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Sky Lounge Podcast

 

This episode of Sky Lounge features Mark Ross-Smith, Loyalty guru & CEO of Loyalty Status Co., the creator of StatusMatch! Like Mark said in a post “We all intuitively know that loyalty status is the most sought-after, most highly prized thing any aspiring traveller can earn.” – we covered a lot of ground talking about the psychology of loyalty, status, status matches & how airlines are adapting to a changed world!You could be a free agent like Alex, who prefers trying out different airline products or you could be like David stuck to one airline but worried about a status downgrade – but no matter what sort of traveller you are, this is a must listen-to episode! Hope you enjoy it!

 

Alex (00:18):

Hi everyone, it’s David and Alex. It’s a new episodes of Sky Lounge Podcast and today we have another amazing guest with us. I refer to him as a loyalty guru. So whenever I hear anything related to airline loyalty, I think of him. Mark Ross-Smith, hello. We are very happy and honored to have you as a guest on our podcast.

Mark Ross-Smith (00:48):

Thanks Alex and David, it’s great to be here. Very generous introduction, guru. I don’t know about that, but-

Alex (00:56):

Guru.

Mark Ross-Smith (00:56):

… we’re getting there.

Alex (00:58):

Yeah. And Mark started the company called thestatusmatch.com. Today, we will not talk a lot about this, about the story, how you started, what exactly you are doing. You’ve done plenty of podcasts on this. We can include few links so whoever is interested, they can listen back. So today, in today’s conversation, we’ll talk more about the current trends and we are keen to hear your perspective on what’s happening in the space of loyalty.

Mark Ross-Smith (01:29):

Cool. I’m looking forward to a fruitful conversation today.

David (01:33):

Mark, like we were talking just before we started the recording, so I may have been in the industry, the airline industry for quite a long time, but like so many things in the industry, we work in silos. So loyalty is something of a new subject to me and especially after I’ve stopped working for an airline, like I discovered, fares are pretty expensive and luxuries are hard to come by. But I think, let me start with a little bit of a segue. I was going through a post of yours today and I wanted to read it out to the listeners because it touched on a few relevant points. Some very nice, some nice secrets and some which may be a little bit controversial. So with both your permissions, I’m going to read out small extracts of it and then if anyone wants to read the entire post, please go and look at Mark’s post on, today is the 31st of May-

Alex (02:29):

30th.

David (02:30):

30th? See, I’m forgetting my months and my days. Okay. What I noted out, we all intuitively know that loyalty status is the most sought after most highly priced thing any aspiring traveler can earn. And I can attest to that because when I look at status and I say, “Oh, my goodness me.” My wife was really upset. She got downgraded from gold to silver and she blamed me because she said, “You’re not buying me enough flights. You’re not sending me on enough holidays.” So I can humbly attest to that, that I got hit on the head when she got downgraded. So that’s number one I wanted to talk about.

(03:06):

But Mark also said, people do crazy things to earn, retain and show off the airline status. Alex, this sounds like you, but I can assure it’s not you because you, we’ll come to a little bit about loyalty and you a little later, unnecessarily flying around the world, overpaying for flights. I don’t think you overplay for flights. So that’s not you. Connecting via another city instead of flying direct, I think you did that recently.

(03:32):

Instagramming the salt and pepper squid, sorry. Sorry, my glasses, squid lunch from the first class lounge. Yep. I haven’t seen you doing that yet. Posting photos on LinkedIn about how they’re flying to events. Now I’m just quoting from Mark, okay? I’m just quoting. This is exactly, exactly as you wrote it. Okay? But I’m just going to go to the next two points and then I’ll shut up. I promise you. Status is the single most powerful asset an airline has to drive new business, but personally I would say most airlines don’t know about it or perhaps don’t care about it. We covered that in the [inaudible 00:04:11], in the rest of the episode.

(04:12):

And the last point I want to make is no trains or buses for me. Now those that are green are going to get a little bit upset. I’ll be flying in for the event. After all, I have a light status to maintain. So with that, I think we’ve added a little bit of controversy to the podcast in terms of status. But Mark, can I start with the first question, Alex? I mean, I just read what Mark said, but now can I get to the question?

Alex (04:41):

I mean, I want to hear Mark’s opinion on that. You gave a full extract of the post. Mark, please do comment.

David (04:52):

Okay. But before Mark comments, Mark, one question. Before we go to that, we wanted to start first with what actually is your definition of loyalty and then we’ll come to the post. What’s your definition of loyalty?

Mark Ross-Smith (05:05):

Okay, so in the context of airlines, there’s the business of loyalty, which is selling points and miles to banks, it’s credit cards, partner accrual, that kind of thing. It’s making money. And then there’s the real customer loyalty. That’s what you and me and everyone else sees when we think of loyalty in the airline. So that’s the status recognition, that’s the business class check-in, the lounges, the priority boarding, all that kind of stuff. The stuff that we experience day-to-day when we fly to, “Hey, you’re one of our most valuable customers, that’s why you’re getting these extra perks,” kind of thing. So there’s kind of two parts to the loyalty equation here. Airlines in today’s world need both.

(05:49):

Some airlines can make quite a lot of money from selling points or miles to banks to the point where we’ve seen in previous years where the loyalty programs are valued more than the airline’s worth itself. So if you were to split them up, it’s like the airline, they’re actually… You could argue that the airline’s not an airline. The airline is a marketing company that has a loyalty program that happens to fly planes, not an airline that has a loyalty program. So that’s kind of how powerful the loyalty program is. And that’s because of the business of loyalty. But when it comes to, what I’ll sort of call passenger loyalty, that’s what we all experience every day when we go through the motions of flying in airports and stuff, that’s really about how we feel about the brand. So loyalty in that respect, is a bit of a branding sort of exercise.

David (06:43):

Perfect, thank you. Now would you like to maybe give a few comments on what I just read out and Alex, it was not the full post. I would recommend that you read it as well. I think it came out this morning, so-

Alex (06:55):

I read it.

Mark Ross-Smith (06:59):

This feels like one of those Instagram reaction videos reacting to my own post. But I have a good point in my post. Status is ultra powerful. Typically, the top 5% of flyers contributed by around 30% of seats for airlines. So as its own sort of group or segment, they’re responsible for probably the largest single chunk of revenue that airlines earn. So if you take status away, basically if you shut down the status program of airline today, watch the airline suffer tomorrow, if it survives at all kind of thing. So status is hugely powerful from that perspective and to my point in some of the notes and posts, people do sometimes crazy and irrational things to try and keep their status. David, your story. I’ve heard this quite a lot. People just doing crazy things.

(07:57):

Personally, I’ve done a bunch of status runs in the past to keep status and known status. Been totally worthwhile. I’ve got a lot of fantastic stories around it as well. How I’ve sacrificed days of my life just sitting on an airplane going back between two or three cities, just churn it out just to get that card. There’s a lot more people that do that than you think. It’s not like a very small niche group of one in a million people that do it. It’s quite a lot. I’ve heard stories in the finance industry comes towards the end of the year and suddenly, the whole office mysteriously has to do a meeting in some other country because they all need to keep their gold status for the year. It’s like, “Oh, well. We all need to go on a retreat to da, da, da, da, da. We all have to fly business class and we all have to fly via these two cities to get there.”

David (08:51):

Correct, absolutely. And I think, you know, and that’s when each time you look at your statement that you get from the airline, it’s technically you look at your points. But again, points are there. It’s like the money in your pocket, but it’s status, I would say, is like the brand you wear, that people pay more attention to a status than to what the actual miles are. So I see that happening. And just a side story, my mom called me up, when was it? About two months back. She said, “David, I’ve got this mail from Etihad asking about status match. What exactly do they mean by it? Because they say if I do this, this, this, I get gold. I become a gold member.” I said, “Mom, I’ll need to check that out.” And then when I did my research, I realized that Etihad had tied up with you for a status match for, I think, India and was it Australia?

Mark Ross-Smith (09:48):

Yes, correct. India, Australia.

David (09:50):

So I guess, it’s the word of mouth that even my mom, she’s 80 right now, she’s still bothered about her status and I asked her why. She says, “You know, when I go on any other airline, I’m stuck with that seat. It could be that cramped seat and at least with status, I get to access the lounge, I get a little bit more of niceties, maybe the airline will treat me a little bit better.” So I guess, all testament to your… Congratulations to you and the team because I can imagine what it does to the corporate types and the younger people, but if you’re reaching somebody who’s 80 years old and still wants to maintain a status, then that just shows the power of what status is all about.

Alex (10:28):

Did she do it, your mom?

Mark Ross-Smith (10:30):

Yeah. Did she do it?

David (10:33):

I told her, but then what happened is my sister paid for her ticket on another airline. So she said, “Okay, I’m going to [inaudible 00:10:39]-

Alex (10:38):

Oh, no.

David (10:39):

So yeah, but-

Alex (10:41):

Here we go. One lost customer for Mark. What a shame, David.

David (10:45):

I know, I know. But the thing is that, anyway, we’ll talk about that later. We’ll talk about that later.

Mark Ross-Smith (10:52):

I was going to ask for a testimonial from your mother to put on that website.

David (10:57):

I mean yeah, if she had done it, but I guess you may need to ask if Etihad to do it again, then I’ll tell Mom, “Mom, this time around, you need to do it.” And then of course, you know [inaudible 00:11:05].

Mark Ross-Smith (11:05):

So the offer is still valid. It’s still out there. You can still do it. Etihad, Status Match India and Australia.

David (11:10):

Okay, let me tell her that. Let me tell her that and if she does it, then I’ll make sure that she gives you a testimonial as well.

Mark Ross-Smith (11:19):

To be fair, there’s quite a lot of airlines doing status matches right now. Probably a dozen or so around the world. They’re very public sort of offers. There’s a bunch in Europe happening right now, even more coming.

David (11:32):

But I guess it comes back to relevance. Again, which airline is relevant to you and which country are you in at that particular point of time? So for her, Etihad makes sense or for me, Etihad would make sense or Emirates would make sense. So I think it’s, again, about… For me, I’m not interested in British Airways, as an example. So I think it’s just about relevance and timing as well.

Alex (11:52):

I said in the beginning that we will not cover much the Status Match story, but I think we need to mention here what exactly you’re doing because David, you said a few times, Status Match offer and I just want to make sure that listeners understand exactly what it is. So Mark, just give us a brief description of what exactly is status match and why airlines are doing this.

Mark Ross-Smith (12:19):

So status match is a concept. It’s been around for about 40 years. It’s not a new thing. 1986 is the first example of status match we’ve heard about and loosely, the concept of this, if you’ve got a silver gold status with one airline or hotel and a brand might offer what’s called a status match to another brand, right? So in the context of the Etihad example. Let’s say you’ve got a Qatar Airways gold status and you’re like, “Well, I want to try something new. I like Qatar, but I want to try something new.”

(12:55):

And you could, what’s called a status match, you could match it into an Etihad had gold status. And so basically, we run this sort of process on behalf of the airlines. And so there’s a website you go to. You basically plug in some details, we validate the status is correct, go through a bit of process and pretty quickly, you’ve got your Etihad status is now gold and Qatar doesn’t know about it. So you effectively have two statuses at the same time. And the idea is, hey, you’ve got this new gold status over here, just try it.

(13:30):

For the first… It’s like brand introduction, right? And so that’s when, David, to your point on my LinkedIn post, it’s the most powerful asset, digital asset now and has to get you customers. That’s effectively what it does. It’s a way to lure people across to your brand that have proven themselves with a competitor. And if you’ve got a gold stars with pretty much like the mid-tier then the airline, presumably you’re spending somewhere between five and 20,000 US dollars a year on flights somewhere in that range to get that status. That puts you in the top 5% of commercial airline customers who went global already, just by spending it much, many because most people don’t even fly once a year, right?

(14:12):

So already puts you in the top and think about it. You’re running an airline, I’d love to get a customer like that and how can I get a customer spending 20,000 bucks a year on flights? What’s the cheapest way I can get them? Status match. So that’s kind of the bit of the background on how it’s come. Me and a couple of former airline executives, we sort of got together in COVID times and how do we help airlines? What’s the product we can create to help accelerate airlines out of this recovery into the [inaudible 00:14:46], I should say. And so we built a system around it and it’s [inaudible 00:14:51] about a dozen brands that use our platform today.

Alex (14:55):

And there is no limitation, right? So let’s say in your example, if I have Qatar Gold, I could get Etihad’s Gold, I could get BA’s Gold, I could get pretty much as many airlines as I want, right? There is no limitation per se.

Mark Ross-Smith (15:14):

Good question. Yes and no. So we don’t work with every airline in the world and also, not every airline offers a status match. So BA currently in your example, are not currently offering a status match so not much help there. Etihad, yes, and depends. Airlines are not allowed to poach each other’s customers if they’re in the same alliance. So airlines in Oneworld, for example, they can’t go stealing customers from other Oneworld carriers. They’re not allowed to. Same for Star and SkyTeam as well. So there’s a few sort of nuances around that. But we’ve got a tool, basically. You can plug in what status you’ve got and we can tell you what you can get, what’s available, what’s out there, and you can sort of shop it around a little bit and collect a few little gold cards along the way.

(16:06):

But keep in mind, if you’ve got all these gold statuses, in a perfect world, you want to keep them, right? Because the status match is generally for, sometimes it’s for a few months, sometimes it’s for a year. And in that time, you’ve got to fly. You can’t just sit back at home and do nothing. But to be fair, if you are at home doing nothing, Status is pretty worthless to you anyway. It’s only useful as soon as you turn up to the airport and then it kind of kicks in. So if you’ve got all these gold cards or platinum or whatever, ideally you want to be flying so you can use them and try new brands, try new airlines, and see something new.

Alex (16:46):

Yeah, absolutely. Or at least you can make a really nice picture for Instagram or LinkedIn, me and all my loyalty cards. But Mark, I want to segue from here to something that I experienced personally. I’ve been loyal to one airline or airline group for many years, but then at some point, two years ago, I’ve just seen that level of service dropped. I was dissatisfied with many things and I honestly just wanted to try so many other new airlines. So I decided to become a free agent in travel and I just started experimenting and trying all these different new airlines and honestly, I love it and I don’t regret losing my… Well, I still have it, actually.

(17:40):

I was downgraded to the lower status, but I still have it, but I don’t regret it. I don’t regret a day not flying that airline or that group of airlines. So my question is, what’s your take on this? What’s your take on those free agents? Because I am pretty sure my case is not unique. Many people do this and is this happening just because I was so dissatisfied with that loyalty program and I just haven’t found a decent replacement for myself or it’s just like, I don’t know, it’s new trend that people like to not being loyal?

Mark Ross-Smith (18:20):

So you said this was a couple of years ago, yeah, that you-

Alex (18:24):

Uh-huh.

Mark Ross-Smith (18:25):

… started to… So a couple of years ago was end of 2022, was what I call the status cliff, which is when folks that had had their status renewed for free during 2020/2021, maybe 2022, for the first time in two or three years, they were being downgraded. They were due to be downgraded. So you had people that were at say, a gold level and they were dropping to a silver for the first time in many years because travel was a bit difficult, yeah? And what I call that cliff, that status cliff, estimate there was tens of millions of people that were being downgraded. And what happened is, maybe this is or isn’t you, but a lot of people reassessed their position at that point.

(19:08):

They’re like, “Well, you know what? Being downgraded, I haven’t flown for a couple of years, what am I going to do?” Travels was coming back hard and fast at that point and it’s like, “Well, things get expensive. I might just try this airline over here. Never tried them, but I’ll give it a shot. First time ever. I’m losing my status anyway, so who cares? I’ll go over here. I’ll try them.” And you try and it’s like, “Hey, wasn’t as bad as I thought. Was I really trapped with this group over here or was it a thing in my mind that I was trapped and I’m not really, and I can actually fly anyone I want anytime, but this gold cut or this silver cut that was keeping me loyal.” That was, we call the golden handcuffs in loyalty, right? [inaudible 00:19:55] to the airline, which is very effective.

(19:59):

And so a lot of people in your position just decide, I’ll just try something new. I follow your posts Alex and if you’re always at the front of the plane, arguably, it doesn’t matter too much. You’re already getting the lounge access and the business and first class check-in. So that is kind of on par with that mid-tier status anyway. So you’re already getting a lot of that when you fly another brand anyway. There’s also people that get downgraded. We’ve got a statistic, I think it’s something like 50. I can’t remember the exact what. It’s like 52% of people that get downgraded in status said they would consider flying another airline when they wouldn’t previously.

(20:43):

I can’t remember the number. I think it’s 30, 35% said they would never fly the brand again if they were downgraded. Even though it’s their own fault that they’re being downgraded, they would still never… There’s a window where they’re like, “F you, I’m not flying this airline again because they downgraded me, even though it’s my own fault that I’m being downgraded, but I’m not flying again in protest.” So there’s a window around a month and a half, where they kind of protest to themselves like, “I’m not doing this. I’m flying someone else.” So in my eyes that window represents an opportunity to try and, “Hey, come try this thing over here. You’re a still valuable customer to the industry. There’s still need to fly. Don’t stop doing that, but try over here.”

(21:26):

But when people, what I call disconnect from premium loyalty, they tend to… There’s a lot that kind of drop out and it’s like, “Well, I’ll just fly whoever’s cheapest,” or whatever the best connection is, the best network, the timing, whatever it is. And I think in some ways, this has helped drive the sort of uptake in low cost carriers as well because people are like, “Well, I’m flying these legacy airlines and heck, there’s this low cost carrier, ultra low cost carrier over here, save a lot of money. Even if I buy all the upsells, the seats, the bags, the [inaudible 00:22:03], even if I buy all that, still cheaper than what I’m paying over here and it’s like the equivalent of my gold status over here when I’m buying it all. So why not try it?” So in some ways, you could, bit of a long bow here, but could say that downgrading people and status has caused, in some ways, a rise of low cost airlines.

David (22:27):

I have a question here on the point of low cost airlines, and correct me if I’m wrong, Mark, one of your first customers was actually Frontier, if I’m not wrong.

Mark Ross-Smith (22:36):

Yep.

David (22:37):

And it’s strange because like you said is, normally when you think about low cost, you normally don’t think too much about loyalty, you don’t think too much about status. Everyone is hypothetically treated the same. And so there was actually two questions. Number one is, what exactly… I mean, what exactly did you do with Frontier? That’s the first question. Second is, as you see more and more low cost airlines increasing in different… I mean, I can talk for Abu Dhabi itself now. We’ve got a full service carrier and we’ve got actually two low cost carriers. What do you see? I mean, the program obviously changes, right? Because you don’t have status like you normally have in a traditional airline. So what is the sort of trend that you would see in terms of status match, status programs when you talk about low cost airlines? So two questions there. One is Frontier. I mean, how did you start with them? I mean, it didn’t make sense. It doesn’t make sense. Come on, what do you do with Frontier?

Mark Ross-Smith (23:37):

I like how we’re on point of not talking about status match today. It’s for you Alex.

Alex (23:43):

Can I take this back? Too late.

Mark Ross-Smith (23:47):

So I’ll share some interesting things. I’ll try not go too status matchy here. Frontier’s loyalty program is, looks and feels more like a legacy loyalty program than a low cost airlines loyalty program, what that might look like. So they have tiers, they have… You get benefits of those tier, I mean, there’s no lounge access, obviously, but think of it as the tiers are ancillary waivers. The higher you go up, the more stuff you get for free. So the base tier might come with a free carry on bag, whereas the top tiers come with priority boarding, free bags, free seats, free premium seats, all the stuff that you might otherwise pay for. But to get to that tier, you’ve still got to fly. Or in the case of Frontier and Spirit as well, which is a client, you can spend your way there on the credit card and this is where they make a lot of money.

(24:43):

So especially in the US, the [inaudible 00:24:45] credit cards, they just make so much cash for the airline that they can’t ignore it. I read a stat the other day, I think it was Southwest, it was… I can’t remember the exact number. I want to say it was like 19 or 20% of total revenue for the airline came from selling points of miles to banks, credit card, of total airline revenue. So that’s like being seats and cargo and corporate contract, all that, being all that kind of stuff, 20%. And that’s high margin revenue as well. It’s not like 1, 2% selling… I think what the best airlines in the world now operationally are what? 20% margins, 25%, something like that. They’re really, really sort of top ones, but most are somewhere around 5 to 10 selling points of miles to banks. This could be 80% margin.

(25:35):

So it’s what we’ll call the right type of revenue that you want to attract. That’s where these Spirit and Frontier, they really come in. They make a lot out of those credit cards. And so when people have status with the airline, it’s pretty logical that they’ll go get the credit card. So for them, it’s a quasi financial services company, the loyalty program. That’s effectively what it is. They’re just peddling credit cards for the banks, which makes them a ton of cash. To be fair, all the US airlines are like this as well. They make a lot of money from their credit card partnerships. This is less relevant outside North America though. So Europe, covering credit card’s, not really the biggest thing in the world. Asia, it’s kind of hit-and-miss depending on where you are. Middle East, it’s kind of a thing in some places. It just depends.

(26:29):

So to your point on Frontier, we’ve done a couple of things with them. Obviously, we’ve run status match from day one. They’re our first client. We launched the world’s first paid status match with them where you pay an application fee to apply. It was wildly successful and they said we need to do this again. We made a bunch of cash, got a bunch of new customers, got a bunch of new credit card customers, this is awesome, so let’s do more. So they’ve been very supportive of our business model from day one and launched a bunch of other things with them. Since then, we’ve launched something called a card match, which is… You think the top 5% of frequent flyers have status and then you’ve got the 95% under that, and the 95% don’t have status within that… The top 60% or so of those, think people that fly, they fly often enough, more than once or twice a year, but not quite enough to hit silver status, right? And that universe of people is significant.

(27:28):

So we ran a special offer for them when they could buy effectively, the silver level status for a fee and they had to pay for that on a travel credit card to prove that they were interested in travel. So that was very interesting. We launched that about a year ago with them. That was huge and successful as well. Actually there’s a good… Alex, you’ve heard the story, but I’m going to tell it again. That product actually, I happened to be, coincidence, sitting next to the CEO of Frontier Airlines on a flight, pure coincidence. I had no idea, just next to him. It was a four-hour flight, Denver to Miami on a different airline, which is pretty funny. And we just got chatting and realized who each other were. We realized we worked together already and by the end of the flight, we’d dreamed up that new product. It didn’t exist before that flight and he’s like, “I love it, let’s do it. I want to launch it now.”

(28:21):

And seven days later we’d launched it into market. So we’d built a brand new product for them from scratch, signed some new contracts, security reviews, media launches, all the brand stuff you had… You know all the sort of the [inaudible 00:28:34] you have to go through with these big brands. Did all that within a week. It was the fastest product I think we’ve ever launched. Probably fastest product that airline industry’s ever launched, very aggressive. So I really like brands that are progressive like that. They’re really innovative. They want to try something. They’re pushing the envelope a bit. They’re just doing something new. Doesn’t always work. I mean, it did for them, but it doesn’t always work. But at least you’re trying stuff and I think people in airline [inaudible 00:29:03] can get a little jaded sometimes. When you travel a lot, it’s the same thing over and over.

(29:08):

You go to the airport, check in, lounge, flight. It’s very much the same. Nothing’s really changed in the last, I don’t know, 30 years. And so when some new sort of product or offer comes along, there’s a bit of novelty and people are kind of drawn to it. It’s like, “Well, wow. The airline’s doing something new. Let’s try it.” That’s why I think when I’m, do something new, there’s all this media around it. It’s like, “Wow, look, they’re doing something different. There’s a new seat, there’s a new meal, there’s a new amenity kit.” Because it almost seems like much happens even though a lot does. So I’m a big fan of airlines that embrace innovation and try new things, and especially in loyalty where it’s a very marketing thing where you can take more risks. You don’t need to have the culture of, no, no, no, operationally in airline, very risk-adverse. Yeah? Because safety’s first, which is great, but in loyalty, safety is not an issue.

Alex (30:10):

Points are first.

Mark Ross-Smith (30:12):

Points are first. Status, status.

Alex (30:14):

No, when you talk about marketing, I told you many times this idea that every time I go to this lounge, I still go to this lounge in Berlin airport and I messaged you, “You know, Mark, you should put an advertisement of Status Match just in front of that lounge because I think it’s not only me, I think some other people who are leaving this lounge, they’re going there just because they have this card, still have this card, but basically, they’re not really satisfied.” At least, that is my feeling. So I think if you present this offer, “Oh, hey, there is a better lounge somewhere there. You can be going there instead. Just join our loyalty program, status match your current match,” that could be working. I keep selling this idea to Mark for a few years already. It’s not happening, so probably the idea is not the best.

Mark Ross-Smith (31:13):

I think the German mafia might come after me if I put a sign outside the lounge.

David (31:24):

But no, I mean, it’s strange that how airlines, like you said, have not changed anything in all these years and pretty inflexible, not very innovative. We always have that focus on safety and security. But the good thing here is like you said is with marketing. What is the worst thing that can go wrong? You get a little bit of bad PR, but people forget about it. But if it works, goodness gracious me, it actually is sort of very, very beneficial for the airline. But then going to Alex point about being familiar with something, if I was comfortable with an airline and I liked the airline, and I really sort of, it felt like home because I’ve always flown it.

(32:07):

Do you think just the thing of being, sort of experimenting by trying, “Okay, let me try the status match and try another airline,” do you think it actually works for a large percentage of people or is it just a small percentage that I’m willing to try out a different airline or to experiment? I know Alex likes to experiment a lot. I perhaps do in a slightly much lower sort of, I’m going to take a new airline when I’m flying next month. It’s an airline called Star Airlines in India. It’s a pretty regional carrier. And my wife said, “No, I’m not flying them. I’ve never heard about them, so I’m not going to fly them. Check another airline.” But do you think people actually would say, “I’m going to move away from this airline that I’ve been flying all these years to try out something?” What percentage of people, Mark, do you think do that?

Mark Ross-Smith (33:04):

So in my experience, people are pretty lazy and there’s this thing called human foraging behavior, which is people don’t like change effectively. You go to the airport on a Friday afternoon, you know John’s going to check you in, check your bag in. You have your conversation, “How was your week?” You go to the lounge and then there’s your Judy in the lounge. She says, “Oh, welcome back. Good to see you again.” Because she sees you every week because you’re in there every Friday. And then you’re on your 7:00 back home again and then you know what time it lands and you know, one in 10 flights, it’s going to rain, the weather’s going to affect it and there’s a routine there. And most people that fly like routine because they don’t like change. It’s a theme in the airline industry.

(33:51):

So a lot of people, especially business travelers that do short one/two hour flights, that’s a thing. They want to be able to rely on the airline. “I know I’m going to get this and it’s going to get me here then.” So that’s a thing. So getting them to try a new carrier is a little tougher. And these people, typically, if they’ve got status, they’re only going to change carriers because of status. I’m making this up. Let’s say that typical flight they fly is $1000 round trip and then airline B who offers comparable flight timing product, is half the price for the same thing. They’re still going to pay a thousand dollars, even though it makes no logical sense. You could easily save a lot of money over here.

(34:39):

And the only thing waiting to switch them across, is status. That’s the thing they care about. Even though it makes no sense at all, they want to keep the status because in their mind, the status makes a lot of sense. It’s all sort of ingrained in their mind. It’s an emotional thing. They’re very attached to it. They can tell their friends, all their colleagues at work have got gold status, so I’ve got to be in the club, that kind of thing. So status is the number one thing that can sort of draw people across to try something else. Not that everyone wants to do it, not that everyone should do it because Alex is on her mission now to collect 10 gold cards of different airlines and how’s she going to keep 10 different… It’s a bit tricky.

(35:21):

There’s an airline we work with and they gave me some status for free is just part of, “Hey, just try it out.” Right? And upfront I said, “Guys, I don’t think I can keep this. I’ve got enough status as I’m trying to keep and some will…” You give another one, how do I keep this, right? The funny thing is, I’m probably going to keep it this year. I’m well on my way to actually doing it. So I’m living and breathing this life every day. [inaudible 00:35:53] trip I’ve booked next week, same deals on that same airline and probably just scrape in. [inaudible 00:35:59] totally off-topic.

(36:03):

There’s two different groups of people, a bunch of people, they’re never going to change and that is totally fine. They like the way things are. They like what the airline provides, they like the timing, the service, the colors on the plane, the smell, all this kind of stuff. And then there’s people that can be swayed and there’s different things that will sway them. Things you can do to woo them across. Some people, they really want to try the next best thing. Some people, they don’t mind their connection, so they’ll connect through a city just to try something new.

(36:38):

Sometimes the product is just so good you want to give it a shot. My first time when I flew Etihad was in the Residence, in the thing at the front. I just wanted to try it. No one else offers the Residence. Not that rich, can’t fly private. So I was like, “I’ll give it a shot. Get Residence.” It was cheap at the time, so I thought I’ll give that a shot. Did that swing my loyalty to them? No, but I want to try it out, right? So I think there’s a bunch of people that will go after novelty factors as well.

David (37:13):

Great, thank you.

Alex (37:14):

It’s interesting you mentioned that you don’t see big changes in the loyalty for the last 30 years, but I’m pretty sure many things still change, right? And there are some trends, emerging trends that are current now, that haven’t been present before just because of technology development and other things. So if you get to name maybe three top trends, trends at the moment in loyalty space, what would that be in the airline loyalty?

Mark Ross-Smith (37:48):

I’ll tell you what interests me, AI marketing actually, a bit, because in my experience, airlines are pretty average at sending personalized things to you. Actually, funny story, just a week actually. Book another flight and I booked a business class ticket and I’m top status with this airline and they said, “You can select a seat for $99.” I’m like, “Hang on. I get free seat selection. Why are you telling me that?” And it says, “You can pay, da, da, da, and get lounge access as well.” I’m like, “Hang on a second. I get lounge access through my ticket and my status. Why are you trying to sell this to me?”

(38:32):

And that’s kind of a good example. This is basic personalization 101. This is not even anything. This is not big data, AI, none of that. This is just getting stuff right. And I think airlines, jumping from that to actually showing me something that I want to buy, that personally as a traveler, I’m really interested in that because you’re finally showing me something I want to buy, I’ll be thrilled. I’ll be so over the moon like, “Wow, look at that.” They’re not trying to sell me a discounted third bag to take on a flight, even though I’ve never taken two in the 2000 flights I’ve ever taken. And instead, you’re selling me a cheap chauffeur drive service or something that might be useful.

(39:21):

My point is, AI and data. That kind of excites me the most there because maybe some airlines will start getting it right, hit the nail on the head. I like ads. I like receiving ads. I don’t do ad blockers apart from YouTube. I don’t do ad blockers on. I like the banners. I look at these things, I click these things. I’m forever getting the retargeting marketing campaigns. I love this stuff. I love this stuff. I get sucked right into it. I buy stuff off it. I’m totally in this world. And the logic is, I mean I like it, but the more I’m in it, the more I see the opportunity for airlines. What if they started doing this kind of stuff? Because it clearly works. Otherwise, companies wouldn’t be spending all this money on this on, Facebook retargeting and Instagram, TikTok, all this kind of stuff. So yeah, improved marketing through AI. I think that kind of excites me.

David (40:17):

But do you think airlines will actually do that, Mark? Because they’ve had the loyalty programs for so long, it just sort of became these annual sort of churn or the points or updates that you sent to members. You had all this data for so long but they’ve not done anything with it. Do you think anything will change right now? Yeah, we are talking about AI, we’re talking about all this, but do you really truly believe that airlines will change? After all, they haven’t changed for all these years.

Mark Ross-Smith (40:46):

Let’s distinguish airline versus loyalty program. Yeah?

David (40:49):

Okay.

Mark Ross-Smith (40:50):

I think airline, questionable if they do change that and maybe they’re… Airlines are really good at making tiny tweaks and optimizing the heck out of that tiny little thing. How do we predict the winds between this and this destination, so we can flow with it to save three minutes of flight time, which equals this much fuel over a year and this kind of… They’re really good at this kind of stuff. Loyalty, which is basically a giant marketing program. I think there’s much more scope to do these things. We talked about, earlier about risk and they can take more risk. Not that there is risk, but they can take more. They can just try new things and they should be trying new things. They should, in some ways, kind of try and detach from the airline a little bit in terms of the thinking and what else can we do? What new products can we create that we don’t need to talk to our colleagues at the airline about, that we don’t need to get buy-in from someone in operations who has no clue at all about how loyalty works?

(41:50):

What’s something we can create over here in our little silo, just silo even more, just going to stay in our box. What can we do over here that doesn’t affect anyone else that we can just make a lot of money on? I see a lot of opportunity there. I see there’s probably two examples of airlines I think in loyalty, probably doing it really well these days. That would be the Air Canada Aeroplan program. They seem to be pretty progressive in this way. And more recently, Flying Blue, Air France/KLM’s program. They’re doing way more activity lately. Program’s actually pretty interesting now. I had a look at it the other day. It’s actually really cool. They did a lot of cool stuff, new partners, new ways to earn and burn stuff. It’s just got a lot more interesting versus some others I see out there. It’s like the same model. Keep in mind, what I call the same model, the old model. There’s nothing wrong with it. It works perfectly fine. It’s just like if you want to go improving it, you’ve got to try new things.

David (42:49):

Got you. So Alex, I know I’m trying to stay away from Status Match or whatever, but again, the word status keeps coming up again, but what do you do, you know? Here’s a question. So normally airlines have three levels. Oh sorry, loyalty. Let me not, let me take the airline out of it, sorry. Loyalty programs have three levels or four levels. Do you think we should make it more complex by adding in more levels and making it a little bit more confusing for people and adding in more benefits? So for example, you are half silver or-

Alex (43:22):

Gold light.

David (43:25):

And gold light because I’m… Looking at all these different brands, right now, it’s like platinums, platinum gold, silver, and whatever the entry level is. But do you think you can add more tiers and confuse people a little bit more, add in a few more bells and whistles, and make it more attractive and complex?

Mark Ross-Smith (43:45):

Would you like there to be more tiers? Would you like it as a consumer? You’re a traveler as well. Do you want… Most programs have three. Okay, some of the US programs have five or six already.

David (43:56):

Okay. Oh, okay. I didn’t know that.

Mark Ross-Smith (43:56):

I mean, where’s the limit? Was it 10? We go 10. How many you want to go?

David (44:01):

No, I guess yeah, I didn’t realize that because in this part of the world, it’s still pretty simple, but I guess I could convince my wife that silver is better than silver light and maybe get away with it than gold. So I was trying a little bit of psychology over there with her. If you were to sort of say that you completely revamp loyalty, you think of loyalty with a clean sheet of paper, you’ve got AI, you’ve got new airline groupings right now, you’ve got a lot of change happening at this point of time. What would be your ideal approach to loyalty, apart from the lounge access and good evening Madam Alex, welcome on board this flight. I hope you have a good flight and you get your meal maybe a little bit in advance. What would be the loyalty program? What would loyalty look like in the future?

Mark Ross-Smith (44:53):

This is a bit of a loaded question. Wasn’t it Riyadh Air that was saying they wanted to redefine loyalty and they want to understand personalization. We’re going to know if you’re left or right-handed. That’s the level of personalization we’re going to know. We’ll hand you the drink with your whatever hand, [inaudible 00:45:11]. Come on guys. There’s a true and tested model that just works. There’s the kind of bare-bones structure, three tiers, earn and burn. It just kind of works. There’s nothing inherently wrong with it. It can be improved a lot, but there’s really nothing wrong with it there.

(45:29):

I’ll just go back on your point of extra tiers because this gets, of status level, this gets interesting. Just a few months ago, Frontier Airlines introduced a new tier. They had three tiers and they introduced a new tier, a bottom tier, between the zero level and the silver. Kind of like a silver light tier. They did that. I’ve heard nothing but good things about that. There’s a lot of people that kind of… They’re not quite silver, but now it’s something for them. They’re not nothing now. There’s something but not quite where they were, it’s that in-between. They get something but not everything, type of level. And the other tier that airlines typically look at creating is like a super VIP tier. You’ve got one between silver and zero and then one above your typical platinum level. Maybe the VIP tier is a proper, it’s invitation only. Sometimes it’s published. Like we’ve seeing Etihad announced a new tier above their platinum. It’s published, I think it’s $120,000 or spend a year or something to get there. It’s quite a lot.

(46:38):

But they’re saying, “Hey, this is what you need to get it and amazing benefits when you get there.” And when you add a tier, I’ll just… It’s a bit off-topic, but when you add a tier… Actually, I’ve written a whole article about the logic behind why this works. Actually makes a lot of money for the airlines when they launch a new tier for two ways. The tier above platinum that is launched, as long as you publish what criteria is to get there, does two things. One is, there’s a bunch of people that are platinum that will start spending more to try and get into that new tier. And so when they spend more, lot of times unnecessary, just to get into this new tier. So people start spending up. It’s only a percentage of people that do it, but these are the people that when they spend up, they’re not taking the extra flight from London to Paris in economy. They’re taking the extra flight from London to Sydney, Australia in first class kind of thing. It’s a proper flight, proper money.

(47:39):

And then people that are already at that tier that don’t need to spend up, it’s about revenue protection for the airline brand. Because if you’re spending that much, you really have a choice of who, you could fly any… Because presumably, you’re always in business and first class. And if you’re always in… Let’s say you’re always in first class, you could argue it doesn’t matter who you fly. Status at that point kind of loses a bit of its value because if you’re in first, you’re getting everything that the top tier customer is going to get anyway.

(48:08):

You’re getting the lounge, you’re getting the first class, you’re getting everything. So how do you protect that customer? As a customer, how do you keep them spending with you versus going somewhere else? And so if they were to start flying somewhere else, I mean, God forbid that just one flight they move from your carrier to someone else. That could be $20,000 gone in one hit. So it was like, how much would you spend to keep them loyal to keep that extra flight with you versus them shopping around to look at something else one day. So that’s the logic behind the top tiers, is a spend up and then there’s a revenue protection for the airline. It’s less about loyalty at that point and more about airline revenue, securing ticket sales.

Alex (48:53):

Being conscious of time, I think I will just ask one more question. We talked about trends. Another trend that is growing and has been in the airline industry for quite some time now is sustainability. Everyone talks about sustainability. So my question is, in my mind at least, sustainability and loyalty, sometimes they have actually different interests because for example, if I’m loyal to an airline, yeah, I wouldn’t mind not a direct flight. I wouldn’t mind flying instead of taking a train, which is a more sustainable option. So what’s your take on this? This is the first part of the question. And the second part, is it fair that airlines are using this sustainability cost to boost their loyalty? I’ve seen some airlines, they give more worth points, miles, for buying like green fare or offsetting CO₂ emission. It’s a loaded question. Two questions. So please tell us, Mark.

Mark Ross-Smith (50:06):

I have a few perspectives on this. In terms of the green fares, I think we’ve seen a couple of airlines launch these. I can think of one European group that’s been pretty big on this. Ironically, the green fares are not colored green on the website. They’re colored red or yellow.

Alex (50:25):

Blue.

Mark Ross-Smith (50:26):

Or blue, yeah, exactly. They’re different colors.

Alex (50:27):

Whatever. Yeah. Not green.

Mark Ross-Smith (50:30):

The colors they use are marketing because they’re actually colors that your eye is attracted to. So it’s actually to get you to click it. Interesting. If it was really green, people don’t click green, do they? But they click yellow, they click red. So we keep that in mind. I think if… I saw a stat. It was, what is it like 12% of people were buying those fares? Something like that. It was quite a high number than I thought it might be. I think, I mean, the true test is if you take away benefits from that green tier, if you take away the extra points, the extra status earning, the extra bags, all that… If you take away that and just say you’re just paying more because we’re doing this stuff over here. It’s like feel good about helping the world. That’s the true test of if people are willing to pay for it, right?

(51:20):

Because right now, are people buying it because they want to do good and contribute to a cause greater themselves or are they doing it just for the perks? So I think the true test would be just kind of removing those to see how that does. Which brings me to the second point. For probably at least 20 years, I’ve seen airlines sell, yeah, rewind 20 years ago, you’d always see the, for an extra $33 on this flight, we’ll plant three trees and offset your carbon. We’ve seen that for a long time. That has been traditionally one of the worst selling ancillary products airlines have sold. Less than 1% people take up that. So I think there might be a bit of a disconnect between what we’ll call airlines and governments and media are putting out there versus what people are actually willing to pay for. Because if people are not willing to pay the extra one, two, whatever dollars to offset or for SAF or et cetera, they’re just not willing to pay for it means there’s a disconnect somewhere.

(52:25):

So I think it’s a bit of a challenge for airlines to kind of bring these things together, if that’s a path they really want to go down. I live in Asia where it’s less of a focus by airlines. I mean, they’re doing things but not to the level that say, some of the northern European airlines are. And it’s just because when you go about your daily life in Asia, sustainability is just not a thing you see. You don’t see a billion people in China turning off their heating during winter to try and save the planet. You know what I mean? I don’t think any Singaporeans’ willing to turn off their air conditioning for one minute at all to help save the planet. They’re willing to pay for it. So I think it’s a bit of a challenge for airlines to bring these two together, this whole sustainability and loyalty. Actually, I think it was… Is it KLM that says, I think it says the best… I’m terrible at paraphrasing this. It’s like, don’t fly more unnecessarily, but when you do fly, we want you to fly with us.

(53:43):

And I kind of like that. It’s like we recognize that flying brings a lot of positive benefits to the world. There’s not just this carbon, it’s only 4% of carbon emissions. Keep that in mind. The cement industry is 7%. So 4%, it’s actually pretty low. But when you do need to fly, please choose us. We know you have a choice. We’ve got fuel efficient aircraft. We’re trying to do as much as we can. I mean, we’re an airline, at the end of the day. We still fly planes through the air. We haven’t figured out how to levitate and use new propulsion technologies, which to be fair, I think is probably where I think the industry needs to go. We probably need to figure out how to get away from oil entirely and some sort of new sort of technology that’s just levitates us or teleports us or something. That’s probably the longer term view on how to get there. But if we teleporting people, it’s not as sexy, is it? There’s no seven hours of caviar in the sky at that point.

David (54:44):

Correct. Yeah.

Alex (54:47):

Oh, brilliant. I mean, I think we would want to continue talking with you for hours, but we’re conscious of time and I think we need to wrap up for now. But definitely Mark, I think it would be great to have you as our guest again maybe in the year time so we can check in on the latest trends and what’s happening in the loyalty space. I’m pretty sure teleporting will not be a thing by then still. So we would still need, some people would still crave for their loyalty status. Maybe by that time I will change my mind and I will find that one airline that I want to be loyal to, but so let’s see. Yeah, thank you so much, Mark.

Mark Ross-Smith (55:33):

Been a fun conversation, guys. Really enjoyed it. Alex, we’re going to get you this gold card in the near future. I think next time you’ll be like, “You know what? I’ve been flying this one airline and I really love it.” And you’ll just be the biggest poster child for this airline ever had. They just almost pay you. That’s what I think’s going to happen. You’re going to fall in love with an airline.

Alex (55:53):

I have that airline. It’s just, it’s US based.

David (55:53):

[Inaudible 00:55:57]. She already has-

Alex (56:01):

I have it. It’s JetBlue. It’s JetBlue. But I mean, I live in Berlin. What do I do with JetBlue? Unless I need to fly to other destinations, not only US.

David (56:09):

Mark, she’s currently lobbying for JetBlue to start flying to Berlin. So that’s a top secret. Please, we’ll have to cut it from this part of the podcast. But Alex, sorry. I shouldn’t have said that, but we’ll delete it from the podcast that… JetBlue flights to Berlin.

Alex (56:24):

It’s okay.

Mark Ross-Smith (56:26):

That would be interesting. That’s a long flight. What’s that, six, seven hours from New York?

Alex (56:33):

No, it’s seven, seven and a half. They already fly to Amsterdam and Paris and London and Edinburgh. So why not Berlin? Just saying.

Mark Ross-Smith (56:41):

A long way on a single aisle aircraft.

Alex (56:43):

I know.

David (56:44):

But I think that’s going be-

Alex (56:47):

If you’re in Mint, you wouldn’t mind.

Mark Ross-Smith (56:48):

You’re always up front, so that’s fine.

David (56:50):

You’re always-

Alex (56:50):

No, not always. Okay, okay. It doesn’t matter. I think we wanted to wrap up and say bye to our-

David (56:59):

And just… And bye. But just in parting, I’ll close. Mark, it was a pleasure finally talking to you and hopefully, I will not get downgraded in the next few months by my current airline. And if I do, I know how to reach out. I know who to reach out to. So I’ll let you know. If I retain my status or I get downgraded because status actually makes a big difference and I completely agree with you on that, in terms of that.

Mark Ross-Smith (57:24):

It does make a… The trick, David, is to do a status match before you are downgraded.

David (57:28):

Okay.

Mark Ross-Smith (57:28):

Because once you’re downgraded, you’re matching to a lower level. So you want to take some action just before… If you’re not going to keep it, if you don’t think you’re going to, maybe a month before.

David (57:39):

Okay.

Mark Ross-Smith (57:39):

It’s probably the right time to trade it in for something else.

David (57:43):

Thank you so much. I mean, see? That’s what you call gem of advice, just before we stop the podcast, Alex. So thank you, Mark.

Alex (57:51):

Yeah, and we will leave a link to Mark’s website to Status Match website in the episode notes. So whoever is interested to match their status, please go ahead and check your options. Bye. Happy flying, happy status matching.