Pandora's Box Of Loyalty
Loyalty. It is the holy grail of travel marketers. The mountain peak that all hope to summit—preferably with the right mix of superior products and service. For with loyalty, comes the promise of greater long-term customer value, decreased customer acquisition costs, and positive word-of-mouth.
In their original incarnations, loyalty programs were designed to strengthen a brand’s relationship with its best customers. They did this by offering perks and discounts that were otherwise unavailable to the general public. When American Airlines launched the first mileage-based frequent flyer program in 1981, it raised the stakes by providing the opportunity to earn entirely free flights. As other airlines entered the loyalty program game, some wondered aloud if they hadn’t opened a Pandora’s box that would lead to ever-escalating awards to capture the hearts, minds, and wallets of travelers whose allegiance was no longer to the brand but to the awards themselves.
Fast-forward some 31 years, and we may have our answer. According the most recent Colloquy Loyalty Census (2011), the average American belongs to nearly 19 loyalty programs across all industries. That same report estimated that the travel industry issues over 17 billion dollars worth of reward points annually—second only to the financial industry—and that over one-third of reward points go unused by consumers each year.
What began as a way to reward a company’s best customers has become a cottage industry unto itself. There are credit cards offering airline and hotel points galore, tools to monitor award points (AwardWallet), and blogs that advise consumers how to exploit travel loyalty programs (Million Mile Secrets, The Points Guy, and Frequent Miler). If you work in marketing for or with a company that operates a loyalty program, do yourself a favor and subscribe to a few of those blogs. The naked pursuit of points, discounts, and free travel is illuminating. Brand loyalty is the furthest thing from the minds of those bloggers. Their loyalty is to the almighty point.
Frankly, this is a problem. Loyalty may best be described as “unswerving faithfulness,” but is that what today’s loyalty programs are building for travel brands? From where I sit both as a marketer and consumer, I’d have to say no. The reason is that most loyalty programs aren’t loyalty programs at all but rather incentive programs that provide discounts and savings as a proxy for loyalty. The consumer comes back to purchase not because of a faithfulness to the brand but rather the desire to maximize the value of their award.
Now some brands may not care as long as they fill the seat, room, vehicle or tour. However, if you want to engender true loyalty—that unswerving faithfulness to your brand even in the face of lower cost offerings from competitors—then you cannot do it with incentives alone. You must surprise and delight your customers with stellar products, flawless service, and the unexpected perk. You must treat every customer like a best customer. And finally, you must embrace marketing’s creative and collaborative role within the organization to inspire all of this to happen. It’s not as easy as handing out points at every turn, but it’s far more profitable in the long run. As Sir Richard Branson has stated:
“Loyalty rules at every level. Loyal employees in any company create loyal customers, who in turn create happy shareholders. The process sounds easy but it's not, and it has defeated some of the bigger organizations of the twentieth century. [T]he art of loyalty and relationship building provides us with the keys to making a modern organization actually work.”
So take a look at your loyalty program. If it’s more of an incentive program, then it’s time to investigate whether the loyalty you’re building is to your brand or the awards you provide. If it’s the latter, then it may be time to reinvest in efforts across the organization that build unswervingly faithful—and extraordinarily profitable—customers.