Group05 Kingfisher v1.0

8/13/2019 Group05 Kingfisher v1.0

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Kingfisher Airlines A Case Study onLoyalty Program

Submitted to: Prof. Amit Mookerjee

Submitted By:Group 5Amit Kumar IPMX04005Prachi Vimal IPMX04037Pratibha Dabas IPMX04042

Samir Ranjan IPMX04048Saurabh Kukreti IPMX04052


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Kingfisher Airlines A Case Study on Loyalty Program

Applied Theory in Strategy and Competition Page 3

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 ofpoints 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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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 Sabrebookings 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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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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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 airline-

hosted 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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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 amarketing 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 premium-

service/ 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 advocatedelsewhere 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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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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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 andprivileges.

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 flightsand 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 Benefits Activity Needed

King Red - Personalized baggage tag 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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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.

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

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

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.

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.


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- 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.
https://www.kingclub.me/CRANE_IT_WEB/loyalty/member_get_member.jsphttps://www.kingclub.me/CRANE_IT_WEB/loyalty/family_loyalty.jsphttps://www.kingclub.me/CRANE_IT_WEB/loyalty/member_get_member.jsphttps://www.kingclub.me/CRANE_IT_WEB/loyalty/family_loyalty.jsp


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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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5.0 Conclusion

Though the loyalty programme of Kingfisher offers lucrative benefits to frequent flyers, butthe very process of point accumulation and its usage is extremely cumbersome. Thus

limiting the active usage of these programmes. Moreover these programmes are targetedonly towards frequent flyer, essentially targeting mostly business travelers. The choice ofairlines for business travel is driven by the business schedule requirements. Also the pointsearned through such travel will be accumulated in companys account and not to individualperson, unless company policy allows otherwise. These factors further limit the usage ofthese 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

booking2. 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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6.0 Bibliography

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

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