Like most business people with global responsibility, I fly quite a bit. I have been a Platinum member for a couple of years and have flows with American almost a million miles now. A few weeks ago I headed to the counter and asked to be added to the list to get upgraded. After all, I have 18 segment upgrades in my AA Account.
“No can’t do. You cannot use your segment upgrades anymore” said the AA Lady. Wait…what? Last year because I was transitioning to a new job, I did not fly much, and when I flew other airlines were more convenient. I did not get enough miles to qualify for Platinum – or Gold. I missed by just about 2,000 miles. I was demoted from Platinum elite member to member. And if you are not Gold, you cannot use your earned segment upgrades. American won’t allow me to use the upgrades I earned by being a loyal flier for years.
Then, I got an email yesterday where American is asking me to pay $559 to retain my elite status at Gold and enjoy benefits such as checking two bags at no extra cost, which I get at Southwest.
What American does not get is that I am the same guy they used to pamper with free upgrades to business class on an intercontinental trip, complementary access to lounges and other perks. Now that I am traveling again, I don’t feel compelled to use AA – for them I am just a guy. In reality, I am a business traveler, and I spend more than I would like on travel – and American knows it. American’s loyalty program failed to prove loyalty to me as a customer .
American has lost my loyalty and the loyalty of thousands of customers. Now American is in bankruptcy and at their current market ($218 million) Apple could buy the airline with the profits they make in a day and a half. But the goal is not to pick on American or rant about my experience, I am using it as an example of having the wrong idea about what a loyalty program should be.
“ Loyalty programs should be about demonstrating loyalty to your customers, not about bribing customers to do business with you”
Here is the problem: Most Loyalty programs are focused on rewards, which ends up being the same as bribing the customer to do business with you. Ironically, there is no loyalty in bribery: as soon as the bribe stops, customers will go elsewhere.
What if you thought about a loyalty program in a different way? What if the goal of your loyalty program is to demonstrate your loyalty to customers? Customers that feel appreciated, that feel they trust a company, that believe a company will stand by its principles, will become a loyal customer. Customers will be loyal because they will want to do business with you. Not because you bribed them. Seth says “Loyalty can be rewarded, but loyalty usually comes from within”
Maybe that’s why Forrester Research found no correlation to a small negative correlation between customer loyalty and having a loyalty program.
The key driver of loyalty is good, consistent, trust worthy service that meets the needs of your customers.
The old customer marketing funnel based on the AIDA model (attention, interest, desire and action) is obsolete. The new marketing funnel needs to be customer focused. The new customer model is CSLA (horrible, but hey, acronyms suck anyway): Costomer -> Satifaction -> Loyalty -> Advocacy
- You create a Customer when they buy a product or service from you
- Customer becomes Satisfied when you meet or exceed expectations
- Satisfaction drives Loyalty, which is repeat purchases
- Satisfaction and Loyalty make the customer an Advocate that promotes your product or service via word of mouth