Calling on the responsibility of platform suppliers
28 November 2022
Several recent experiences let us recognize a drift towards a situation where established loyalty platform suppliers are no longer living up to the responsibility their role comes with. A change is urgently required here.
As part of our consulting work, we tend to come across a big number of different airlines around the world and although not necessarily directly involved in the topic, we get feedback about loyalty platform suppliers, which indicate that these are no longer always the trustworthy partners they should be.
Three suppliers – three examples
Without blaming anybody publicly, just three anonymous, but representative examples we came across recently.
One airline was literally forced into an RFP by its suppliers as it ran its loyalty program on an old version of the platform, which was lacking several critical functionalities compared to the latest release. However, the supplier asked for such tremendous costs for upgrading to the current version (and too much confidence was lost during that process) that the airline preferred to switch completely to a new supplier.
The second example is probably the most recurring one: Ambitious delivery timelines are promised during the sales process, which are not met afterwards. As customers align their business plans (with corresponding plans to generate revenue) to the initial timelines, any such delays put them in real trouble. In one recent case, an airline was even forced to move forward with a basic program version in order not to delay the project too much – and the supplier considers now all future changes, although clearly outlined in the initial scope, as change requests (and probably even intends to charge the customer additionally for it!).
Our third example is a niche airline, which was interested in launching an FFP and had signed a platform agreement with a supplier. Being a small carrier, they though never got the attention of the supplier and the platform was simply never delivered. Not having the resources (neither the motivation) to restart the project from scratch, the airline has outrightly cancelled its plans to introduce an FFP – what will certainly not help it to become a prosperous airline in the future.
To be fair, we should add that we only heard the airlines’ versions of these stories – but even if the truth might deviate slightly, the result is that serious damage to these airlines has been done. And at least as worse as the commercial aspects is that such events often create a relationship of tension with clients – rather than being a constructive partnership, which would be needed for such a complex task.
Addressing the issues
Whether you recognise yourself in these cases above or not, suppliers should self-critically redefine their position in the market if they want to stay relevant. The right balance needs to be found for many between the efforts put into 1) sales, 2) delivery, 3) after sales support, 4) R&D and 5) innovation.
Where are your strong and weak points in these five areas? How many resources do you allocate to each of them? Such analysis will quickly show you where your shortcomings are, but are also a forward-looking planning tool: If you invest today heavily in sales in order to seize the undeniable opportunities, there is nothing bad about that – but anticipate that you will require additional resources for delivery and after sales support with a few months’ delay. If you understand that you won’t be able to do that, there is no sense in chasing any new customers since, at best, they will not be satisfied.
Redefining partnerships for the future
IT plays such a crucial role to the success of airlines’ loyalty strategies today that there is no way for airlines to excel in that area if their IT partner falls beyond expectations. Objectives and deliverables need to be fully agreed upon with new customers even before signing any contract (and, of course, they are to be defined by the customer rather then being dictated by the supplier!) – and afterwards to be reflected in the contract. We still see far too many contracts where no clear commitment by the supplier is mentioned – including a penalty scheme in case of non-respect of the commitments.
With existing customers, regular meetings to define new requirements need to take place, also resulting in concrete commitments what is possible to realise – without letting customers bleed financially with the smallest change request, which could easily be included to the monthly fees. And while certain customers are larger than others, the loyalty platform is critical to each of them and any feedback from a smaller customer needs to be taken as seriously as from a larger carrier. There should be no notion of more or less important customers in healthy industry relations. If you are not willing to do so, you rather refrain from selling to smaller partners in first place.
Such simple steps will allow suppliers to fully reassume the role they enjoy in this process – to be an enabler. That is exactly what customers expect from an IT platform provider. They do not necessarily look for business intelligence or any other added value – at least not as long as the basics are not right (again).
Many of today’s problems are the result of the desire by suppliers to expand beyond their core competencies. Apparently, a big share of suppliers got too distracted by such ambitions, having a negative impact on the quality of their core business. Pan Am was once the best long-haul carrier by all means. This changed when they decided to distract themselves by building up a domestic network. The rest is history we can learn from.
