The Effect of frequent flyer programs on consumer behavior in the German airline market

Abstract

Due to growing competitive pressure, brand airlines seek to distinguish themselves from low-cost carriers. Since the 1970's, Frequent Flyer Programs (FFP) have been established as popular incentive schemes combining monetary rebates, service, and status awards. The effectiveness of FFP to gain and retain airline customers, however, is questioned in the face of growing cost pressures in the aviation sector. This study evaluates the impact of FFP on consumer behavior. It assesses determiners and moderators of effective FFP design in a representative customer survey (n = 502) of Miles & More members in Germany. The study finds that FFP impact all levels of the customer behavior chain, particularly customer attitude, brand image, booking behavior, customer loyalty, sustainable customer relationships, and passengers’ value perception. FFP building blocks interact: Service, status, and monetary awards have to be effectively combined to maximize customer impact. A broad and far-reaching partner network, as well as transparent redemption options, are essential to convince customers of the program value. Airline safety and quality are essentialessential additional determiners of customer booking and loyalty behavior. FFP mainly addresses frequently flying business customers on short-distance flights. Airlines should develop their programs to appeal to this customer group and ensure perceived FFP honesty by transparent and reliable redemption conditions and a comprehensive service package awarding loyal customers reliably.