The Bankwatch

Tracking the consumer evolution of financial services

The declining value of loyalty plans

Shar’s experience is a classic example of how the whole loyalty model is broken.  Step by step the Airlines [just to pick on them] are eliminating and discounting benefits associated with loyalty.  Then you have situations like this, that frankly have no cost to fix, except a personality transplant for “Linda” and her ilk at American Airlines and others. 

Forrester’s Marketing Blog: Customer Experience Matters More Than Points In Building Loyalty

I *want* to do business with the firms who treat me like a person. Who try to recognize the things I care about. Frankly, I find my miles with American a constantly accruing currency which I have very little opportunity to redeem and therefore don’t perceive as much of a benefit.

For any airline employee to utter the words, “I don’t care who you are or how much you travel” is beyond belief.  Either the loyalty plan means something, or not.  There is no in-between. 

My own experience with air line points is disappointing at best.  Gaining ‘status’ brings so many conditions, that the value is discounted to a bunch of useless coupons, that seem to be impossible to redeem, unless I am prepared to book 12+ months in advance and use completely inconvenient multiple stop routes. [my example is Air Canada].

So stepping up a level, loyalty points and plans are only of value if the customer feels value.  Fewer are feeling that value nowadays, and those Banks who pay for those plans, should think about that.  I think the loyalty plan model is broken. 

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Written by Colin Henderson

December 28, 2007 at 16:37

Posted in Loyalty

4 Responses

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  1. With all due respect, Shar’s story is hardly an example of how the “whole loyalty model is broken”.

    It’s an example of how the airline’s business model is screwed up, it’s an example of a really bad customer experience, an example of an employee who may or may not be representative of the airline’s employees, etc.

    Don’t get me wrong — I’m not making excuses for AA. But the loyalty plan model isn’t what’s to blame here.

    Airline loyalty plans (in particular) are “economic” contracts: The more you fly with us, the more points you get for future travel. (At least in theory). The most frequent flyers should gain some status in terms of other benefits. The fact that “Linda” didn’t bestow those benefits unto Shar is Linda’s fault — not the result of a faulty system.

    rshevlin

    December 29, 2007 at 11:27

  2. @Ron … of course you are right … I just wonder if the promise of widely based loyalty plans are feasible. If the plan contains a promise relative to service expectations, its hard for a Linda, under pressure, to switch on to plan A, B, or C at the drop of a hat. So maybe its the design of the plan that is faulty here.

    Colin

    December 29, 2007 at 15:51

  3. I think there are customers who want points so badly they’ll stay with you in spite of bad service (to a degree, I suppose), just as some people will go to the lowest price no matter how unpleasant the experience (see: 2 Buck Chuck).

    Shar’s right to say that good customer experience is important for keeping customers like her, but that doesn’t mean loyalty programs aren’t the deciding factor for keeping a whole other segment of customers.

    Dan Dickinson

    December 31, 2007 at 09:41

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