The era of punitive loyalty is over


There’s nothing quite like kicking off a major loyalty conference by suggesting that most loyalty programs operate in a punitive manner and that their customer retention efforts are unlikely to end well for the programs in the long term. As it turns out, that’s what we heard this morning at the Loyalty@Freddies conference from Scott Resnick, JetBlue’s Director of Loyalty. And while some of this is his hopes for the industry, not necessarily what is currently happening, Resnick took the opportunity to share how TrueBlue is trying to push boundaries on that front.

For many newer successful companies the concept of a loyalty program is something very different from what hotels or airlines operated for the past 30+ years. There are ways to capture a consumer’s attention and loyalty without barriers such as points expiry, multiple tier levels and relatively high priced redemption rates. In hotel programs the most recent development for general members of a program is access to free wifi on site. For airlines the day-to-day benefits of being a member while traveling are roughly nil. For some of the newer programs there are additional touch points in the programs that draw customers in and give them rewards – even very small things – to drive engagement. Trying to change that level of interaction is challenging for travel providers but in many cases it seems they aren’t even trying. Instead, the changes to program rules are seen by members as punitive.

Being punitive, adding more tiers and devaluing points may make a program more financially sound. It can lock some customers in but it does not end well.

The main challenge with this view, of course, is that the value of the program is typically demonstrated by looking at the miles sold by a loyalty program to partners. It is easy to document an income line and show its progress year over year. It is much, much harder to document customer behavior and determine the impact of the loyalty program on incremental travel purchases. In each of the first three sessions it was suggested that just throwing more miles at a business traveler is probably not the best reward. That’s heresy in some segments of the market, of course, but for many customers loyalty is about reducing friction, not necessarily getting rewards.

The JetBlue TrueBlue program is relatively young and was one of the first in the US market to go to fully revenue-based. But along the way the company added things like the Badges program to drive engagement and activity in small ways, touching on gamification of the program and also delivering tiny rewards to keep customers coming back. An extra 50 or 100 points is unlikely to drive travel patterns but it fulfills the goal to “be generous in little ways.”

So, are we ready for an end to “punitive” loyalty programs? Does the travel loyalty industry need to evolve wholesale to keep up with consumer demand? And can that happen without trashing the travel redemption part of the operation that is still a major (though shrinking) part of what the programs represent?

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.

13 Comments

  1. You know why hotels offer free wifi?
    Because Color TV, Direct Dial Phones, Air Conditioned rooms and HBO made us spoiled and we wanted more 🙂

  2. To me, it used to be about loyalty to one program. As the perks were changed, so did I. I just collect when I can but overall I just choose the best price/value/comfort flight, hotel etc. I don’t pay higher fares to stay with a certain alliance anymore. I make my own perks with lounge access from credit cards, splurge on meals from airport restaurants with the savings from the flights etc. I feel that for once, Airlines don’t have me trapped and chasing status anymore.

    1. Basically all of the legacy programs by this definition. Programs with high barriers to redemption, minimal opportunities for “instant” recognition, perpetual adjustments to program currency (nearly always negative to the member) and more.

    2. I agree the perpetual and negative adjustments to the value of the currency sucks but I get (and don’t see an alternative to) the high Harriet entry, BA can’t give everyone a gold card

    3. The good news is that not everyone needs/wants the benefits of Gold status. There are a lot of ways to give little rewards here and there that encourage participation and shift buying patterns but remain short of full elite status. Whether “surprise & delight” so not guaranteed or consistent delivery, there are ways.

      I’m not sure it is a perfect solution, but it is another option.

  3. I happened to look today to see how many TrueBlue points it would cost to fly oneway on JetBlue’s Mint product. The cheapest for the day I saw was 50,000 TrueBlue points, the highest was 136,000 TrueBlue points That seems like a collection of pretty high priced one way redemptions. Compared to revenue fares, it accounts for slightly over a penny (1.3 cents). I get it, its a revenue based program, but then I look at the benefits of loyalty. While they call the others, “punitive”, I see no carrot of complementary domestic upgrades, just “even more space” which seems like what mid-tier status members get from the Legacies. I would call EQD/MQD/PQD (perhaps in reverse order of their introduction) as punitive, however since JetBlue awards points based on fare prices, that doesn’t really jive.

    So, I guess when it really comes down to it, I’m trying to figure out where the punitive nature of programs are, other than the devaluations that we’ve seen over the years. Don’t get me wrong. I don’t like what the legacy programs are doing, but, I’m not seeing the “break the mold” benefit, unless its somehow buried in the fewer benefits, but maybe those fewer benefits are more consistently provided?

    1. I don’t think he’s claiming that TrueBlue has figured it out or that the program is perfect.

      At the same time, it offers a far more simple structure and set of parameters in which passengers operate. Mint used to have a sweet spot redemption that disappeared but there are still some nice options in the programs with 1.5+ cpp rates (I got way more than that to Cuba, though I recognize that’s an edge case).

      And I don’t see revenue-based as punitive, unless the redemption options fail to adjust in line with the earn process. That’s a real change in currency value that’s hard to balance in many cases.

  4. Simplicity in a loyalty program is a plus. United keeps adding hoops to jump through. First it was just miles to get an award, then it was miles and dollars, then it was miles and dollars and segments, now it’s miles AND dollars AND segments AND segments on United metal. Since I regularly fly to Asia on a United ticket, but the most convenient flights for me are split between United and one of their codeshare partners, I don’t collect the required segments on United metal.
    I have plenty of miles, and have spent plenty of money, and spent quite a bit of time in the air in business class, but most of those miles have been on a United ticket, but flown on a codeshare partner.
    Punitive indeed!

  5. Delta and Hilton are the two programs that leave a bad taste in your mouth. You actually regret you put so much effort into collecting their currency. At least United miles are usable even if their elite benefits are weak these days.

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