A simple guide to understanding how yield optimisation and customer loyalty can work together to create sustainable growth.

Every business that sells a limited number of seats, rooms, or tickets faces the same question:
How do you sell the right product, to the right customer, at the right time, for the best possible return?

That question sits at the heart of Revenue Management (RM) – the commercial discipline responsible for optimising yield and inventory. Running in parallel, Loyalty Marketing focuses on building long-term relationships and monetising engagement through data, rewards, and partnerships.

Both functions drive revenue, but often over very different timeframes. RM maximises today’s yield; Loyalty secures tomorrow’s customer. Understanding how they work individually, and why they perform best in partnership, is the key to sustainable growth.

What Is Revenue Management?

Revenue Management is the art and science of using data, forecasting, and pricing strategy to make the most of limited, perishable inventory.

It began in the deregulated airline industry of the 1980s, when carriers first used algorithms to forecast demand and dynamically adjust prices (Talluri & Van Ryzin, 2004). Today, the same principles underpin how hotels, car rental firms, cruise lines and even entertainment venues maximise returns.

A simple example

Imagine a 250-seat flight from London to New York:

• Leisure travellers tend to book early and are price-sensitive.
• Business travellers often book late and prioritise flexibility.

A revenue manager’s job is to predict how many of each type will book and to release seats in price “buckets” that balance demand. If too many low fares sell early, there’s no room left for high-value customers later. If too many are held back, the plane departs half empty.

That careful balancing act is the essence of revenue management: maximising total yield while keeping occupancy high.

What Is Loyalty Marketing?

Loyalty Marketing is the discipline of building and maintaining profitable relationships with customers. It’s about influencing behaviour through recognition, relevance, and rewards.

At its core, loyalty is a strategy, not a scheme. Brands use it to increase retention, share of wallet, and advocacy by giving customers reasons to return and spend more over time.

Loyalty can take many forms:

• Experience-based loyalty, where benefits such as priority service or exclusive access drive emotional connection
• Transactional programs, which use discounts, cashback, or points to reward frequency and spend
• Partnership or coalition programs, where multiple brands share a single currency or ecosystem

Learn more about the different types of loyalty program models here.

Loyalty programs are one of the most powerful tools within that broader strategy. They combine data, recognition, and incentives in a measurable framework that lets companies understand and influence customer behaviour at scale.

Some of the largest programs – like Qantas Frequent Flyer or Delta SkyMiles – generate hundreds of millions of dollars in profit by selling points to partners such as banks, supermarkets, and retailers. Those partners, in turn, use the points to engage their own customers. But even without a points-based model, the logic remains the same: loyalty is about long-term value creation. It’s the balance between rewarding existing customers, attracting new ones, and ensuring the business continues to grow sustainably.

Why Loyalty and Revenue Management Often Operate in Silos

Despite their shared goal of maximising revenue, RM and Loyalty frequently work in isolation.

Research by Lentz, Berezan & Raab (2021) found that RM teams tend to view loyalty programs primarily as data sources – useful for segmentation and forecasting, but not as strategic partners. Revenue managers tend to focus on rates and occupancy, rather than on customer value or lifetime spend.

Several factors keep the two functions apart:

1. Different horizons: RM optimises the next sale; Loyalty builds long-term engagement
2. Misaligned incentives: RM measures success by yield; Loyalty by engagement or partner revenue
3. Perception gaps: RM may view rewards (such as airline seats, as “free”); Loyalty sees them as prepaid, funded through partner-purchased points
4. Technology barriers: Each function often operates in separate systems with little shared visibility

The result is a narrow view of value – revenue managers see a transaction; loyalty teams see a relationship.

The Reality: Loyalty and Revenue Management Work Better Together

When RM and Loyalty collaborate, they strengthen each other’s results.

1. Using loyalty data to reveal full customer value

Loyalty data shows who customers are, how often they travel, and what they spend on ancillaries or upgrades.

Feeding this insight into RM systems can help price around total customer worth, not just the fare or room rate. As Lentz et al. suggest, loyalty data allows RM to understand lifetime value – not just today’s yield.

2. Loyalty as a buffer for customer perception

Research by Matsuoka (2022) found that when prices and occupancy are high, perceived fairness and satisfaction can drop. In other words, RM can boost short-term yield but risk long-term trust.

Loyalty can counter that effect: perks, upgrades, and messaging reinforcement can help customers feel rewarded and recognised, even when paying more. Tracking member satisfaction alongside yield metrics allows businesses to see when pricing strategies start to erode loyalty.

3. Protecting price integrity from discounting

For revenue managers, maintaining price stability is a constant challenge. Frequent sales may fill inventory but also train customers to wait for discounts.

Loyalty offers a smarter alternative.

Think of an airline like the London to New York route:

• Several months before departure, a number of seats can be offered for points instead of lowering early fares. This secures bookings and can bring in partner-funded revenue without cheapening the brand. We know from c
• Closer to departure, if seats remain, RM can again turn to loyalty – offering them for points or upgrades rather than simply running a flash sale.

Because members know reward seats are limited and transparently managed, pricing expectations remain fair. Loyalty becomes one of the organisation’s strongest tools for keeping customers and the business happy, without undermining price integrity.

Additional Loyalty Benefits for Revenue Management

Beyond pricing and inventory, loyalty creates other meaningful advantages for revenue managers.

• Upselling with Points: Members can use points for upgrades or premium experiences they might not normally pay for in cash. Loyalty programs are proven to activate the self-licensing effect – a psychological phenomenon where people feel entitled to indulge when they’ve “earned” it. In other words, points make customers feel comfortable spending on treats they wouldn’t justify with their own money. This not only fills premium or supplementary inventory and creates memorable experiences, but also monetises points that might otherwise sit unused – generating incremental revenue without discounting the core product
• Tier System Incentives: Status tiers motivate members to fly more frequently and in higher cabins. Perks like priority boarding or lounge access provide optimal efficient rewards (rewards that are low cost to the business but high perceived value) for the customer. Tiers also strengthen airline preference, reducing churn to competitors and stabilising demand forecasts
• Points + Pay Flexibility: Hybrid payments allow members to part-pay with points and part with cash. This opens up redemption opportunities for more customers while still monetising the seat – improving load factors and maintaining revenue flow across varying demand periods

Beyond Airlines

These principles extend far beyond aviation. Hotels, cruise lines, and even sports organisations face the same balancing act between short-term yield and long-term loyalty.

For example, a hotel uses RM to manage occupancy; its loyalty program ensures high-paying guests return. A sports team uses ticket pricing to fill the stadium; its membership scheme keeps fans engaged across seasons.

Wherever capacity is finite, loyalty and RM share the same ultimate goal: sustainable revenue.

Friend, Not Foe

Revenue Management and Loyalty aren’t competing functions, but complementary halves of the same commercial strategy.

RM ensures profitability today; Loyalty ensures it tomorrow. Together, they protect price integrity, strengthen customer trust, and create predictable, diversified revenue. The most successful organisations know how to make the two areas work in harmony.

To learn more about how loyalty programs generate real commercial value, and how they can support your broader pricing and revenue strategy, connect with the team at Loyalty & Reward Co.

References / Further Reading

• Talluri, K. & Van Ryzin, G. (2004). The Theory and Practice of Revenue Management. Springer
• Lentz, P., Berezan, O., & Raab, C. (2021). Revenue management and loyalty program integration in hospitality. Journal of Hospitality & Tourism Research
• Matsuoka, K. (2022). The impact of pricing and occupancy on perceived fairness and loyalty in hospitality. Tourism Economics
• Cross, R. et al. (2009). Integrating revenue management and customer relationship management. Cornell Hospitality Quarterly