This month, Facebook IQ published a new loyalty study entitled ‘Love in a Time of Infinite Choice’ which reveals the strong advantage airlines have over hotels and other non-travel services and retailers to differentiate themselves, build loyalty, and reap profits.
The results show that airlines could win over more consumers if they stopped commoditising themselves, find their market, and build brand fans with quality product and services.
Facebook surveyed 14,700 adults in the US and posed questions on their loyalty to companies in five verticals: Auto Insurance, Airlines, Hotels, Grocery and Restaurants.
The social media platform found that 77% of people surveyed return to the same brands either out of loyalty or habit: 37% describe themselves as loyal to the brand, and 40% describe themselves as repeat buyers.
The variety of verticals makes the study extremely useful because it includes both needs and wants. One can compare results from verticals which supply somewhat unrelated products or services and infer the emotional engagement to airlines, which can be classified as a want but not a need.
The qualities which drive loyalty purchases “Brand Loyalists” and repeat purchases for other reasons “Repeat Purchasers” are illustrated in this graphic:
We can make a number of important observations about consumers’ relationship to airlines based on this data, many of which are surprising.
- Trust is not considered a driving factor of loyalty or repeat purchasing for airlines. While that may seem like a negative (who doesn’t like to be considered trust-worthy?) I believe in this case it is a very positive sign for airlines. That Trust is not a predominant consideration which drives purchasing decisions would imply that consumers take the trustworthiness of airlines for granted. In other words, the skies are safer and generally people trust airlines to get them where they need to go without much thinking about it. The only other vertical which doesn’t have trust as a driver is Auto Insurance, which has also normalised itself to do “what it says on the label.” By comparison, Hotels must build trust before 21% of consumers before they will book repeatedly or develop loyalty.
- Service is paramount. It accounts for 28% of loyalty build and 25% of repeat purchases. The weight placed on service quality for airlines is superseded only by grocers and—importantly—exceeds the weight consumers place on service at hotels by five percentage points.
Price is a more significant loyalty or repeat purchases driver for hotels than airline customers. Price is not an airline loyalty driver, and as a factor of repeat purchases it is five percentage points lower than it is for hotels.
This was one of the most surprising and illuminating results, when paired with ‘taste’ as the consistent driver of both airline loyalty and repeat purchases. That is to say, if an airline appeals to the ‘taste’ of a consumer by finding its ideal market niche and branding accordingly, it will be more likely to build loyalty and repeat purchases than by focusing on fares as the primary competitive differentiation.
Part of the paradigm which drives airlines to ignore the value of brand differentiation and treat their service as a commodity is the assumption that fares are the primary drivers of consumer booking decisions. This belief has been exacerbated by the popularity of Low-Cost Airlines, but I believe it is a misunderstanding of the market dynamics at play.
These Facebook survey results speak to that.
Low-Cost Airlines do well because they are consistent with these results: 1) they have clearly defined their markets and differentiated themselves as brands building on ‘taste’; 2) they do what it says on the box, offer cheap fares and lean products with no other significant expectations; 3) they create an entry-point to the market for those who would like to fly but could not afford a full-service ticket.
For established, legacy, full-service airlines, the dynamic is different. Customers are less price sensitive if they are likely to find a quality flying experience, focused on service.
Unlike their choice of hotels, flyers are also less influenced by proximity.
Again, the success of LCCs proves this. They have been successful at growing their markets in secondary airports.
The key differentiators for airlines to build loyalty and repeat purchases must be to focus on the significant weight consumers place on taste: 39% for loyalty and 36% for repeat purchase. It was surprising to see that ‘taste’ is not listed as a driver of loyalty or repeat purchases when it comes to choice of hotels. But that might be attributable to hotel’s greater skill at clearly defining the ‘taste’ of their product—just as consumers place less of an emphasis on trust for airlines, because trust is invariable.
The advantage of service, associated with a clearly defined brand niche or ‘taste’ has already been proven in the airline industry, even if it is ignored by the strategies of some carriers—tempted to fall into the trap of competing on fares at all costs.
It accounts for the popularity (and impressive consumer goodwill) of Virgin Atlantic. It even explains the appeal of Low-Cost Luxe brands like Virgin America, JetBlue and Norwegian. It also accounts for the turnaround at Finnair, which has defined its brand values and adhered to them in the planning of products and services, turning its back on the idea of competing with LCCs as a commodity. This strategy is core to the growth of Middle Eastern carriers which have built major international hubs and massive traffic in the span of a relatively full years by giving consumers incentive to “go the distance” through superior service and product.
As Facebook writes in the report: price Matters but experience matters more—regardless of consumer income.
“Likelihood to be loyal increases as household income increases: people surveyed who report a household income of $150,000 or more are 32% more likely to be loyal than those who report a household income of under $35,000. But then we asked people, regardless of household income, to describe the brands they love most. We divided these words into the following verticals: consistency, cost, quality and experience. By far the largest group of words was under experience. Perhaps people will always be willing to pay for the things that are memorable … whether that’s because of the taste they can’t get elsewhere or the family fun they’ll remember forever.”
Use Your Words
The importance consumers place on these values to build loyalty and repeat business is further highlighted in the loyalty word-cloud Facebook presents in its study. Notice the relative weight of quality and fun versus affordability or even reliability.
Why is it that consumers generally like JetBlue despite the airline’s weather disadvantage which keeps it lower in the USDOT rankings of on-time performance? Why does Emirates do well, disadvantaged as it is in on-time performance by complications with connections and sandstorms? This could shed some light on those questions.
I don’t mean to take away the importance of arriving and taking off on-time nor the brand impact of inconveniencing customers. I’m only suggesting that if airline customers are pleased with their surroundings, have the expectation of a good time, and receive good service during disruptions, they may be less troubled by delays which are outside an airline’s control.
Note also that “cheap and value” occur less frequently than affordable.
Though by necessity I write a lot about Millennials—they are the generation which launched a bazillion articles—I’m not terribly comfortable with the word.
I’m not that eager to jump on Boomers or GenXers or GenZ either.
While these labels hang from the tree for easy-pickings, I believe they are overly simplistic and somewhat deceptive. One cannot say that any generation of humans is motivated by exactly the same thing. We’re all too different.
There is arguably a certain generational “culture,”and socio-economic drivers which might at times influence similar behaviour, but we should be more sparing with these statistics than salt.
That said, your opinion may differ. Facebook studied the “unique barriers to loyalty” of this large generation of people, and you might enjoy knowing those so here are the results:
Millennials need to feel they can contact an airline or hotel easily before they build loyalty to a brand, but it is significantly more important that they can reach an airline than a hotel. And ease of contact for airlines is nearly as important to Millennials as the hygiene of their grocers!
Because many Millennials are engaged in social media, airlines which satisfy these needs are not wasting their time or resources.
Of course, there are other ways for brands to be approachable (Messenger, apps, SMS notifications). I expect we’ll see those evolve and mature soon, but I think social media will continue to play an important role until GenZ rises to predominance and rolls its collective eyes.
(I had an interesting conversation with an older GenZ-er yesterday who believes social media is a joke, fake, deceptive, unreliable and best avoided. She’s really into chatting with friends and family on WhatsApp, though. Maybe she’s just odd.)
We’re Not Kidding Around
Facebook’s survey agrees.
42% of New Parents describe themselves as loyal compared to 36% of non-parents.
“New Parents are particularly more loyal in verticals that might not trigger as much loyalty in non-parents, such as Hotels. This is especially true of verticals with products and services that tend to be more experiential. We think it’s because a desire to experiment gets replaced with a desire to stick to what they know. After all, a restaurant’s food might not seem as important when parents start thinking about stroller access and crayons at the table.”