Credit: Another Believer
The piece suggests that ‘loyalty needs to be reciprocal’:
According to a study by Kitewheel, three-quarters of consumers believe loyalty programs are for brands to show their loyalty to consumers. But two-thirds of marketers think the reverse: that loyalty programs are a way for consumers to show their loyalty to brands.
In a world where brands were loyal to customers, it suggests “Airlines and hotels would renew status levels for customers who took a hiatus from traveling when they had a baby or were between jobs.” And indeed there are a small subset that do (and more than allow ‘buy backs’).
And if you want to maximize profit over the long run, you need to provide superior value to your customers (of course at a price that exceeds marginal cost). You need to keep trying to add value while controlling costs, not squeeze value out of a program trying to see how far you can go taking things away from your customers.
That contrasts with using your customers as leverage (as a means to an end, rather than treating them as ends in themselves).
Things get worse when carrots turn to sticks and brands start penalizing disloyal behavior. Consider Amazon’s recent announcement that it would stop selling products that aren’t compatible with its video streaming service. Like other Amazon customers, I question how this serves its mission to be “Earth’s most customer-centric company.”
The author suggests that a brand can “create a sense of loyalty that is reciprocal, authentic, and emotional” by “focus[ing] on fostering the emotional response that is most likely to drive loyal behavior—gratitude.”
That goes beyond just ‘giving your customers stuff’ though rewards and recognition are both important. Here the advice is less actionable.
The strategy for generating sustained gratitude is to discover and foster a shared purpose with your customers, and to help them share that purpose with others.
It may not be easy to figure out the ‘shared purpose’ a business can help its customers with, individualize it, and build a program around it.
But a precondition and a starting point is treating your customers as people with goals that your business works hard to help with with, not as means to an end.
Customers are Not the Problem
When United moved to “identify and reward more fairly high value members” while saying that their problem now is they’re “inundated” with members, or they believe ‘over-entitled’ customers are their problem or when Delta says “when everyone’s an elite flyer, no one is” they make clear they see things transactionally.
When American’s President Scott Kirby mentioned during the airline’s third quarter earnings call that they planned to take away basic elite benefits some time next year from their most frequent customers who buy the cheapest tickets they offer, I was troubled.
- “I am not my fare.” I am a valued customer, or I am not, and how welcome I’m made to feel should not change between Tuesday on a full fare and Thursday on a discount one when I’m buying a ticket pretty much every week.
Business travelers are leisure travelers, just on a different day, so it doesn’t make sense to reward one “type of traveler” or another. It makes sense to develop relationships with customers you value, and treat them well every time you interact with them.
That doesn’t mean that everyone who flies a certain amount is a traveler you want to reward. Often travel providers don’t understand the difference between average fare and cost, and marginal analysis which is what drives profits. But once the criteria is set for whom a program wants to deliver for, it should do so consistently treating the customer as a person not as a transaction (treating them differently depending on the given transaction).
Rebates Aren’t the Same as Rewards for Loyalty
When Delta announced they were moving to a revenue-based frequent flyer program, I said the biggest problem was that they’re re-commodifying air travel.
I don’t see anything sacrosanct about rewards based on miles flown. Earning points based on miles flown is a proxy, however, for time out of your life spent with an airline. With significant days, flights, hours, and trips you develop a relationship with an airline. And it’s an emotional relationship.
This isn’t S&H Green Stamps and it isn’t your neighborhood sandwich shop punch card. It’s a reward for your loyalty. The time spent with an airline becomes your reward, “you give us your business travel, you give us your paid leisure travel, and you become like a good friend that we will take care of down the road in the best way we can – with that free trip to Hawaii, with a business class trip to Europe for your anniversary, or by making sure you get home to see your kids even when there’s a mechanical delay.”
Frequent flyer programs changed what are essentially a commodity to be sold at the lowest price – an airline seat between any two cities – and turned them into a differentiated product with brand identity and customer loyalty.
But in explicitly rewarding the precise dollars that you spend rather than the time you spend with the airline (of which miles flown are an imperfect proxy), they’re re-commodifying the experience. They’re reducing points-earning to a transaction; a rebate instead of a reward. United has followed Delta, and there are many flyers nervous that American will as well.
These programs also further pit employers against employees, creating incentives where folks spending someone else’s money explicitly are rewarded for spending more of that money. Elements of that already exist, of course – programs try to get customers to choose their associated airline independent of best price, in many cases they require higher fares to upgrade internationally for instance – but this makes the arrangement specific and explicit.
Instead of a romantic loyalty relationship, they reduce the frequent flyer program to a crass commercial transaction – which undermines the genius marketing insight that’s made programs so successful in the first place.