mail. As travel arrangements are now the responsibility of purchasing
managers, it is no longer so easy for airlines to influence through cosy
familiarization trips.
The loyalty imperative
With the slower growth in the 1990s, BA focused on building loyalty with
its existing customers rather than on winning new customers. Up until
1991, the purpose of the Executive Club was to increase revenue by selling
lounge facilities and other features. However, this changed when competi-
tion increased at Heathrow with the arrival of American and United
Airlines, which introduced customer reward programmes for ‘frequent
flyers’.
BA’s Relationship Marketing Department was set up as a defensive
move and BA launched the UK mileage programme – Air Miles Latitudes
- which was run in tandem with Executive Club. However, because the
existence of both programmes caused confusion, later in the year Executive
Club was re-launched with service benefits and mileage rewards com-
bined. By 1996 this was a global ‘frequent flyer’ programme, with 2 million
members.
There are three grades of membership in the Executive Club – Blue,
Silver and Gold. 85 per cent of BA’s customers are in Blue and progression
to Silver and Gold is rewarded by the amount spent with BA. If customers
use BA less frequently, they are demoted to a lower grade.
The branding and benefits of Executive Club are centrally controlled, but
the mileage programme is regionally driven, with four frequent flyer pro-
grammes around the world. This ensured that BA offers the same service
in comparison to other airlines and is a tactical sales tool by creating a data-
base for direct mail offers.
BA’s prime target market is business travel, which provides 60 per cent
of BA’s revenue. 85 per cent of this comes through travel agents, while the
other 15 per cent is from direct telephone sales and tickets bought at airport
check-in.
As was previously mentioned, large corporations have been looking to
make savings in their travel budgets which, for many, amount to several
millions of pounds a year. Improved information systems and centralized
purchasing has given them market power. As a result, there has been a
polarization and consolidation in the travel agent market with business
travel management companies and smaller leisure-oriented travel agents.
For BA, this means that just three travel agents provide the majority of its
business revenue: Hogg Robinson, Carlson Wagon Lits and Amex.
These changes have led to BA reconsidering the relationship it has with
travel agents. For many, there had always been a suspicion that money was
not well spent on travel agents and Richard Lucenti, BA’s Head of Field
Sales UK and Ireland, reflected this view:
480 Relationship Marketing