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What’s Wrong with Loyalty Programs?

What’s Wrong with Loyalty Programs?

Are loyalty programs doing their job? Consulting company Deloitte thinks not, and they’d be happy to show the airlines how to improve their schemes.

Underlying Deloitte’s sales pitch for its services are the results of its survey of 2,500 travelers who took at least one flight during the past 12 months. Among the highlighted findings:

  • Loyalty programs were only the 19th most-important factor when choosing an airline, out of 26 attributes.
  • 44% of business travelers and 72% of high-frequency business travelers participate in two or more airline loyalty programs.
  • Two thirds of respondents were open to switching to a competing loyalty program even after achieving highest status level.

None of the above findings is surprising. And none is a strong argument that mileage programs aren’t working. Taking the points in order …

Although loyalty programs weren’t terribly important to infrequent leisure travelers (who accounted for 1,500 of the 2,500 survey respondents), they ranked 2nd in importance, behind a comprehensive route network, among high-frequency business travelers. That’s the most profitable segment of the travel market, and the group that loyalty programs are most concerned with engaging.

Regarding business travelers’ membership in multiple programs, that simply reflects the fact that no single carrier can meet the needs of the most frequent travelers on every trip. Sooner or later, even the most loyal frequent flyers will have to use alternative carriers. And it makes perfect sense to earn miles for those flights as well.

Likewise, elite members’ willing to switch to another program can be explained in practical terms. Once you’ve achieved top-tier status, it makes perfect sense that you’d seek status in a secondary program, since there’s no higher status to be earned in your primary program. Disloyalty, or the behavior of a rational actor?

No one questions the premise that loyalty programs need improvement. But which improvements? What can the airlines do that both adds value for the consumer and maintains the programs’ economic viability? As for the improvements that Deloitte would recommend, the report confines itself to vague teasers, along the lines of “refocus on individual customer preferences.” Paying consulting clients presumably receive more substantive advice.

The report closes with a call to action:

Now is a propitious time for airlines to chart a course for renewed airline consumer loyalty, even as economic growth remains uncertain and global pressures persist. There is no shortage of opportunity for those brands that choose to invest in breaking out of the frequency-based sea of “me too” loyalty programs.

That at least is something we can all agree on.

Reader Reality Check

What’s wrong with loyalty programs? And how can they be improved?

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  • Kort

    Because the highest level is too easy to obtain, causing the ranks to swell, the new upcoming MDQ and United dollar qualification are good for the highest levels…..though I think they should include any tickets purchased from alliance airlines.
    And as for people who will bypass this requirement by switching their home address to another country, the airlines should be looking at where they book tickets from as their home airport would be in the USA…..that I feel is not very ethical for individuals to do in order to bypass the requirement.

  • harvyk

    IMHO, loyalty programs these days are more akin to frequent spender programs. It’s possible to start climbing the ranks of a FF program by simply purchasing things via the right credit cards rather than actually needing to spend hours on a plane.

    What I’d love to see is the removal of all points earning credit cards and make status gained by how many hours you spend sitting inside an aircraft, not by how savvy you have been shopping.

    The other thing I hate is the fact that reward tickets still require the payment of taxes. It makes using points for eccon flights a very poor use, and I’ve see some cases where a flight cost $500 in taxes + 30,000 points, or you could purchase the flight directly from the airline for $499 and save the points. How is pulling stuff like that going to gain loyalty?

  • Beth

    Being a Road Warrior and not always traveling long distances, it is very disturbing to me that people can get a Credit Card, and spend $$$, and get Elite status above me. WHY do the people who have money, get more perks than those of us who actually FLY?????

  • justmeeeee

    The only thing I use my status for is to be treated like a human being rather than a pile of garbage when I call the CS line and they know by my FF number that I am elite. Too, too sad!

  • KimK

    Loyalty program miles earning method should have always being on metal only. That is mileage to be earned only from flights. Now Mastercard and others killed the program leading airliners to add fees that are close to cheapest Y ticket price. I think it is wrong that a household spends all their purchases through credit card, earns then miles for every dollar/ euro spent and then gets free flight for a holiday – without flying.

  • Deon Charles

    The better aspects of frequent flyer programs are now just broken promises. No wonder airline loyalty is falling. United cheats on domestic upgrades, offering cheap upgrades to non-elites despite promising free upgrades to elites. Delta has extremely limited availability on desirable low and mid priced award flights. Get a United credit card and you can board at the same time as someone who has provided 1 million miles of flight revenue. Many airlines fail to adequately enforce boarding order benefits promised to elites.

  • Shankar/Selina

    So what is stopping you? It is all a business.