Airline Companies Loyalty Programmes and Market Share Essay

Competitive Advantage

The growth of the market share of airline companies through the introduction of relevant loyalty programs is a proven hypothesis. For instance, according to Liu and Yang (2009, p. 97), lucrative bonus offers to regular customers in the form of flyers have a positive effect on competition and help keep travellers. This fact is logical since people who have constant discounts at a particular airline are ready to use its services more willingly.

Breugelmans et al. (2015, p. 133) confirm this assumption and note that “an airline could use its dominance in a particular hub airport together with its frequent flyer program”. As a result, those companies that make efforts to develop and promote relevant programmes receive a favourable competitive advantage and can rely on customer loyalty and stable demand for services.

Satisfying Different Customer Categories

Loyalty programmes may be based on different approaches to engaging and retaining customers, and one of them is the provision of services by category. Dreze and Nunes (2008, p. 892) pay attention to the method of differentiating travellers by status and argue that “the influence of tier size” can have a positive effect on interest in a certain company. The validity of this practice lies in the fact that the classification of bonuses into categories defines passengers’ various indicators, including social, and allows customers to choose those services that they need.

If travellers can select their desired flight options, this will increase their interest in a particular company. Such a tier system is also described by Magatef and Tomalieh (2015, p. 80) who state that this loyalty principle gives passengers an opportunity to extract long-term advantages, thereby ensuring stable demand and interest in the market for airlines. Therefore, this practice is mutually beneficial and successful in terms of customer retention and, as a result, profit.

Relationship Between Profit and Brand Value

The impact of loyalty programmes on airlines is high in case customer interest in specific participants of the market is high and stable. In other words, small and unpopular firms that provide passenger transportation services will not be able to benefit greatly from such projects. According to Dorotic, Bijmolt and Verhoef (2012, p. 80), if an airline’s market share is average, loyalty programmes will not have a significant effect.

The promotion of brand value and the creation of a solid material base is the conditions for ensuring high interest and demand for services. Voorhees et al. (2015, p. 208) confirm this conclusion and note that “without support from a valued brand name”, it is impossible to influence client spending and maintain stable profits. It is essential to build a business that is able to withstand market competition and have credibility among clients. Otherwise, any attempts to attract the attention of customers through loyalty programmes will not have the desired effect.

When taking into account the fact that loyalty programs in large airlines influence the number of passengers positively, one can note the importance of these practices in the context of profit growth. Vilkaitė-Vaitonė and Papšienė (2016, p. 111) argue that such an activity indicator as organisational performance increases, which, in turn, raises market positions and is a driver for continued growth. Therefore, in the case of the competent implementation of available loyalty strategies, airlines can increase the share of profits and have a stable demand for their services.

Reference List

Breugelmans, E, Bijmolt, TH, Zhang, J, Basso, LJ, Dorotic, M, Kopalle, P, Minnema, A, Mijnlieff, WJ & Wünderlich, NV 2015, ‘Advancing research on loyalty programs: a future research agenda’, Marketing Letters, vol. 26, no. 2, pp. 127-139.

Dorotic, M, Bijmolt, TH & Verhoef, PC 2012, ‘Loyalty programmes: current knowledge and research directions, International Journal of Management Reviews, vol. 14, no. 3, pp. 217-237.

Dreze, X & Nunes, JC 2008, ‘Feeling superior: the impact of loyalty program structure on consumers’ perceptions of status’, Journal of Consumer Research, vol. 35, no. 6, pp. 890-905.

Liu, Y & Yang, R 2009, ‘Competing loyalty programs: impact of market saturation, market share, and category expandability’, Journal of Marketing, vol. 73, no. 1, pp. 93-108.

Magatef, SG & Tomalieh, EF 2015, ‘The impact of customer loyalty programs on customer retention’, International Journal of Business and Social Science, vol. 6, no. 8, pp. 78-93.

Vilkaitė-Vaitonė, N & Papšienė, P 2016, ‘Influence of customer loyalty program on organizational performance: a case of airline industry’, Inžinerinė Ekonomika, vol. 27, no. 1, pp. 109-116.

Voorhees, CM, White, RC, McCall, M & Randhawa, P 2015, ‘Fool’s gold? Assessing the impact of the value of airline loyalty programs on brand equity perceptions and share of wallet’, Cornell Hospitality Quarterly, vol. 56, no. 2, pp. 202-212.

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