China Railway will release their loyalty program on Dec 20th. Not only will it soon become the world’s largest loyalty program, it will also be a potential game changer for the loyalty program environment in China. It would also help airlines’ loyalty programs worldwide.
China is so fragmented that no one is a dominant player of anything. Air travel is not the primary means of travel and credit card is not the primary method of payment. This is the opposite of mature loyalty market like Singapore, Hong Kong, Japan, USA, Canada, in both air travel and credit card payment.
In addition, most other programs in China have no idea what they are doing anyway, just because others have done it so the loyalty programs are in place. Together with the “discount” trend in China for 20 years, no one is really loyal to anything except to train which is run by the government – no discount, no barging, nothing
Why I think the railway program is a game changer?
Whenever a new concept is being introduced, you will need a dominant player with mass user base and most importantly, enough money to be spent on educating the concept.
1. It is an absolute dominant player: Yes, you still face the same price sensitive type of consumers, but China railway has no discount anywhere, and consumers have no alternatives.
2. Much higher frequency and engagement than flights: There are many reasons why airline programs cannot take off. Engagement and frequency is one, but the average frequency of taking a train is much higher than taking a flight. There are 3000+ passenger train stations, but only 244 commercial airports.
3. They have a late-comer advantage: They can build it directly to fit the need of a modern traveler.
How will that benefit the airlines programs worldwide?
Most of the miles’ revenue are generated from banks and there are not many big banks left. Even if there are, banks run a budget to fund miles. We don’t expect any bank to be able to run another billion dollar budget in the next few years to compete with Amex, Citi or Chase, so the market needs new players. Players not competing with existing one, but to bring extra. Mileslife was designed for this purpose, but it will take longer to show the bigger effect as you need merchants, airlines and users from all sides.
Then train comes into play where there is a huge fresh member base. Other than basic redemption for train tickets, it will be soon be able to offer something air and lifestyle related and to connect ground and air. They are not competing with airlines as longer trips is still preferred by flight, and short trips cannot be reached by flight in China, it will mutually benefit each other.
Obviously, there are many things to be done before the results come into effect. However, loyalty industry is for long term anyway so let us just patiently prepare for another 5-10 years.