Loyalty is one of the most interpretable concepts on the planet and can both be measured while also being unquantifiable. Wild one, huh? It’s no surprise then, even when you get a panel of loyalty professionals, you’ll get wildly different quotes and takes on what it should be.
Jerry Maguire would say it’s “show me the money” and Harvey from Suits would say “it’s a two way street, if I’m asking it from you, you’re getting it from me” and the list goes on.
After some recent loyalty changes in the hotel and airline space and a few breakups on both sides, I wanted to share my thoughts on the real core exchanges between us the customers and the programs, with some voicing from both sides.
For starters, I think there are concepts people need to decouple from strictly being “loyalty”, like engagement. You can engage without being loyal to a brand and you can also engage deeply while showing extreme loyalty. Both can be true.
It’s Money In Exchange For Value
I think the handshake contract between a person and a loyalty program is an exchange of money for value. Value is an abstract art and its beauty is in the eye of the beholder.
It’s why, although I don’t love revenue based systems, I understand their intent and they probably are the best proxy. Money is really the object on the program side and attaining value is really the object on the member side. It’s the least fuzzy way to move forward together.
In an era of greater financial insight and modeling, it’s also the easiest way to justify to CFO’s why all this “stuff” is being “given away for free” to people.
In a competitive market, the program must ostensibly showcase enough potential value to the member to justify the financial behavior its asking for – aka stronger loyalty behavior over a clip of time, and that may be uncomfortable for both parties. It probably should be.
And yes, it’s obviously travel behavior too, but that all rolls up into the financial impact.
It’s Incremental Behavior And Tactical Defense
Loyalty programs are typically intended to extract incremental value from a member. It’s that extra hotel night, better flight or whatever brings the business goal home, so it’s natural for the status requirements to feel somewhat intimidating at first. If they’re not, the program isn’t influencing behavior, it’s just rewarding what already exists within your travel.
What’s not discussed enough is that there’s also sometimes nothing wrong with not doing that. Sometimes the best offense is a good defense. Ask Jose Mourinho. A low frequency but high margin traveler is worth celebrating and it really doesn’t matter if they take an extra trip, if they only ever want to take trips with you.
Of course, the ultimate win is when they feel that way and loved the experience so much that they DO take that extra trip, but sometimes celebrating a truly loyal customer for exactly what they are without changing them is a beautiful thing.
The “dance” of offering enough to be the chosen game, but asking enough to drive business goals forward is an absolutely abstract art form. It’s a constantly changing painting and the brushstrokes may be different for each member.
Loyalty, It’s Way Beyond Points
I’d argue points are the lowest form of true “loyalty” — yet still one of the most important parts of the ecosystem and handshake.
I argue this because the positive economics around points, which mean that you really can earn points anywhere and everywhere – are not just strictly related to the core travel behavior a loyalty program is trying to drive as a business.
Points are all about the strength of a currency – aka the promise of meaningful rewards – not necessarily a love for the brand and experience. They may have absolutely nothing to do with a deeper emotional loyalty connection or the travel preference. It might just b knowing that the loyalty currency of a program will provide great arbitrage opportunity or unlock travel goals.
The closest loyalty plays is in opportunity cost (again, the relative strength of currency) and the choice of earning one type of points over another could be seen as loyalty, but I think someone can be a points millionaire and not be at all loyal, but would really struggle to hit top tier status without loyalty.
Vitally, It’s Knowing Things Will Go Well
Way above any upgrade certificate or one off perk is what’s at the backbone of loyalty, and that’s knowing, not hoping, things will go better and go well.
Whatever airline cabin or star of hotel you’re traveling in, $#!T happens and loyalty done well is insurance that you come out as unscathed as humanly possible. You’re priority one when it hits the fan. You pick up the damn phone, right away. You waive whatever red tape is standing in the way of mutual success.
If you ask most true road warriors what they keep their status for, it’s knowing they’re top priority when it does. The other stuff is the enticements to get more business out of you, or to competitively reward your business enough to keep you focused on theirs and why they’re the best, but the getting it right when things go wrong is the underlying contract.
People don’t focus enough on the delivery aspect of a program during these challenges. The best benefits in the world can fly out the window if this underlying contract of care is not met at the highest level. Crucially to note, this part of loyalty isn’t in the tables of what you’ll get as you move up the tiers. It’s not as easily defined or transactional, but paramount too.
Above All, A Mutually Beneficial Journey
There’s a lot of talk in loyalty about creating irrational behavior. Creating the customer desire to stay on the wrong side of town if someone has to, just to stay on brand. That’s beautiful in a way, but I like to look at it the other way around.
I actually think the higher mission of loyalty is to be agnostic to irrationality and really just to focus on making someone feel wildly rational about their travel choice, regardless of whether it is or not.
It’s about weaving together touch points, benefits and experiences that create an extra level of privacy, detail, comfort or personalization that makes it really hard to risk any other option. It’s that magical journey of truly winning someone’s custom and preference by providing superior levels of experience that create real FOMO whenever someone is price shopping.
At that point they’re not irrational for choosing you, it’s actually highly rational.
In exchange, the logical answer for a customer, or me, is that loyalty is an invisibility cloak drowning out all the things I’d like to avoid in my travels and that cloak is worth justifying any remotely reasonable price differences to attain.
To me, loyalty is about investing in each others success.
How do you define loyalty these days?
Many traveller bloggers use the same logic about loyalty and criticize the airlines for going revenue based. I wonder, though, why are they moving toward that direction increasingly? I am sure they have the data to see whether this sort of move is beneficial for them and I am guessing they do think that the revenue based system creates more business for them. Of course, if it was not beneficial for the passengers they would travel less with them this less revenue but if we assume that the revenue based system creates more business, isn’t that some sort of mutually beneficial change? I am not criticizing your logic here, I am just quite puzzled these days by these arguments, which make logical sense, yet the airlines change of direction cannot be ignored as well…
Loyalty is a two-way street but I disagree that it should all be tied to revenue. It’s like saying a person who spends 40 nights a year in $100 hotel rooms is less loyal than someone who spends 10 nights at a $ 300-a-night hotel. Which customer is more likely to have a negative impact on revenue or loyalty for that matter? Is someone who spends money on a co-branded credit card more loyal than someone who has a ton of butt-in-seat miles? Which one is easier to lose in the marketplace? There is a reason why many airlines had both qualifying miles and earned miles as well as earned status by segments flown.