The effects of frequent flyer programs in the airline industry on customer loyalty

© The Author(s) 2021. Published by ARDA. Abstract Customer Loyalty Programs are one of the handiest tools to raise brand awareness, and secure long-term and strong ties between a brand and existing consumers. Airline companies have been using frequent flyer programs (FFPs) to retain customers with the expectation of increasing passengers’ loyalty levels. The purpose of this study was to examine the significance of FFPs for customer loyalty, which is of great help for customer retention in the civil aviation industry in the sample of passengers flying from the new Istanbul Airport. Furthermore, we questioned the effectiveness of various services and products offered within FFPs for loyalty, which is decomposed into two main components, behavioral, and attitudinal commitment of loyalty. We evaluated the significance of various demographic factors on passengers’ perception of FFPs services and privileges, and customer loyalty. The study confirmed the vital role of FFPs to build up brand loyalty, where profession, duration of the membership to FFPs, and gender are essential factors.


Introduction
It is extremely critical for companies to have strong ties with their customers. Customer Relationship Management (CRM) is seen as the best business strategy for companies that aim to retain customers in the current dynamic, and constantly changing economic world [1]. This commitment also determines where the companies will be positioned in the competition. This is why many companies try to weave their customers' feelings of loyalty and try to persuade them to make the next purchase. This persuasion process is based on very delicate balances, which may result with a commitment or a separation. Without doubt, the quality of the product or service is an important determinant of the level of loyalty [2]. However, factors beyond product and service quality also make an important contribution to the process. This contribution also shows that the process of creating customer loyalty is a multi-dimensional process. Customer loyalty programs (CLPs) are one of the most important CRM tools used by companies to brace loyalty. These programs can be seen as a new roadmap which is common to diverse industries in different countries for the development of relationships between companies and customers [3]. In CLPs, companies try to be closer to their customers with mutual moves. Companies offer various benefits to their customers following their regular purchasing actions. If this purchase-reward relationship continues, customers' loyalty levels can increase rapidly. Thus, CLPs have become an important customer relationship management tool in recent years, which support a sustainable business environment. The civil aviation sector draws attention as one of the sectors where customer loyalty programs are used extensively. Frequent flyer programs (FFPs), which are an important tool in this industry, are used as a tool for the sustainable relationship between airlines and passengers. Furthermore, FFPs are seen as a major prestige issue, especially for large-scale airlines. Therefore, the value of FFPs has increased even more in the civil aviation. This study aims to focus on the importance of FFPs for customer loyalty in civil aviation industry based on a survey conducted in Istanbul. The contributions of our work can be highlighted as such: Firstly, the services offered within FFPs and their relevance on building up customer loyalty will be examined, where the loyalty concept will be investigated under two related sub-constructs, behavioral, and attitudinal loyalty. Furthermore, the significance of some demographic factors for FFPs and customer loyalty will be evaluated, which will provide additional insights on the design of FFPs for marketing professionals in aviation sector. Lastly, the survey data was collected from passengers who have used Istanbul Airport, the new airport of the city. The rest of the study is organized as follows. In the second section, a literature review is presented, which questions the relationship between two constructs, FFPs and customer loyalty. The third section addresses the general concepts of customer loyalty and FFPs, and provides a basis for the discussion of the results. In the fourth section, the research framework, data, results and managerial remarks are presented, while the last section is devoted to conclusion

Literature review
The pressure on full-service airline to maintain customers especially business travelers in the airline industry has been mountain with an increasing competition and innovations in an ever-changing industry. Relationship marketing especially the use of FFPs has been adopted by airlines widely since its introduction by American Airlines in 1981 and has been found to increase customer loyalty especially for business as against leisure fliers [4], and [5]. The effectiveness of this initiative in achieving its intended benefit of enhanced customer loyalty and securing repeated buying has become a topic of much discussion, debate, and investigation in the form of research works from various researchers in different markets. Reference [6] developed a model that classified the benefits of FFPs into the three groups of recognition, convenience, and exploration. These benefits when achieved are expected to improve the perceived relationship investment between the airline and its customer which in turn should improve customer satisfaction and possibly loyalty. In the low-cost carrier market, [7] argued that the FFP is not limited to only full carriers but are part of the business model of this segment of the industry at list in the case of the European market. Low-cost carriers possess lower complexities in their implementation as against legacy carriers and this makes the FFP more than a tool for loyalty purpose but a broader issue of airlines business model. Reference [8] highlighted the need for low-cost carriers in Europe to do more than just offering fares at a lower cost. This work highlighted the need for the broadening of the offer by including service features such as the FFC in enriching their business model. Reference [9] in their survey of 2000 business travelers of Chinese domestic flight found FFP to be second to airline reputation in influencing the loyalty of customers. In this work, other important factors were aircraft, and inflight services. This finding was in support to [10] who based their study on China Airlines and found the FFP to be an important component in the marketing programs of airlines as it comes with positive effects on the finances of airlines and their partners. These benefits are as a result of the database the FFP uses to offer personalized marketing programs [11]. In Turkey [12] found a medium relationship between the adoption of the FFP and customer loyalty. They highlighted members of this program were more interested in the intangible rewards such as free tickets, priority in reservation, guarantied reservations, and express check-in that such a program offers to its members. In the corporate world, customers travel on cost burnt by their corporation, the relationship mirrors a triangle with the customer having to consider company policy in choosing an airline. The decision here on joining a FFP and staying loyal to that airline might not be wholly upon the shoulders on the individual customer. Reference [13] found the FFP less important to them when choosing an airline as they will have to conform to the cost reduction policy of their corporation. A similar consideration was echoed by [14] with just above half of corporate travellers in his survey agreeing to be loyal to their airlines of choice. In general, the FFP is seen as an essential tool in the airline industry in securing the loyalty of customers. According to [15], airlines that fail to offer such programs stand at a disadvantage. This programs is believed to have a long-run positive effect on the loyalty of customers [16]. One main explanation for such an outcome is the increase in the switching cost that this program brings to its users and as such one would prefer to continue in such a scheme and be loyal to that airlines where membership has been maintained for quite some time [17].

The concept of customer loyalty
It is noteworthy mentioning that there is no consensus on the concept of customer loyalty in the marketing literature. An early and widely accepted definition is one provided by [18]. The duo defined brand loyalty as "… a set of six necessary and collectively sufficient conditions [which are] 1. the biased (i.e. nonrational), 2. behavioural response (i.e. purchase), 3. expressed overtime 4. by some decision-making unit 5. with one or more alternative brands out of a set of brands and 6. is a function of psychological (i.e. decision-making, evaluation process. Subsequent definitions buttressed one or more of these six elements that would necessitate a customer being identified as loyal to a company, brand, service or product. Reference [19], for example defined the concept of customer loyalty as purchasing the goods and services that they prefer continuously, despite the situations that may cause a change in customers' preferences and marketing efforts, and the commitment of that company to being a customer of that service. In concurrence to [19], [20] emphasized the necessity of a customer to continue patronizing a company even when the company is making mistakes for that customer to be known as loyal. Further definitions of loyalty include those provided by contributors such as [21], which states that customer loyalty refers to the tendency of customers to become repeat customers based on their past experiences and future expectations. Reference [22] define the customer loyalty as the desire of a customer to constantly recommend their company to others, or to maintain their relationship. According to [23], loyalty is the consumers' positive attitude towards the company and repurchase behavior. Reference [24] argues that loyalty is the customer's desire to continue their relationship with a company or brand which is an emotional commitment that does not change against a company, product, brand, or person. In addition to repeat purchasing behavior, customer loyalty emerges as a concept that leads businesses to sell at lower costs, the willingness of customers to recommend products or services and to commitment to the business, thus indicating that businesses can gain competitive advantage against competitors [25]. This is imperative for companies operating in today's business; an environment of intense competition. In other words, establishing customer loyalty is a necessity for today's companies that are aiming to achieve sustainable competitive advantage [26]. Looking at these definitions, a conclusion that can be deducted is customer loyalty is a term that explains the rationale of customers, which is characterized by their willingness to consistently prefer a company, brand, service or product over its substitutes whenever the need for purchase arises. In general, two dimensions of loyalty have been studied in the literature; behavioral loyalty, and attitudinal loyalty. The former explains customer loyalty only with the frequency of purchase. However, some researchers draw attention to the attitudinal aspect of loyalty, arguing that the behavioral approach is insufficient to explain customer loyalty alone. The attitudinal loyalty is referred as psychological commitment of the customer to the company's products and services. A customer with attitudinal loyalty can recommend it to others, even if s/he does not use the company's products and services regularly [27].

Concept of FFPs
FFPs aim to protect the loyalty of passengers by giving passengers various rewards. In addition, it can be said that loyalty programs have two other main benefits. First of all, demographic information is obtained from the passengers who are members of the program and recorded in the database, and by matching this information with the flights, they have the opportunity to offer different product packages to different customer segments. Second, the rewards offered to customers through FFPs make the airline differentiate from other airlines. With FFPs, the aim is to turn the passengers into loyal passengers depending on the business. These programs also provide great advantages to businesses [28]. FFPs were implemented for the first time in the USA. The liberalization policy in the USA brought many airline companies to operate in the aviation sector and the removal of the limit on ticket prices, and the sector shares of large and small-scale airline companies showed a rapid change. Although many airline companies did not operate in the American aviation sector at that time, they had trouble reaching the sufficient number of passengers. Therefore, they have started to develop applications to attract passengers. Although an application that offers rewards to business travelers by Southwest Airlines with 'Sweetheart Stamp' cards in the early 1970s laid the foundation of FFPs, the first systematic FFP accepted in the literature was Advantage Program, which was launched by American Airlines in 1978. One of the main objectives of the program was to provide the most frequently traveled business passengers with free seats that were already empty, and to facilitate reuse of the airline's idle capacity [29]. FFPs provide significant advantages to both members of the program and businesses implementing the program. Members of the program can benefit from various rewards / services. Free tickets / flights, discounted car rental, special promotions, discounted hotel accommodation, excess baggage allowance, reservation priority are some of these rewards / services. Factors such as increase in sales, decrease in costs, free promotion and advertisement opportunities and increase in business profitability stand out as important advantages for businesses. Some viewed these programs as a marketing fraud or a bribe to impress the customer to repurchase them, or as a clever scheme that impacts business travelers by giving empty seats in the form of free tickets. However, today it is considered as one of the most important competitive tools among airline companies and it is considered to be the biggest, most successful and most important marketing tool for business travelers [30].

Effects of FFPS on customers/passengers
Passengers want to make the most of the opportunities that will be offered to them as customers. Over time, the level of these expectations has also increased. Faced with these expectations, FFPs are an important advantage for airlines. Accordingly, airlines use FFPs as a powerful, effective and attractive tool to meet the different expectations of their customers. The main issue for these programs is free tickets, gifts, etc. are not issues; The most important issue is the level of value given to customers and the continuity of this value [31]. Generally, customers' processes of choosing a product or service are complex. This complex situation becomes clearer or even more complicated according to the strategies of the companies. FFPs are an extremely important help for the civil aviation industry and airline companies since these programs integrate customers with the services of airline companies according to the services they offer. For some passengers, the FFP of an airline company is a tool to identify with that airline company. In other words, passengers prefer to be a part of an airline company, which supports the feeling of being a privileged customer [32]. Airline companies have operated with a small number of passengers in the past years. For this reason, strategies such as FFPs have not been seen as realistic strategies. However, with the growth of the sector and the increase in the number of passengers, airlines have sought to establish close relationships with passengers in order to gain a more advantageous position. FFPs can be viewed as a shortcut for airlines in this regard. Although this type of practice affects passengers' choice of airlines, passengers must be satisfied for the sustainability of this effect. FFPs provide this satisfaction to passengers, which convinces them to engage in a long-term relationship. Tickets, gifts, discounts, privileges, benefits, etc. enhance passengers' sense of material and moral satisfaction [33]. At the same time, FFPs create a sense of addiction for passengers. Passengers earn mileage points after purchasing a ticket, and these mileage points accumulate over time. The increase in the number of these mileage points and the advantages offered by these mileage points encourage passengers to travel with the same airline once again as the know that they will gain more advantage with more mileage points. In this way, FFPs strongly guide passengers' airline preferences. The amount of mileage points specifically helps passengers to focus their ticket purchase planning on a particular airline [34]. FFPs create an extremely critical impact, especially for passengers who travel frequently. Accordingly, the passengers who travel frequently can find hotels, accommodation, car rental, tour programs, extra menu, etc. bundled together with the purchase. Such opportunities directly and strongly affect their choices. On the other hand, the holiday opportunities offered by FFPs indirectly affect the tourism strategies of tourism sector actors. The shape and content of holiday offers within FFPs help to increase the commercial potential of national and international tourism organizations. For this reason, FFPs come to the fore as an intermediate factor for the travel planning of passengers [35]. When viewed from another angle, FFPs also appear to represent a sensitive situation for customers. Accordingly, all services included in FFPs must be offered for a long time period. The duration factor at this point determines the sustainability level of the interaction between passengers and airline companies. If an airline terminates its FFP of its own accord, or if an airline violates passenger rights within a FFP, this will damage its prestige, which decreases the credibility the airline company [36].

Scope of the research and results
Considering the strong ties between customer loyalty and FFPs, it is of vital importance to investigate this relationship in more depth and provide additional insights on the rewards and services offered by FFPs and their possible effects on loyalty. To this aim, this study was carried out with the customers of companies operating in the airline industry in order to reveal the relevance of the rewards/services offered within the scope of the FFP on the level of customer loyalty. Accordingly, the research was applied to 405 people in Istanbul who fly from Istanbul Airport. The survey was carried out according to the convenience sampling method. The variables investigated in the study are the scale of the importance of the rewards / services offered under the FFP and the customer loyalty level of the airline passengers. Accordingly, the model of the research is presented in Figure 1.

Data collection method and tools
Questionnaire interview method was used as data collection method in the study. In the first part of the questionnaire, the demographic information of the participants are collected. In the second part, the expressions to determine the importance given to the rewards/services offered within the scope of FFPs were questioned based on the data obtained from the official websites of the airline companies and from [30] doctorate thesis study. On the other hand, the customer loyalty scale, used as the dependent variable of the study, which is borrowed from [37] and [38].

Demographic data
The numbers and rates of all demographic variables are given in the Table 1. According to the table, 65,7% of the participants are women, while men constitute 34,3% of them. In terms of occupation, most of the participants (63,2%) are employed in private sector. The most remarkable travel purposes shared by the participants are "business" and "touristic", whereas "other" purposes are selected as the least frequent option. The travelers taking part are mostly long-term (6 years and more) FFP members of at least one airline (41,2%), while, on the other hand, 23,7% of them have been an active member within the last year. When it comes to the type of FFP card ownership, they mostly (62,0%) own a basic FFP card.

Factor analysis
Based on the participants responses, the KMO value of the scale of importance given to the rewards / services offered within the scope of FFP was determined as 0.910, and this value led to the conclusion that the sample size was excellent for factor analysis. In addition, when the Barlett sphericity test results are examined, it is seen that the chi-square (p <0.01) value is also significant (see Table 2).  ) ,000 The scale, consisting of 14 statements, is divided into two different constructs after the analysis. Based on the factor analysis, the final version of the scale, and factor loadings are given in Table 3. Table 3. Factor analysis of the scale of importance given to rewards / services offered under FFPs The KMO value of the customer loyalty scale was determined as 0.936, and this value led to the conclusion that the sample size was suitable for factor analysis. In addition, when the Barlett sphericity test results are examined, it is seen that the chi-square (p <0.01) value is also significant (see Table 4). Based on the factor analysis, the final version of the scale and factor loadings are shown in Table 5.
The reliability analysis reveals that the alpha values of the scales in the study are seen as greater than 0.700 that confirms the reliability of the concerned constructs (see Table 6). Furthermore, we conducted correlation analysis that confirm all independent variables have high level (p <0.01) relationships with both dimensions of commitment dependent variable (see Table 7). ,000  One-to-one relationships between components marked with ** were considered statistically significant at p <0.01, and those marked with * at p <0.05.

Results
Based on the research model above, we propose the following main hypothesis and sub-hypotheses: When the Table 8 below is examined, it is seen that independent variable for H1a has a high positive effect on the behavioral commitment (dependent variable) (p <0.01). In addition, it is seen that this dimension, which has a significant effect on the behavioral commitment variable, and explains 21.9% of the dependent variable (R 2 : 0.219). On the other hand, the discounted services have no effect on the behavioral commitment (p> 0.05). Based on these results, while the H1a hypothesis is supported, but the H1b hypothesis is not.
Likewise, it is seen that the other reward/services has a high positive effect on the attitudinal commitment (p <0.01). In addition, it is seen that this dimension, which has a significant effect on the attitudinal commitment variable, explains 15.6% of the dependent variable (R 2 =0.156). On the other hand, the discounted services has no effect on the attitudinal commitment (p> 0.05). Based on these results in Table 9, the H1c hypothesis is supported, whereas H1d hypothesis is not. So, H1, the main hypothesis is partially supported. We further questioned the relationship between demographic variables and passengers' views on the importance of the rewards/services offered by FFPs. We formulated the following hypotheses accordingly.
H2: Passengers' views on the importance of the rewards/services offered under FFP differ significantly according to gender. H2a: Passengers' views on other rewards/services vary significantly according to gender. H2b: Passengers' views on discounted services differ significantly according to gender.
The relationships of the gender, which is one of the demographic features of the research, with other rewards/services and discount services are evaluated by t-test and shown in Table 10. Based on these results, it is seen that the H2a hypothesis is not supported and the H2b hypothesis is supported. In the light of this information, it has been revealed that the H2 hypothesis is partially supported. The hypotheses questioning the relationship between profession and FFP constructs are formulated as follows: H3: The views of the passengers on the importance of the rewards/services offered under FFP differ significantly according to the profession. H3a: Passengers' views on other rewards/services differ significantly according to profession. H3b: The opinions of the participants about discounted services differ significantly according to their profession.
The results of statistical analysis on relationship of the profession with other reward/services and discount services offered under FFP are as shown in Table 11. Based on these results, it is possible to say that the H3a hypothesis is supported and the H3b hypothesis is not. In the light of this information, it is seen that the H3 hypothesis is partially supported. The results of the multiple comparison test (post-hoc/Tukey) are given in Table 12, which shows which pair of differences arise, there is a high level of significant difference between the public sector employee and the student (p <0.01). In the light of these results, we conclude that the students are the group with the most negative opinions about other rewards/services. The purpose of travel is another variable that may be of great relevance when attaching value to the FFPs related services and products. The next group of hypotheses are examining this relationship. Thus, we claim that: H4: The views of the participants on the importance of the rewards/services offered within the FFP differ significantly according to purpose of travel. H4a: Participants' views on other rewards/services differ significantly depending on purpose of travel. H4b: Participants' views on discounted services differ significantly depending on purpose of travel. The relationship of the travel purpose variable with other rewards/services and discounted services is as shown in Table 13. Based on these results, we conclude that the H5a and H5b hypotheses are not supported.
In the light of this information, it is seen that there is no significant difference between the groups of passengers that use air transportation for different purposes with regard to their views on both, discounted services, and other rewards/services offered within FFPs. Thus, H4 may not be accepted.
H5: The opinions of the participants on the importance of the rewards/services offered within the FFP differ significantly depending on the duration of their membership. H5a: Participants' views on other rewards/services differ significantly depending on the duration of their membership. H5b: Participants' views on discounted services differ significantly depending on the duration of their membership. The relations of membership duration variable with other rewards/services and discounted services are as shown in Table 14. Based on these results, we conclude that the H5a and H5b hypotheses are supported. In the light of this information, it is seen that duration of the membership to FFPs is a significant factor affecting the passengers' view on FFP services. Multiple comparison test (as post-hoc/Tukey) results are given in Table 15. The results show that passengers with a membership duration of 6 years or longer are significantly different views on FFPs than those having a membership less than 1 year (p <0.01). The same conclusion can be drawn for both variables of the construct, the views on FFPs.  Table 17 is examined, we conclude that there is a significant difference between the private sector employees and the self-employed individuals (p <0.05) in terms of their behavioral loyalty. In short, individuals who are business people have more positive views on behavioral commitment than student individuals do. On the other hand, the analysis reveals that a significant difference is observed between individuals who are business people and students (p <0.05) when it comes to the attitudinal loyalty (p <0.05).  As a result of all the analyses carried out, the overall inferences revealed are summarized in Table 18 below.

Managerial insights
Customer loyalty is, in a way, a sign of customers' reluctance to change the product, service, brand, or store they depend on. In this way, customers will continue to prefer the products or services they are loyal to in their subsequent purchases, which will shorten the purchasing process and help customers save money and time. Customers' trust in a business makes them feel safer and has a shortening effect on the decision-making process. Increasing the commitment of customers to a business and preferring that business despite other businesses is an important advantage for the business. Because the cost of acquiring new customers is higher than the cost of keeping existing customers. As can be clearly understood from this situation, ensuring customer loyalty is extremely important for companies. Today, customer loyalty programs are one of the most popular relational marketing approaches applied to create, develop and maintain customer relationships and are applied in many sectors such as retailing, banking, tourism, airlines, car rental and entertainment. Customer loyalty programs are marketing activities that enable companies to establish closer relationships with these customers by using customized products offered to their predefined customers. For the civil aviation industry, customer loyalty programs are shaped by FFPs. FFPs aim to protect the loyalty of passengers by giving passengers various awards. In general, air transport has been considered as an expensive transport system for many years. For this reason, there has been a visible distance between the actors of the sector and the passengers. In parallel with this, it is much more costly for airline companies to acquire new customers than airline companies to keep their customer base. Airline companies aim to gain brand loyalty to passengers with FFPs and to continue as their own customers on their next flights. Airline companies earn income both from the miles they sell to program partners and from the spending they make with the miles earned by their passengers. In addition, it is observed that women have more positive opinions than men about discount services. The professional status of the participants comes to the fore regarding other rewards and services. At this point, especially retired passengers have more positive opinions about these rewards and services. Retirees are able to follow these rewards and services more closely and more closely due to their location. On the other hand, students have the most negative thoughts on the subject. The main reason for this is that students do not fly as often as other professions and have not reached a position to be sensitive about this issue. The income levels of the participants also have an important place in the rewards and services offered. Another important point is the duration of membership. Individuals with a membership of 6 years or more care more about other rewards and services. These individuals with higher income find rewards and services other than discounts more valuable. On the other hand, people with a membership less than 1 year have more positive opinions about discounted services. Thus, the price discounts are more important for these individuals. Considering the occupational status of the participants, it is seen that those who are in business people position are more loyal to their airline companies. This result can be also directly linked with the income level. The findings of this study also confirm the leading micro customization trends in marketing and rejects onesize-fit-all solutions. Namely, FFPs must be more individualized rather than a simple segmentation policy based on the frequency of flight. With the current advancements in data analytics and machine learning, tailormade FFP offers specific to each passenger will be the common practice in the future.

Conclusion
Basically, FFPs can be considered as an alternative form of marketing for airline companies. Airline companies reserve a special place for FFPs among the already numerous marketing activities. FFPs makes it possible for passengers to think positively about their choice, which possibly influences their loyalty to the brand. Thus, careful design of the content of a FFP is of paramount importance to moderate the loyalty attitude of passengers. This work aimed at examining the relationship between FFPs and customer loyalty, which can be further decomposed into behavioral, and attitudinal loyalty. Additionally, the effects of demographic variables on these two constructs were studied in order to gain more insights on targeted design of FFPs. To this end, a survey was conducted on passengers flying from Istanbul Airport. The collected data was analyzed to check the claimed hypotheses. The analysis has shown that there a significant effect of FFPs on both types of loyalty. The results also approve that profession, gender, duration of membership to FFP are significant factor for both, the views of passengers about services offered within FFPs, and the customer loyalty. Two issues can be brought to the forefront as suggestions for future studies. The first of these concerns the status in the FFP. Accordingly, Evaluation of customers separately according to the FFP cards they use may reveal additional hints about FFP and customer loyalty. At this point, choosing a specific airline company in future research will also make an extremely positive contribution to the quality of the study.