Loyalty Truth

“Don’t hate the player, hate the game” is a classic sports epithet. Stuart Scott memorialized the saying for me on ESPN Sportscenter while pleading with fans for a greater show of sportsmanship. Translated for non-sports junkies: if you don’t like the way a particular team performed on game day, say so, but don’t personalize your discontent through a personal attack on the individual who committed the key error, threw the interception, or air-balled a free throw.

Loyalty programs are apparently special. Lately I’ve seen quite a few articles by self-appointed pundits that hate both the game and the player.

The latest was an article written by Christopher Elliott, author of “How to be the World’s Smartest Traveler” titled “Frequent flier programs scam travelers“. Published in the Atlanta Journal Constitution, the daily newspaper dominating the home market of Delta Airlines, Mr. Elliott boldly led with the comment that “Loyalty programs may be the single greatest scam pulled on the traveling public” and went on to describe frequent flier programs as “Habit forming schemes that impair your ability to make a clear-headed decision about travel and that almost always benefits the travel company more than you”.

After leveling this caustic opening attack, Mr. Elliott went on commend Delta’s reinvention of its own SkyMiles Frequent Flier program (FFP). You have probably read that Delta is changing the core tracking medium in its FFP from miles to dollars spent on fares.

The change is controversial, mostly because the airlines do everything (change fares, introduce services, modify their FFP rules) in virtual lock-step, almost as if we’ve returned to a pre-deregulation world circa 1978. In this case, Delta has taken a clear step ahead of the pack and has risked criticism from the flying public for adopting a different approach to defining “most valuable fliers” and rewarding elite benefits to the group.

I’ve gone on record supporting Delta’s rule changes and think the rest of the industry will slowly fall in line with this new revenue based model. Airlines, like any business, are in business to turn a profit. Evaluating their most valuable customers is best done by blending multiple measures, frequency (how often people fly), monetary value (how much they spend), and advocacy (willingness to recommend the service to others).

Most airlines have been using frequency as a core positive reinforcing measure, tracking miles and segments earned as flights are logged by travelers. Recency translates into a carrot to avoid a negative event, specifically the loss of miles and status earned through activity rules that potentially penalize travelers by erasing their miles if they don’t patronize the airline for an extended period of time.

Whether Delta chooses to parse out elite status and benefits by any of the measures above can be easily rationalized, though I happen to think that too many brands have focused on frequency, missing the importance of customer value as a key determinant of loyalty program benefits. The changes announced by Delta precisely address the difference in annual customer value among its FFP members and I applaud their courage for making the change.

Digging for substance in the argument made by Mr. Elliott against the player (Delta) and the game (frequent flier programs), the only thing I could solidly identify was a strong expression of entitlement from the author. If you read the fine print of any loyalty program, you’ll see that the brand retains a right to change or cancel the program at its sole discretion.

Times change, business climate changes, and every business is wise to assert some control over its future ability to turn a profit. Mr. Elliott saying that SkyMiles “remains unfair to most travelers because Delta can change program rules at any time without notice, confiscate your miles, or terminate your membership whenever it wants to” he is missing that very big reality faced by every business.

When I was asked in an interview recently if I was worried about the saturation of loyalty programs in the world today, my answer was to say that only the proliferation of “bad” programs bothered me. Programs that are hastily created, reward only frequency, offer weak value, and are poorly communicated can hurt a business more than help it. That might be one place where I think I can agree with Mr. Elliott. The only problem is, none of those critiques apply to Delta SkyMiles.

As a consumer, if you feel you have truly been “betrayed by a program’s vague promises” or fooled by a “barely legal bait and switch game”, there’s a good chance you’re playing in one of the many poorly constructed and operated programs in the market today.

If on the other hand, you’re making an irrational appeal for sale prices from a retailer long after the sales are over, or seeking to claim status and benefits from an airline you haven’t flown much in the past few years, you might be channeling your spoiled inner child. There should be equity in any relationship and loyalty programs are no different.