Virgin Atlantic is recruiting tens of thousands of British Airways frequent flyers to its own loyalty programme following a targeted campaign. The airline’s promotion offers to essentially upgrade BA customers to a better membership status at Virgin if they switch over.

This campaign targets the weakness in BA’s loyalty programme, which was dramatically altered last April when BA decided to shift from a system based on distance travelled to money spent. As a result, many longtime customers lost their gold tier membership status. The head of Virgin’s loyalty programme, Anthony Woodman, expects the programme to achieve double digit percentage growth in a year’s time.

British Airways describes this campaign by Virgin as a well executed PR stunt, however the truth is that airline loyalty programmes (and loyalty programmes more generally) have evolved from customer retention tools to critical revenue producers. Higher tier members represent a big proportion of value for airlines since they frequently fly on expensive tickets, and have stronger loyalty which makes them less sensitive to price increases.

Virgin’s aggressive poaching campaign offers affected customers recognition of what BA withdrew from them, positioning the airline as rewarding loyalty in a way that British Airways does not.

What does this mean for the airline industry?

• Going back on commercial promises carry serious relational risks with regards to important customers

  
  

• Smaller carriers can successfully utilise marketing to undercut much more established rivals, essentially stealing away brand recognition from giant players like BA

  
  

• Customer expectations are beginning to undermine the efficacy of loyalty programmes, as the costs in providing associated benefits like lounges begin to chip away at margins