Q&A: IAG Loyalty CEO on the New Age of Customer Loyalty

This sponsored content was created in collaboration with a Skift partner.

What makes a traveler pick one brand over another in a market overflowing with choices? The decision is based on more than just price or convenience — it’s rooted in a brand’s ability to make people feel understood, valued, and rewarded.

This deepening relationship between travelers and brands reveals the increasing significance of loyalty in the industry. Loyalty programs have evolved from mere points-based incentive schemes into tools that influence traveler decisions — decisions that are no longer about just getting the best seat on a plane or a room with a view, but tied to the emotions that drive each journey. But how do travel brands capitalize on this growing demand for loyalty?

SkiftX spoke with Adam Daniels, CEO of IAG Loyalty — a company specializing in customer loyalty programs and the driving force behind Avios, the loyalty currency of British Airways, Iberia, Aer Lingus, Vueling, Qatar Airways and, as recently announced, Finnair’s loyalty program — to understand the current pulse of loyalty in travel and how the company is innovating its approach to adapt to travelers’ needs.

SkiftX: Why does customer loyalty matter so much in today’s travel industry landscape?

Adam Daniels: The crux of it is the need to stand out in a crowded market. Differentiating your brand is vital, and loyalty programs offer a powerful way to create strong bonds and drive behavioral change. When brands provide value that resonates with customers, they encourage repeat business, increased retention, and growth and profitability. It’s much easier to grow revenue from existing customers than to search for new ones. That’s the core of why loyalty matters so much.

For example, when we look at Sainsbury’s Nectar, which we partnered with in January 2021, Avios collectors spend an average of 50 percent more than those who don’t, showing the power of the currency and the purchasing potential of our members. In a competitive market like the UK, such a shift is significant for growth.

SkiftX: What trends have you seen in the loyalty landscape in recent years, and how have traveler demands around loyalty changed?

Daniels: The demand for strong loyalty programs is higher than it’s ever been. Some even call it the “golden age of loyalty.” For us at IAG Loyalty, members are collecting Avios in numbers we haven’t seen before: In the first half of 2023, they collected on average 70 percent more than in the same period in 2019. We are also seeing record redemptions, especially this past July, and we surpassed that in August.

The pandemic accelerated this growth — people continued to collect Avios even when they weren’t flying much. Our recent study into loyalty behaviors during the cost-of-living crisis gave us some valuable insights into what’s important to consumers when there is more pressure on their wallets. According to the results, 92 percent of respondents felt that loyalty programs provided extra value during such times, and 55 percent were actively finding new ways to collect points.

But while trends evolve, the core of a loyalty program stays the same. They need to be straightforward to use, and the rewards should be significant, recognizable, and valuable to people. That’s what we’re trying to achieve, and it seems to resonate with our members based on feedback we’ve received.

SkiftX: What are the biggest challenges faced by today’s loyalty programs?

Daniels: The biggest challenge is staying relevant and keeping the program fresh. This is vital because members’ needs are changing rapidly. We must be in tune with what’s important to them. It’s also very important to differentiate and not be seen as an isolated program tied to a single airline or destination. Lastly, the currency’s growth and utility are intertwined. It’s problematic if there’s a mismatch, like being able to earn points without enough opportunities to spend them — a challenge many companies grapple with.

SkiftX: How does IAG Loyalty empower travel companies to address these challenges? What unique strategies have enabled the company to stand out in the industry?

Daniels: Our partners are consistently looking for a loyalty proposition that’s distinct and geared to their customers’ needs. Time and time again, we’ve seen them grow key metrics like market share and share of wallet through their partnerships with us. They can see just how powerful an incentive Avios is at scale.

Our willingness to allow the exchange of points in and out of the program is what sets us apart. Many loyalty programs might hesitate to venture here due to the perceived risks, but this approach has been rewarding for us, and we’ve seen much higher customer engagement. We’re getting a high volume of inquiries from international brands, which indicates a broader recognition of the potential of Avios. It’s part of our strategy to make Avios a global brand.

SkiftX: How does IAG Loyalty leverage technology to enhance the customer experience? How does it translate into customer loyalty?

Daniels: We’ve been heavily investing in both our processes and our technology for years. We started as a heritage business reliant on technology that was over 20 years old. But now, agility is central to our operations. We’re utilizing modern APIs and have shifted almost entirely to the cloud. This has accelerated our pace significantly. Tasks that once took months now take just weeks, and that speed matters for our partners and our members.

A good example is a new collection product, which allows members to boost the Avios they have earned. We built this in three to four months, which was unthinkable even just a few years ago. We saw it embraced quickly by our members, with half a billion Avios issued in the first few weeks.

SkiftX: You want Avios to be a global currency — why? And how do you envision this to work?

Daniels: Avios is already recognized in our core markets like the UK, Spain, Ireland, the US, and Qatar, but we’re aiming to extend its reach so that our members can collect Avios wherever they travel. An example of how we’re doing this is the deal we signed with Qatar Airways last year. They adopted Avios as their currency in 2022, and we’ve seen billions of Avios moving between our programs since then. Redemptions have gone up fivefold and there’s more awareness of the currency. Continuing this momentum, we’ve just signed a new deal with Finnair, which will adopt Avios as their currency starting in 2024 — a partnership we’re very excited about.

We believe our model works with other businesses as well, not just airlines. As it evolves, our vision is to transform Avios from a local to a global currency. We think that’s a real opportunity going forward.

SkiftX: Can you share any key insights or lessons that have been instrumental to IAG Loyalty’s growth?

Daniels: Our growth revolves around a simple strategy: providing the best experiences for our members and making it as easy as possible for them to collect the currency. Members will only keep collecting if what they can spend on is meaningful to them. That’s why we’re focusing on offering the best rewards and streamlining the ways they can be earned.

Our recent partnerships with brands like Santander, Sainsbury’s Nectar, Barclays, Uber, and Qatar Airways have been instrumental in realizing this strategy, making it convenient for members to collect Avios on everyday spending. We’re also opening new avenues in India with our multi-branded credit card in collaboration with IndusInd, British Airways, and Qatar Airways.

We’ve been innovating the rewards strategy as well. We’ve reduced the cash amount people need when they redeem Avios, where members can fly to and from Europe from as little as £1 plus Avios, a low cash option that we expanded to all long haul routes for UK and US members at the end of last year. We also launched Avios-Only flights, where every seat on select in-demand flights can only be booked with Avios, which has already proved very popular. The first flight to Geneva sold out in just three hours.

Members can also part-pay with Avios when they book with British Airways Holidays. 20 percent of all bookings now utilize this. The Wine Flyer, which is a venture we set up last year, lets members purchase wine online using their Avios and have it delivered to their homes. We launched the opportunity for members to be able to donate their Avios with the BA Better World Community Fund — millions of Avios have already been donated to support over 150 causes.

SkiftX: Where do you see the loyalty landscape heading in the next decade, and how is IAG Loyalty adapting to these changes?

Daniels: I anticipate a consolidation of currencies across loyalty programs. The current situation, in which every retailer has its own program, its own currency or set of rewards, doesn’t seem sustainable long term. Technology will of course play an important role — AI and machine learning will help provide more personalized offers to members. Currently, we’re only scratching the surface, but it’s a domain we’re actively exploring. Moreover, people will value unique experiences more and more.

But even as loyalty programs evolve, one thing stays the same: they need to be simple and offer real value. It’s all about providing the best rewards possible and truly knowing what members want. Our 30-plus year history shows we’ve adapted to these needs before, and we’ll keep doing so in the future.

To learn more about IAG Loyalty, visit iagloyalty.com.

This content was created collaboratively by IAG Loyalty and Skift’s branded content studio, SkiftX.

Please join Adam Daniels, CEO of IAG Loyalty for a special session at Skift Global Forum, September 26-28 in New York City.