How Loyal Are Loyalty Programs?

The real essence of a company’s existence is -of course- to raise substantial revenues. Customer loyalty programs are placed among other management strategies employed by various companies and brands in order to engage the most frequent customers in the vicious circle of constant purchasing.



What exactly are the customer loyalty programs?

What exactly are the customer loyalty programs

If we had to provide an accurate definition of these programs, this would look like: a rewards program offered by a company to its best customers. Rewards can take the form of points, miles, coupons, discounts and even advance released products and we usually encounter them in such companies as airlines, hotels and car rental companies.

Loyalty breeds Loyalty

Loyalty breeds Loyalty

What occupies the first place in the imaginable hierarchical scale of every company’s success story is what we can call in simple terms as “happy customers”. If customers are satisfied by the company’s overall treatment, this will undoubtedly lead to the increase of the customer’s loyalty rate. It has also been statistically proven that it is more profitable for companies to retain existing customers than to acquire new ones. Hence, if the customer is happy, she/he will:

●  Always come back to the company or brand,

●  spread the word to other family members, friends or even acquaintances and thus expand the company’s reputation,

● spend more money on the company or brand which has created positive experiences to her/him either by its excellent customer service or by the value and quality of the product or service provided,

●  feel a stronger bond to this very company or brand and choose it among other companies, even in cases when better prices or terms are being offered.

Building a fruitful customer loyalty program

Building a fruitful customer loyalty program

Airlines and hotels tend to offer customer loyalty programs, but they do not always succeed in building them. They establish complex rules, blurred terms and conditions and frustrate the customer, who eventually becomes more suspicious rather than loyal. Some basic issues, which they should take into consideration while creating such loyalty programs, are the following:

●  Always use a simple point system. For example, an airline should make it clear that a mile equates with one point. An x amount of points will lead to a specific reward. Therefore, the relationship between the allotted points and the tangible rewards must be more than obvious, and not complex and confusing. Customers should know beforehand what they aim at.

●  Give small and frequent rewards: in the case of an airline’s customer, a small reward would be that the traveler may choose her/his own seating place in the aircraft’s cabin without extra cost if she/he has gathered a specific amount of points. Companies should not leave a huge time gap between purchase and gratification of the redeeming of points. Customers will be eventually unengaged and indifferent.

●  Place an upfront fee, through which potential obstacles (e.g. in waiting queues at the airport) will be minimized for the customer.

● Partner with another company in coalition programs. For example, airlines usually partner with car rental companies and/or with hotels to provide all-inclusive offers for the travelers.

●  Be generous. Do not let the customer spend a fortune on your services and give back meager rewards. This will have the opposite effect and surely not the desired one. Show to your customers that they have a certain value to your company.

Who should participate in a customer loyalty program and who not?

Who should participate in a customer loyalty program and who not

The fact that airlines, hotels and other travel companies offer the possibility of a customer loyalty program does not necessarily mean that each and every one of us should participate in such program. The common sense says that you should collect miles and points, if:

●  You are a globetrotter or even a frequent traveler and tend to use the same airline all or most of the times. It is highly likely that you will get some benefits whatsoever and you will collect miles in the short run.

●  You regularly go on business trips, which are in charge of a travel department.

● Your city does not have a hub airport and you usually use a specific airline for your air travels.

However, there is no point in collecting miles and points, if:

●  Traveling is just a leisure time activity for you and you normally travel on holidays, once or twice a year (or even less!).

●  You live in an area with a hub airport and you can choose among a variety of airlines.

If you are a deal-seeker and in the constant pursuit of the best value for money when booking flights or hotel rooms.

The other side of the coin

The other side of the coin

It is generally insinuated that customer loyalty programs are built for the sole purpose of benefiting the customer in every way possible. However, as I mentioned above, the sole purpose of a company’s existence is to raise substantial revenues. Companies are not anthropocentric, they are mostly money-centric. They offer gifts, but simultaneously make sure that they take back their value in another form. The same token applies in this case, as in many others: the truth lies somewhere in the middle. Let’s enumerate some key points every traveler should pay attention to before taking part in a customer loyalty program, nurturing high expectations:

●  Your privacy is the company’s friend. Every time you unconsciously give your personal and travel details, the company gains authority over you. In other words, you allow the company to identify your spending behavior and portray your character, inclinations and preferences. Thus, you make it easier for them to manipulate you, creating needs for you that you may have not even imagined they ever existed in your head. They may also share your data with their coalition partners, something you may never get informed about. If you can’t stand the thought of your own privacy being interrupted and violated, then customer loyalty programs are not that suitable for you.

●  Making you spend more is their ultimate goal. As you let them know all about your spending preferences, they will always find a tricky way to lure you into giving them your money. In most of the cases, when people are bound to customer loyalty programs, they do not opt for another airline (let’s say!), even if better deals are offered. “But if I am loyal to this company and gather 100 points more, I will get that free ticket”, you may think. And you simultaneously pay a huge amount of money for these 100 points and get that free ticket. For which, of course, you eventually paid two or three times its value. Marketing at its highest!

●  You become part of the company’s categorization process. You cannot put all customers into the same basket. Judging by their spending behavior, a company divides its customers into the best ones and the good ones. There is no doubt that only the best customers will enjoy some real benefits, which by no means might ever harm the company’s status.

What you should always bear in mind when you decide to participate in a customer loyalty program is that a company will never offer you anything that you haven’t paid at all before. What I suggest here is that there is no such thing as a free ticket or a free hotel room or a free car for rent. You have paid for it before and the company knows it much better than you do.

Also, they won’t tell you that:

Also, they won’t tell you that

●  Your miles are not really yours. They belong to the company, which can manipulate them at will. You would have known that, had you read the terms and conditions before you signed up for that customer loyalty program.

● You may not be able to redeem your points or miles. Redemption levels can change at any time and with no notice, which leads us to the next problematic story:

●  You are responsible for following every change in the program. The company is not necessarily responsible for notifying you every time something has changed or in case your points or miles are about to expire. This is your job and it is on your negligence that they bet.

●  You may lose everything because you haven’t travelled in a specific timeframe. Inactivity might cost you your loyalty account and set you out of the game.

●   You may not be able to collect miles and points in every flight or in every hotel stay you choose. There are limitations here, too.

●  You may be obliged to pay fees or taxes in order to redeem your points and get that hypothetically free ticket or hotel room. Well, that’s kind of funny!

●  If you break a rule, you can be expelled from the program. And in case they observe any suspicious changes in your account, they are allowed to audit your profile and share your personal details with third party companies.

How to choose the best customer loyalty program for you

How to choose the best customer loyalty program for you

We cannot overlook the fact that customer loyalty programs might prove beneficial for some travelers, who are of course aware of the aforementioned problematic issues and have their eyes wide open when they decide to enroll in such programs. Let’s make a list of some key-points that will help you in choosing the most suitable customer loyalty program for you:

● Your own travel behavior and needs. Seriously think: “am I going to travel mostly with this specific airline”? Or: “does this hotel expand to most of the cities I intend to visit in my next travels”? If this is not the case, do not opt for that specific program.

●  The terms and conditions. Most of us, in the sight of this very phrase, seek passionately for the “skip” option. Number one mistake. Read the program’s contract and if you encounter incomprehensible and blurred sentences, just skip this program and move on to another.

●  The company’s fame. Search for comments and reviews about the customer loyalty program you are about to choose. You will be able to build your own opinion and avoid the possibility of participating in a less open-handed, unreliable program.

● Very important: redemption rates. They are usually available online and you will not have any difficulty in tracking them. If you observe that they are very low, then you will get the message that you will never earn much with the points or miles you will ever collect.

●  Customer service. If you see reviews cursing the customer service department and all its employees for their rude manners, then just don’t give them your loyalty. They do not deserve it.

You don’t have to be forever loyal

You don’t have to be forever loyal

Let’s assume that you followed our advice and chose a customer loyalty program suitable for your travel needs. Are needs stable? No. What you should do when your needs change? Easy! Change. You should stop participating in a customer loyalty program, if:

● You stopped traveling. You might have been a globetrotter in your 20s, but now in your 40s your obligations do not allow you to travel more than three times a year. This means that you will not frequently use the same airline, you will book less hotel rooms and you may not rent any car at all throughout a year. It is then that you need to terminate your account in a customer loyalty program.

●  You used to live in a region with a hub airline, but you have now moved out to another city with a hub airport and a vast majority of options regarding airlines, for example. Why on earth should you keep being loyal to that hub airline? Your sentimentality might benefit the company you are loyal to, but not your own financial state.

● The company doesn’t show its appreciation to you as a customer. You are constantly being treated poorly by the company’s customer service and you keep maintaining an account in their customer loyalty program? You should bear in mind that this behavior does not only degrade you as a customer (and as a human being after all!), it does also not prevent other ignorant customers from signing up for this specific customer loyalty program.

Loyalty programs are only for those elite customers, who will also enjoy some benefits bestowed by the company exclusively on them. But for the rest of the travelers, loyalty programs are dangerous in that they manipulate your spending behavior. Being a wary consumer is the key to overcoming any potential danger in the sphere of customer loyalty programs and beyond that.

Edited  by Elena Dimitriadou

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