A Guide to Avoid the Same Fate with Your Loyalty Program
It wasn’t that long ago that a well-known politician stated that “you have to pass the bill to know what’s in it.” I was reminded of this odd statement just this past week when, in response to severe customer backlash, Delta CEO Ed Bastian stated, “we’re reading the feedback” and “we probably went too far” regarding the recently announced changes to the beloved Delta SkyMiles loyalty program. The response to the program changes was immediate and overwhelmingly negative. As someone who has spent the last 20+ years working with global brands to architect, launch, and optimize enterprise loyalty, I wasn’t at all surprised Delta made these changes. However, I was surprised that Delta appeared to wait until the changes were announced to start listening to their customers. You can almost hear someone telling Ed that “we have to announce the changes to really know what our customers will think about the changes.” A bit of free advice… you should read the “research” feedback before announcing the changes.
Read The Data
As someone who feels that strategy should always drive loyalty, and data should always inform strategy, directionally, these changes make sense. Since 2020, the number of Delta’s Diamond Medallion members (the highest elite level) has doubled. The so called “exclusive” Diamond customer service phone line regularly has 30+ minute wait times. If you want to relax at a Sky Club in a major hub, you can find yourself waiting in a line so long that agents are bringing water to members waiting outside. And the upgrade lists comically have 50+ names on them for almost every flight. I don’t know about you, but nothing about those data points feels elite, differentiated, rewarding, or worthy of spending thousands of dollars to attain.
The root of the problem Delta is trying to fix can be summed up in one simple statement – If everyone is special, no one is special. And the whole point of Delta SkyMiles, and almost every other loyalty program, is giving customers who spend the most (money and time) an experience that makes them feel truly special and giving those at lower tiers an aspirational goal to attain. With a currently bloated Delta SkyMiles, those first principals of loyalty have been severely compromised and more than anything, the draconian measures to right the ship are more of an inditement on the poor stewardship of the program over the past decade.
By definition, customers in the elite tiers should be a small percentage of overall program members and what it takes to attain that status should increase as the market dynamics of the program change. Think of it as loyalty inflation. As members have more ways to earn their way into elite status, so too should the thresholds to enter those tiers. This ensures that members at the top represent the most valuable tier of customers. This sounds obvious, but there are lucrative reasons to allow more customers to take a bite out of the carrot being dangled.
Delta’s partnership with American Express is beyond successful. It generates over $7 billion dollars a year. Some analysts predict that the credit card partnership with Amex will eventually rival annual ticket sales for Delta. So, it stands to reason that some very smart people at Delta felt that if they can add shortcuts to elite SkyMiles status benefits and get throngs of Delta customers to chase that status, it’s a win/win for everyone. Except that it’s not, for all the real-world reasons listed earlier. Instead, it may have been more interesting to develop a completely new slate of compelling benefits for Gold or perhaps reimagine a Gold Plus level that doesn’t dilute the value of Platinum and Diamond status. Good program design takes time, research, and thoughtful due diligence to develop new benefits that customers never knew they couldn’t live without. But if done right, you can perhaps avoid introducing a jaw dropping $350k credit card spend threshold to earn your loyalty programs top tier status. Or ask members to spend a breezy $75k on a platinum card to get unlimited access to the Sky Club. Of course, much of these may be revised. After all, Delta is now listening to customers and plans to peel back some of those thresholds. But it won’t solve the fundamental problem of how Delta will continue to service an increasing loyalty member base in a program with an infrastructure that was designed to deliver an elevated level of service with far fewer members. You can build more lounges and add more premium seats but that takes time and doesn’t scale. Did Delta get too aggressive with spend thresholds, absolutely. These programs train customers how to engage with a brand, how to “play” the game. And airline loyalty customers are black belt gamers when it comes to playing the game. So, any change to how they move up the leaderboard will be felt, and the initial changes Delta announced didn’t go over well.
Lessons Learned
This movie isn’t new. Recent history tells us that whether its Mariott Bonvoy, American Airlines, or Delta Air Lines – programs will evolve because they should and/or because they must in order to be sustainable. And yes, customers will complain and eventually adapt when these changes occur. Last I checked Bonvoy was listed as a top 3 program by US News & World Report, and the American AAdvantage program is thriving. Delta is a great brand, and they too will come out the other end with a stronger program, and likely much happier elite status members as they will start to see more exclusivity and options when booking, upgrading, and accessing the Sky Club.
It seems the real takeaway here for any major brand that runs a loyalty program is this simple fact – just because your program can generate billions in revenue, that alone is not the ballgame. You must also keep a watchful eye on the customer experience and protect it at all costs. If your pursuit of profits sacrifices a best-in-class customer experience for all your customers, but especially for those best customers that are loyal to the brand, then it may be time to change course. To be clear, both profitability and outstanding customer experience are achievable, but it requires constant attention and communication with your customers. As Delta is learning, they’re more than willing to offer an opinion.
How Can We Help?
Whether you’re looking to optimize an existing loyalty program, overhaul a program entirely, or are just beginning to ideate your loyalty strategy, we can partner together to design a program that will create brand fanatics for life. Keep in mind, B2B partner incentive and loyalty programs are more akin to consumer programs than not. Contact us today if you’d like to continue the conversation.
