and an expensive one at that. Additionally, some carriers felt that FFPs amounted to a kind of rebate or discount, which was inconsistent with their premiumservice/ premium-price strategy (especially for business and first class). Notwithstanding these qualms, when such FFP-less carriers as South African Airways, Singapore Airlines or Swissair began losing share to their U.S. counterpart carriers, the power of mileage was proved indisputably, measurably, on the bottom line. In marketing terms, FFP has become part of the "core product" offered by airlines. Mileage is a basic consumer expectation, alongside convenient schedules, competitive pricing, safety and customer service. The programs boast over 100 million members. The large U.S. FFPs (American's AAdvantage, United's Mileage Plus, Delta's SkyMiles) have more than 20 million members each. Many members, of course, are shared. The most frequent flyers tend to be enrolled in 4-6 programs simultaneously. As advocated elsewhere on this site, this is not the best way to maximize the benefits of FFP participation. Members receive 10 million awards per year.

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Kingfisher Airlines A Case Study on Loyalty Program What makes loyalty programs attractive (from the consumer standpoint) and effective (from the airline standpoint) is the reward side of the equation. And for most FFP members, the reward is a free ticket. The most popular among members of U.S. FFPs: tickets to Hawaii and London. As a very general rule, 5% of an airline's seats are allocated for use by frequent flyer program members using award tickets.

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Kingfisher Airlines A Case Study on Loyalty Program

3.0 Kingfisher Loyalty Program

Nearly every Airline has a point reward system. The Indian airline industry also has a loyalty program system. Passengers following certain airlines get special trips and privileges. KingFishers Club Loyalty program Kingfisher Airlines has the loyalty program called Kingfisher King Club program. The King Club loyalty program allows flyers to earn mileage points each time a flight is made and through arrangements with its partner airlines, car rental agencies, hotels, and other services. The King Club frequent flyer program is a tiered program that offers free flights and other benefits at various levels. Benefits begin at the King Red level, King Silver level, King Gold level and King Platinum level. The Kingfisher Airlines King Club frequent flyer program points can be redeemed for free flights, upgrades, lounge vouchers, and to purchase merchandise in the Air Boutique online. And best of all, family members can pool all their miles into one family account. Conditions to join King Club program: Individuals who are above 12 years of age The member has a minimum period of 12 months to complete the requirement of 3 valid flights in order to receive a plastic membership card. A minimum of 10,000 king miles in their king club account

The Various Level with benefits and requirements: Level King Red Benefits - Personalized baggage tag Activity Needed Qualification for King Red requires 6 Sector Points, or 3,000 Status Miles or 4,000 Partner Miles in a preceding 12

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Kingfisher Airlines A Case Study on Loyalty Program month period. King Silver - 1 Upgrade voucher - Priority check-in (Domestic Airports only) - Excess baggage allowance (10kg or 1 piece) - Domestic Lounge Access (for travel on Kingfisher First / Kingfisher Class) - Priority baggage handling - 15% Tier bonus. King Gold 1 additional Domestic Lounge voucher for your companion - 3 Upgrade vouchers - Excess Baggage Allowance (20kg) - Domestic & International Lounge access - 25% Gold Tier bonus - Guaranteed Seat Reservation (up to 6 hours prior to departure on full fare economy class booking on Kingfisher Airlines) - Priority Boarding King Platinum - 2 additional domestic lounge vouchers to enjoy with your companion - 5 Upgrade vouchers - 35% Tier bonus - Non expiry of King Miles T o reach King Platinum you need 180 Sector Points, or 90,000 Status Miles in preceding 12 months. To requalify 162 Sector Points in preceding 12 months are required. To qualify for King Gold you need 120 Sector Points, or 60,000 Status Miles in preceding 12 months. To requalify you need 108 Sector Points in preceding 12 months. Qualification for King Silver requires 60 Sector Points or 30,000 Status Miles during a consecutive 12 month period. For requalification you need 54 Sector Points in 12 Months

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Kingfisher Airlines A Case Study on Loyalty Program - Complimentary Companion King Gold Membership card

Validity: King Miles in your account expire 36 months from the month they were earned. Some of the Airline partners are: Air France, British Airways, Continental Airlines, Delta, KLM and others Some of the Hotel partners are: Ananda hotel, Double Tree hotel, Hilton and others Some of the car rental partners are: Avis, Hertz, SIXT and others

Group Loyalty

As a part of Group loyalty, King Club offers you customized solutions to suit your travel needs. Family Club and Member get Member are two such solutions which enable you to get maximum benefit from the King Club program. Family Club Pool King Miles within your family into one single King Club account and enjoy the rewards even faster than ever before. Best of all, family members remain eligible for tier upgrades. Member Get Member Looking to introduce a friend to King Club? The new member get member promotion ensures that both you and the referred member are rewarded generously.

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Kingfisher Airlines A Case Study on Loyalty Program

4.0 Assessment of Kingfisher Loyalty Program

King Club Loyalty program Advantages Priority Luggage starts at an early level which benefits customers. Premier counter check in Lounge access Priority boarding Customers called by name making him/her feel privileged. Upgrade vouchers. Inform club members via phone about cancelled flights. More time for web check in Hotel facility for king club members in case of cancellation. Premium card members have free cancellation. Potter facility is available.

King Club Loyalty program Disadvantages Many times King Club member are not aware of premiere check in, so airline staff must be trained on this aspect. Even after luggage tagging facility, members of King club get luggage with normal passenger. Lounge access service should allow at least one guest for all levels. Special discounts can be offered to at least the top two levels.

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Kingfisher Airlines A Case Study on Loyalty Program

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Kingfisher Airlines A Case Study on Loyalty Program

5.0 Conclusion
Though the loyalty programme of Kingfisher offers lucrative benefits to frequent flyers, but the very process of point accumulation and its usage is extremely cumbersome. Thus limiting the active usage of these programmes. Moreover these programmes are targeted only towards frequent flyer, essentially targeting mostly business travelers. The choice of airlines for business travel is driven by the business schedule requirements. Also the points earned through such travel will be accumulated in companys account and not to individual person, unless company policy allows otherwise. These factors further limit the usage of these loyalty programmes by the flyers. To handle these issues following needs to be implemented 1. Allow easy accumulation of points at the time of check-in, rather than at the time of booking 2. Loyalty programme should be considered as an add on tool for customer loyalty on top of superior core performance and shouldnt be considered as substitute.

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Kingfisher Airlines A Case Study on Loyalty Program

6.0 Bibliography
Tata Motors Annual Report 2007-10 Prowess Database Wikipedia, online business news sources http://www.frequentfiler.com

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