How Not To Build Customer Loyalty
As someone who both works in loyalty marketing and travels for a living, I might have unusually strong opinions on frequent flyer programs. Delta has made the interesting choice, one that we never recommend to our clients, of changing program status criteria in a more restrictive direction. They added an earning criteria to their status qualifications, which doesn’t sound like so much from the headline amount – $2,500 per year for Silver up to $12,500 for Diamond. What’s the issue?
Spending has to be net of taxes and fees. That’s not a big deal in a retail program, where the only taxes and fees at issue are a 5-8% sales tax on top. In a highly-regulated industry like airline travel, it’s very frequent for taxes and fees to comprise an absolute majority of the headline ticket amount. Forbes gives the example of an $826 roundtrip to London from New York, which yields 6,902 qualifying miles – around a quarter of the way to Silver in the old system. Buuuuuut….net of taxes and fees, that $826 ticket is actually only $184. That’s some serious ticket shock, and the same dynamic applies (to a less extent) to flights within the United States. Given that, it becomes easy to see what a big hurdle the new requirements are, locking out most people who don’t travel very regularly on high-fare flights for work.
It’s a good example of the hazards of introducing a loyalty program – changing it after the introduction can be a dicey proposition. While these changes may seem pretty reasonable to Delta, they disproportionately impact and are noticed by their top customers. These are the people that should be the brand evangelists, many of whom are right now figuring out which status match offers for which they should sign up.
Oh, Delta. If only the other legacy carriers weren’t basically as terrible…