Airlines Miss The Point Of Loyalty

If you’ve picked up any newspaper or business magazine over the past several years, then you know the pain and suffering that the airline industry has been experiencing. Rising fuel costs, aging fleets, employee strikes, price wars, and most recently - maintenance controversies – make for turbulent times. Just ask any of the airlines that have filed for bankruptcy recently.

In the midst of this ugly environment, airlines must do everything in their power to attract and retain customers. Their primary weapon in this never-ending battle for the customer is the embattled frequent flier rewards program. Every airline has one, and each has it’s own set of advantages and fatal flaws.

Apparently, airlines believe that the mere presence of a reward program is enough to get customers to stick around – even when the next price war wages around them. Certainly it works for some customers; there are those neurotic frequent fliers that will schedule their entire lives around their ability to keep their reward miles climbing with their favorite airline. However, I would argue that betting the health of your business on a group of neurotic customers is a shaky strategy.

Airlines simply miss the point of customer loyalty. They do a poor job of attracting the next generation of frequent fliers and do a poor job of catering to former frequent fliers.

New to our airline? Go to the back of the plane please.

First, most airline rewards programs penalize new fliers. If you are a young professional just joining the throngs of frequent fliers – then you have no preferred status with the airlines. That often means loading last, sitting in the back of the plane, and often being relegated to a middle seat that always seems to situated between two unpleasant individuals (feel free to use your imagination here).

“Just keep flying with us for about 25 more segments and you’ll get preferred status,” a smiling airline representative would say to these newbies. After surviving several experiences like that, it’s a wonder that people stick around to get their preferred status at all.

Haven’t flown with us for a while? Go to the back of the plane please.

Being on the other end of the frequent flier spectrum doesn’t work all that well either. I was a notorious frequent flier for nearly 20 years. During that time, I racked up miles and achieved preferred status on several of the major airlines. Specifically, I attained ‘Platinum’ status on American Airlines and was a proud card caring member for most of that time.

I learned recently, however, that my loyalty to American is not reciprocal.
Let me explain. I recently had to travel to Chicago on business and, as a loyal American Airlines customer, I booked a flight on American. But guess what? Despite being a great and loyal customer for years – I now have no preferred status. None. Apparently, since I quit traveling to start up ClearBrick over the past 2 years, I am no longer a loyal customer. American’s rewards program seems to be based on the ‘what have you done for me lately?’ principle. So it’s back to square one for me; back of the plane, last to load, middle seat misery.

“Just keep flying with us for about 25 more segments and you’ll get elite status,” a smiling airline representative would say to me.

Nurturing Commodity Behavior

What most airlines don’t realize is that the rewards programs that are intended to instill loyalty are having an unexpected side effect; they breed commodity behavior. Customers with no preferred status with any airline will tend to exhibit commodity behaviors; they’ll look for the lowest price or wait for the next promotion, then choose the lowest bidder.

As we’ve learned, attaining and retaining elite status with an airline can be difficult and fleeting. Take the rewards programs out of the picture and the customer is left to decide which airline to fly based on a number of very commodity-like attributes. Most airlines fly to and from the same cities, operate the same aircraft, and serve the same snacks and soft drinks. In addition, more and more airlines are merging to attain operating efficiencies, leaving the customer with fewer differentiated alternatives.

Why wouldn’t the customer simply choose the lowest cost option and continue to exhibit commodity behavior?

Breaking the Cycle

Certainly a few airlines have been able to break away from the crowd. Southwest tries to make flying ‘fun’, JetBlue adds amenities, and MidWest offers all first-class seats and a warm chocolate chip cookie. These few outliers seem to get the fact that they need a differentiated experience in order to compete for the ever-important customer.

A truly loyal customer base is not built on elaborate rewards programs or hard to attain preferred status. That’s a point that many airlines seem to miss. Rather, true customer loyalty is built over time – by delivering a unique customer experience.

With no preferred airline status anymore, I guess I’m free to choose any airline for my next flight.

First class seat and a warm chocolate chip cookie anyone?