The Price of Loyalty
Loyalty programs - everyone loves them. The logic is simple: reward your best customers, encourage them to keep buying from you, and the people who are providing most of your revenue will be a reliable source of income. It's obvious - so obvious that it bears a second look.
Good loyalty programs strengthen ties with your best customers. But they are not a substitute for paying attention to your core ability to deliver value to all of your customers. Too often, loyalty programs become a substitute for delivering the right value to all customer.
Airline loyalty programs are a great example of a good idea gone bad. I'll pick on the airline that I fly most often: Continental. I think Continental's "Elite" loyalty program is actually very good. Elite flyers get automatic upgrades to first class when seats are available, accrue mileage faster, and have special (read: shorter) lines for check-in and security.
As often as I fly Continental, I'm not Elite. I fell a bit short this year, so I'm not in the program. This means I will continue to enjoy the non-Elite Continental experience - which is dreadful.
When I talk to Elite flyers, they cite the first-class upgrades as the key benefit of the program. Why? Because Continental's coach accommodations are the most cramped I have ever experienced. I am only 5'8" tall, but am unable to open a laptop, reach for the bag at my feet, or hold up a newspaper in a Continental coach seat. It's truly awful, and it seems to be a consistent feature of every Continental flight. On the other hand, when I've been on Southwest or American lately, things are noticably nicer.
And there's the problem. Continental's loyalty program doesn't really reward good customers - it just protects them from the horrors of the basic Continental customer experience. Because flying coach is so terrible on Continental, they have to protect the best customers from reality.
Compare this to upstart jetBlue, whose frequent flyer program is nothing special. When I lived in DC, I knew many people who raved about jetBlue and few them whenever possible. Then I took one of their flights, and became one of those people.
It was just amazing. The seat was comfortable. The staff was helpful. Everything was just as it ought to be. I hope they come to Houston some day and kick Continental's butt.
Think about it: jetBlue would not have to give me anything to choose their airline whenever I could, because they provide a great customer experience. Continental has to give people something to keep them coming back even when they are a near-monopoly in Houston. Which strategy leads to real long-term loyalty?
By all means, create a loyalty program for your best customers. But make sure the reward is really that - a reward - not a way to compensate for your failings. Because if you are failing on basic customer experience, it is going to catch up with you eventually.
Good loyalty programs strengthen ties with your best customers. But they are not a substitute for paying attention to your core ability to deliver value to all of your customers. Too often, loyalty programs become a substitute for delivering the right value to all customer.
Airline loyalty programs are a great example of a good idea gone bad. I'll pick on the airline that I fly most often: Continental. I think Continental's "Elite" loyalty program is actually very good. Elite flyers get automatic upgrades to first class when seats are available, accrue mileage faster, and have special (read: shorter) lines for check-in and security.
As often as I fly Continental, I'm not Elite. I fell a bit short this year, so I'm not in the program. This means I will continue to enjoy the non-Elite Continental experience - which is dreadful.
When I talk to Elite flyers, they cite the first-class upgrades as the key benefit of the program. Why? Because Continental's coach accommodations are the most cramped I have ever experienced. I am only 5'8" tall, but am unable to open a laptop, reach for the bag at my feet, or hold up a newspaper in a Continental coach seat. It's truly awful, and it seems to be a consistent feature of every Continental flight. On the other hand, when I've been on Southwest or American lately, things are noticably nicer.
And there's the problem. Continental's loyalty program doesn't really reward good customers - it just protects them from the horrors of the basic Continental customer experience. Because flying coach is so terrible on Continental, they have to protect the best customers from reality.
Compare this to upstart jetBlue, whose frequent flyer program is nothing special. When I lived in DC, I knew many people who raved about jetBlue and few them whenever possible. Then I took one of their flights, and became one of those people.
It was just amazing. The seat was comfortable. The staff was helpful. Everything was just as it ought to be. I hope they come to Houston some day and kick Continental's butt.
Think about it: jetBlue would not have to give me anything to choose their airline whenever I could, because they provide a great customer experience. Continental has to give people something to keep them coming back even when they are a near-monopoly in Houston. Which strategy leads to real long-term loyalty?
By all means, create a loyalty program for your best customers. But make sure the reward is really that - a reward - not a way to compensate for your failings. Because if you are failing on basic customer experience, it is going to catch up with you eventually.
posted by John Whiteside at 12/24/2004 02:53:00 PM
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