Don’t Lose Touch With the Mother Ship

In early 2000, a major airline successfully “spun out” their loyalty program.  This appeared to be such a massive win on every front.  The airline got a large cash infusion for selling the equity (and this was in the dark days when airlines were losing money—lots of it) and the loyalty program achieved a massive market valuation from what was previously a hidden or unrecognized asset—everybody won.

Competitive airlines contemplated jumping on the bandwagon and to figure out how to also achieve this economic miracle and be less tethered to the Mother Ship. Loyalty program assets were not being appropriately valued by the market (frankly, the loyalty program assets were worth more than the market cap of the airlines at the time).  However, most others couldn’t seem to find a way to mimic a successful loyalty program spin out.

Fast forward a number of years and the aforementioned spin out miracle is unraveling.  The airline recently announced the experiment was over and they are bringing their loyalty program back in house.  The lack of control over their loyalty program created major gaps such as a lack of customer information and access, plus the loss of control of the co-branded credit cards.

While this is a fascinating case study which may eventually be analyzed in MBA programs across the country, I think what is instructive to loyalty geeks (not just airline loyalty geeks) is this:

  1. One clear break up factor was strategic divergence between the loyalty program and the airline. The independent loyalty program was pursuing its own agenda and that agenda was not valued by the airline (Mother Ship).
  2. Economics were not viewed as balanced. In fact, they were viewed as so out of balance in favor of the loyalty program, that walking away looked like a good alternative for the airline.

While I am sure there were myriad other factors, these two seem like great check points in our own loyalty efforts.  As loyalty program leaders, are you constantly asking questions such as:

  • Is my loyalty program doing what we intended when we ventured into fielding our own loyalty program? And, do I show my managers frequently how we deliver value to the company?
  • Does the company believe the economic case for the loyalty program or have they started to just see loyalty as a cost of doing business?
  • Do I get tempted to think of our loyalty business as a semi-independent business?

Based on a long time in the loyalty space and having made many mistakes along the way, I would urge all loyalty leaders to think deeply about how to frequently deepen and demonstrate your ties and value to the Mother Ship.

Written by Russ Hinckley, Senior Vice President Commercial- Aspire Loyalty Travel Solutions