Monday, May 9, 2011

For Love or Miles

Did you know off the top of your head that seat E on a Delta MD-90 airplane is a window seat, but seat E on a Delta A320 is a middle seat? I did. I am a flyer. More specifically, a loyal Delta Airlines flyer. My elite or “medallion” status on Delta means I am frequently upgraded to the first class cabin at no cost, earn double miles for all of my flights and am able to utilize priority boarding and security privileges at most major airports. To be honest, it’s nice, but it’s not all that great. I have serious doubts that these privileges are worth the cost of allowing Delta to monopolize my frequent air travel. Yet year after year, I monitor my mileage balance and travel plans and work my way towards re-qualifying for medallion status. I’m certain our lasting relationship is better for Delta than it is for me, but somehow they’ve hooked me.

Entire Web sites such as WebFlyer are devoted to the analysis and strategic exploitation of frequent flyer programs. I am not aware of anything similar relating to any other industry and have often wondered why the travel industry’s loyalty programs (particularly airlines, hotels and rental cars) are different.

Businesses in many, if not most, industries do things to reward their best customers; they just approach it differently. Some wait for specific customers to demand special treatment—be it a discount on the products/services being purchased or some other incentive to keep the customers loyal to that particular business. Why does Delta tell me up front that if I fly 50,000 miles in a year I will achieve gold medallion status and be entitled to its specific benefits, but my local grocery store doesn’t say “if you buy $X of groceries in a year, you are entitled to a discount next year and special checkout line?” The travel industry is unique in its willingness to publicize precisely what it takes to become “special” and exactly which benefits “special” customers receive. For me, having that specific goal to reach each year probably adds one or two more roundtrips to my schedule than I might otherwise take, which means an extra several hundred dollars to Delta each year. Multiply those incremental extra dollars times tens of thousands of medallion status customers, and we’re talking about meaningful money to Delta.

If I were an entrepreneur in a business that relied upon loyal, repeat customers for a large portion of its profits, I would think hard about how some of the characteristics of the travel industry loyalty programs might work in my business. Of course, many aspects of these programs are not easily transferable to other businesses, but here are some notable common principles:

  • Levels of loyalty/spending/use by the customer and resulting benefits to which the customer is entitled from the company are clearly communicated to the customer up front

  • Loyalty benefits are not discretionary and are distributed fairly and equally to every customer falling within certain specific parameters

  • Benefits are given by the company without being asked for by the customer (helpful for the Midwesterners among us who are afraid of being called “pushy”)

  • Loyal customers receive some meaningful benefit(s) at a minimal cost to the company
In addition to these principles (and maybe the most important point of all), the most successful loyalty programs never forget that they are dealing with people. People who want to feel important and special. Smart businesses remember that a simple note or comment of appreciation for a customer’s loyalty goes far and doesn’t cost a thing.

A Post by Alyssa Hirschfeld, Guest Blogger

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