Loyalty Programs Don’t Actually Reward Loyalty Anymore

When you hear the term Loyalty Program, what do you think? I’d imagine that images of a program that rewards you for being a loyal customer, right? I mean that’s the definition of loyal.

Loyal – faithful to a cause, ideal, custom, institution, or product

But let’s be honest. Do programs really reward us for being loyal anymore?

If they did, they’d reward us for all the times we’re loyal to the brand. Nowadays, loyalty is only rewarded if it’s under the terms of the program.

Basic Economy Restrictions

during-your-flight-filler-basic-economy

We’ll use the airline’s basic economy as an example. If you’re a loyal flyer with an airline, you’re going to have some form of status. You’d think that would give you some sort of perks when flying on that airline, right?

To earn American Airlines Executive Platinum status, you need to fly either 100,000 miles or take 120 flight segments and spend over $15,000. These are the most loyal of the American flyers. They get complimentary same-day stand-by and flight changes, complimentary upgrades on all flights or at least complimentary or discounted preferred or Main Cabin Extra seats. That is, unless they purchase a basic economy ticket.

Basic Economy fares aren’t eligible for upgrades, complimentary/discounted Preferred or Main Cabin Extra seats, Same Day Standby or Same Day Confirmed Flight Change.

Unless you pay for the ticket American wants you to buy, you don’t get any of the benefits that you’ve earned by being loyal to them with your money and your travels.

American’s not alone. Delta and United also restrict the benefits of even their most frequent flyers if you purchase a ticket in basic economy.

Airlines have definitely gone with the stick approach when trying to change the behaviors of their frequent flyers. If you buy a basic economy ticket, suffer the consequences.

Other programs have decided to try the carrot approach. They offer extra awards if you change your behavior.

IHG Rewards Club

The best program at doing this is IHG Rewards Club and their Accelerate promotions. Each member has an individualized bonus that’s based on your past activities. For example, I have an IHG credit card but I rarely use it to pay for my IHG stays. One of my tasks is usually to use my card for 1 or 2 hotel stays. Same goes for buying bonus point packages. I don’t usually do this but I might consider it if the reward was high enough.

Since we usually stick to one or two IHG brands, I’ll have an offer for bonus points to stay at three different IHG brands. They’re rewarding me for going outside my normal travel habits but the request isn’t that out of the ordinary that I wouldn’t consider it.

However, if someone like me, who stays at IHG hotels around the U.S., were to receive an offer that only rewards me if I stay for three times in China, Thailand or Indonesia, that would be a pretty useless promotion. I’d probably delete it the moment I read it because there’s absolutely no chance of me ever completing the requirement to receive the bonus.

Someone tell this to the people running the Starbucks Rewards program.

Starbucks Rewards

Starbucks Cup

The loyalty program that tries to alter its members’ behavior the most is Starbucks. This is a typical offer I receive from them:

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They know me. They know I NEVER stop by a Starbucks after 2 p.m. So why do they keep sending me offers for me to come in the afternoon? Because I don’t come in the afternoon and they want me to. And why do they want me some several days in a row? Because I only stop at Starbucks on my way to work and I hardly ever work more than three mornings in a row. When I’m home, I’m 100% more likely to make the good coffee I have at the house than I am to drive to Starbucks for coffee.

Almost all of the bonus offers I receive from Starbucks are totally useless for me. To go out of my way to earn 125 bonus stars, that’s not even enough for an iced coffee under the new redemption rules and definitely not worth my time.

Final Thoughts

Come to think of it, there aren’t a whole lot of programs that truly reward loyalty. The hotels tend to be the best at it, with their promotions that offer extra points for multiple stays. But even those bonuses will be based on either the number of stays or the number of nights. If you’re on the road at a single location for a week at a time, a promotion that gives bonuses based solely on the number of stays is not as valuable to you as one that would reward the number of nights you stay.

More and more, loyalty (or should we start calling them incentive) programs no longer reward loyalty in the true sense of the definition. They only give rewards when you act the way they want you to. Depending on the program, this may be through incentives for good behavior or punishment for not acting the way they want you to.

And to me, that’s not loyalty.

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This post first appeared on Your Mileage May Vary

4 thoughts on “Loyalty Programs Don’t Actually Reward Loyalty Anymore”

  1. I think that Hyatt and Alaska are about the two best big domestic travel companies that actually provide value, which at least for me drives loyalty, and in turn business. The English use the term “scheme” for loyalty programs, and in a lot of instances I’d agree with the term. Bonvoy sure feels and acts like a scheme, just as one example. The problem is that things have become far too one sided in favor of the company, almost always to the detriment of the customer.

  2. Good examples of loyalty programs not rewarding loyalty. I could understand a program not giving you elite bonuses for basic economy at lower tiers, but my god if you’ve spent $15K in a year with an airline, you should have earned just the minimum perks on whatever ticket you buy.

    Same with pulling upgrade seats from top elites and selling them for a buck and a quarter at check in. I’m not a top elite with any airline, and have no expectation of being one with any US airline, but even from the outside that’s a crock.

    I’m still trying to figure out why AMEX can’t figure out their offers to drive incremental spend. On the one hand they have a wide variety of popular offers they load up constantly. On the other, I have almost zero interest in any of the name brands offered, and have cashed in maybe 2 offers in 3 years. But they don’t drive total spend or generic category spend for me, just keep throwing the same crap at the wall hoping one day it sticks.

    Sorry…that’s a lot of words to say I agree with you and you could have gone even further than you did. 🙂

  3. Good post and very true. I’d add programs that are big offenders like Kohl’s. Shop here and get 30% off etc. But they leave out the fact that they are already more expensive than most stores but they people in with marketing and Kohl’s cash. I really like Spirit airlines but their miles/points expire in 90 days. Doesn’t make me very loyal which makes me only fly them as a convience but as a choice over other airlines.

  4. I have the luxury of working both sides of the loyalty equation – an active participant in loyalty programs and during the workday I work for a loyalty program (obviously unnamed).

    From the vendor perspective it is less about rewarding you for your loyalty and more about increasing your loyalty. Indeed for a vendor two major benefits of a loyalty program are:

    1 – Data Collection – A loyalty number allows us to assemble your full buying history – something that is otherwise not available. People move, people have multiple credit cards, people pay with cash, people pay with mobile wallets – and this all means that a retailer can’t get a full picture of all your purchases. The loyalty card changes this and enhances data collection. In essence, a large part of the loyalty equation is “the company pays you to provide better tracking data.”

    2 – Targeting – This data means we can target you and the Starbucks example in this article nails it. I analyze the loyalty data to come up with offers that INCREASE your spend with my company. If you are buying a coffee every AM – we don’t need to give you any incentive. If you never shop in the summer, we want to get you to make a new/extra visit to the store. If you shop/stay/travel 6 times a year – we want to make that 7 times. If your average spend when you shop is $40, then we will give you a coupon for 20% off a $60 order. In essence, the algorithm tries to give MORE to the low-loyalty customer to get them to become very loyal (aka give us more of your money). For the very loyal customer – we want to keep you coming – but we want to minimize the spend it takes to keep you loyal.

    So essentially by day I work on the algorithms to help my company INCREASE loyalty and by night/weekend I try and take advantage of other loyalty programs that are not as accurate/precise 🙂

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