Quit That Loyalty Program Mindset Once and For All

he term loyalty program is a misnomer in the year 2015, for all intents and purposes; and the time is long overdue to quit that loyalty program mindset once and for all.

Articles from all different kinds of media sources complaining about the present state of loyalty programs — removing benefits, changing their models from being based on distance to being based on revenue in terms of airlines, and introducing dynamic pricing of awards as three of many examples — are relentlessly flooding the Internet and bombarding you with verbiage resembling the end of the world as we know it.

The basic tenet of loyalty programs in their early years was simple when compared to today: patronize an airline or a lodging company; and in return, earn miles or points to be used towards what was then as close to truly free travel as possible — excluding the inherent opportunity costs, of course. Acquire a certain amount of miles and you can use them for a free trip within a defined region; and a certain amount of points will get you a free night in a hotel. Easy to do and simple to keep track.

Theoretically, the company administering the program would gain more business from its customers, which translated into more profits. Everyone wins — right?

Apparently not.

Over the years, a major flaw of these so-called loyalty programs was exposed:

Greed: the greed of the customer; and the greed of the corporation.

Customers have devised ways over the years of exploiting the benefits of those programs — whether or not that exploitation was designed but not originally intended by the airline or lodging company — resulting in what could arguably be called the enjoyment of more than their share of benefits to which they were entitled.

Meanwhile, stakeholders have relentlessly held corporations accountable to increase and maximize profits — especially in the airline industry, where people who purchased airline stocks and did not heed the warnings of investors lost significant amounts of money as that industry hemorrhaged billions of dollars over the years. The pressure was on for airlines to simply placate their stakeholders — never mind fulfill the fiduciary responsibility of providing its investors what they want after suffering year after year: a return on their investment.

There was no way companies could survive under those impossible financial circumstances of bleeding cash while “giving away the store” to its customers in the hopes of charting the right course towards profitability…

…ah — but alas, as evident in many other areas of society such as politics, entertainment and religion — an overcorrection occurred. When the airlines started to profit from this formerly-untapped treasure trove of ancillary fees for products and services which used to be included in the price of an airfare, they went from begging for your help to what feels like trouncing all over you before leaving you behind. It did not matter how much or how well you supported them during their lean years. The mantra is “what have you done for me lately?”

One can argue that the customer had that same mantra to the airlines during those years of disappointing earnings reports financial quarter after financial quarter. Evidence of that varies amongst weblogs and Internet bulletin boards — with one glaring and blatant example being the ethics of taking advantage of mistake fares, over which there is still a heated debate after so many years.

Let’s face it: whether as a customer or as an employee in a corporation, there is an inherent trait of the personality of human beings to be selfish and maximize on an opportunity presented to them. That is not to say that human beings cannot also be thoughtful and generous — there are countless examples of that in all aspects of life — but thoughtfulness and generosity are not typically what governs the policies and procedures of both the loyalty program and the behavior of its members. When someone exploits the system — regardless of in which direction or who is the actual cause of that exploitation — it is usually the impetus for action upon the person or entity to counteract that exploitation as a form of protection…

…or perhaps as a basis for a form of exploitation as a response — the overcorrection to which I referred earlier in this article. Either way, it is not just the most greedy customer that suffers the consequences of his or her actions. When the policies of frequent travel loyalty programs are further restricted, usually all of the members suffer the consequences.

I have stated many times in past articles — such as this one as an example — that the current economic climate in which airlines are currently enjoying the earnings of record profits in consecutive financial quarters will not last forever. When the airlines are once again hurting — perhaps not like they did in the past — and once again offer incentives to take part in their loyalty programs and increase your patronage of them, will you accept? Will you remember the days where you felt like your support seemed to mean nothing?

I will be the first to admit that this article is an oversimplification of how loyalty programs and its members have evolved over the past 34 years since American Airlines introduced the first frequent flier loyalty program in 1981, as there are myriad factors and exceptions which one could “cherry-pick” to easily disprove what I wrote…

…but the bottom line is that loyalty programs in 2015 are typically missing just that — loyalty, on all sides of the equation — and the blame can be shared all around.

It is important to maintain perspective in life and adjust expectations to mitigate disappointment. Choose your battles wisely. Remember: loyalty programs are administered by for-profit entities; and you are a customer who is free to shop around. The best thing you can do is to quit that loyalty program mindset once and for all and do what is best for you in terms of travel — without being greedy, of course.

Photograph ©2014 by Brian Cohen.

10 thoughts on “Quit That Loyalty Program Mindset Once and For All”

  1. ken says:

    totally agree. I recently realized that I have been choosing airlines outside of my typical loyalty program: United mileage. I still try to fly American or its partners and keep my status there because I feel I am rewarded enough to keep the loyalty but I left UA and LH this year completely and it is liberating! The ticket prices are much cheaper and often better deal even after paying for seat assignment etc. You get the seat you want, still pay less than before. Makes sense for me…

  2. Christian says:

    While it seems old fashioned, I still fervently believe in loyalty. Without it, my business would be long defunct. Any corporate loyalty program is going to have a few people taking major advantage. Obviously, you build that factor into the program from the start. If you don’t treat your loyal customers like idiots, you will go far in keeping their loyalty, even if you have a 3rd rate program to begin with. I was perfectly happy with Skymiles for years, despite how awful the program was. When they intentionally made it much worse, I bailed, since the only goodwill was on my part. As a result, I felt like an angry chump. Treating people like dirt may work short term, but Delta may yet rue this perspective. Certainly I avoid them.

  3. Ben says:

    Yawn… Your point is? Without loyalty programs, airlines or hotels, none of your blogs and other points and Miles bloggers thriving on credit card affiliate programs and referral links would exist. Nothing new to see here, folks.

    1. Brian Cohen says:

      Tell you what, Ben: you find evidence of one single penny I have earned as revenue from credit card affiliate programs; and I will humbly agree with you.

      Notice that I did not limit that statement to articles I have written at The Gate. I am talking about at any point in my entire life.

      One single penny, Ben. Go ahead — if you are up for the challenge…

    2. Real says:

      Ben, There is a very solidly defined point in the article. Perhaps you could read it again? If you don’t like the article why don’t you just ask for your money back. (ha)

  4. Joey says:

    His point is the word “loyalty” in loyalty programs is a misnomer. 😉

    I agree with you but I think it’s been a misnomer ever since it was possible to accrue loyalty points from using the affiliated credit card! I mean one can earn 100k miles from NOT flying?!?!?! In addition, people would use these AAdvantage points not to redeem on AA metal, but on Cathay Pacific or Qantas or British Airways! It’s definitely odd when it is harder to redeem Cathay Pacific First using Marco Polo miles (or Asia Miles) than AAdvantage miles.

    1. Brian Cohen says:

      Thank you, Joey.

      Guess what? I have never applied for a credit card which earned frequent travel loyalty program miles, points or elite level status — which means that I have never earned a single mile or point from a credit card as a result. Rather, the credit cards I have used over the years have always given me cash back for what I spend.

      Might I have “left some money on the table” over the years by that decision? Perhaps; but I never wanted what I earned as a result of spending with a credit card to be beholden or dependent on a frequent travel loyalty program where the policies and rules can change at any time…

  5. john says:

    Frequent flyer programs were never about loyalty from the customer. Customers were never required to be loyal to an airline. Loyalty is faithfulness to something or someone to which one is bound by pledge or duty. Airlines never expected or required that its FFers not fly with other airlines or even primarily with one airline, or act in the best interests of the airline. FF programs never involved any duty or relationship of trust. At least not on the part of the customer anyway.

    Airlines promise ff benefits. They tell customers (who are also stakeholders) after you meet certain conditions, you will receive certain benefits. It is a breach of trust, loyalty and fundamental fairness when after expending money and effort to meet those conditions, airlines tell customers the promised benefits are no longer available or are available at a much higher price than was promised. That is why customers are angry. Customers irrationally expected the airlines to keep their promises and treat them fairly when airlines are under no legal obligation to do so and they can make more money (short term) by reneging..

    You seem to think that customers are upset because they can no longer exploit the airlines ff programs and that customer exploitation of ff programs was a significant factor in the airlines previously poor financial performance. Bloggers are the ones developing and advertising ways to take advantage of or maximize the benefits of ff programs. Even with people like you doing their best to minimize the value of ff programs to airlines, that still is not the reason most airlines could not make money. Few of the tens of millions of ffers take advantage of the tricks you advertise. On the contrary, I assert that most of those in ff programs fail to take full advantage of the benefits they have earned. Letting miles expire and booking award flights at levels higher than potentially available are two examples that come to mind. I’m sure you can think of others.

    Southwest has been able to maintain a ff program and turn a profit for decades. The airlines that were losing money hand over fist did so because their costs exceeded their revenues. Simple. The primary culprit for decades of airline losses was high costs due to the absurdly generous level of employee wages and benefits and overly restrictive work rules that the legacy airlines brought with them from the era of regulation coupled with the inability to raise fares because of competition and excess capacity. The business model of being all things to all customers helped keep costs high, too.

    Consolidation in the airline industry has eliminated much of the competition and made it easier for the industry to control capacity. Although fares have come down in recent years industry wide, the fares for legacy carriers have actually increased. Plus fees have exploded.

    Furthermore, because a business or industry lost money in the past provides no economic justification for making more than a reasonable rate of return going forward. Today’s record profits are not benefitting the shareholders, customers, employees, communities and creditors who suffered or lost money in the past because of the airlines’ mistakes.

    As long as airline management continues to reap multi-million dollar bonuses from listening to the consultants and analysts who see further ways to raise earnings guidance for the next quarter, ffers, employees and customers will continue to be the victims of greed. .

    1. Brian Cohen says:

      I actually agree with much of what you posted, john. Thank you for the response, which is evident that you put a lot of thought into it.

      I have mentioned in past articles which I have written that trust is indeed an issue — this is one article which immediately came to mind:

      http://thegate.boardingarea.com/trust-really-matter-court-rules-united-airlines-million-milers/

      Greed is of course another factor.

      You are correct when you state that “today’s record profits are not benefitting the shareholders, customers, employees, communities and creditors who suffered or lost money in the past because of the airlines’ mistakes”; but try telling that to those who have suffered or lost money and are not benefiting from them despite having invested in the airlines — foolishly or not — and seeing those record profits pass them by.

      You are absolutely correct that frequent fliers are but a small subset of customers who take as much advantage of what travel companies offer in benefits as possible — but then why do there seem to be significantly increasing restrictions on that small subset of customers?

      In fact, we can look at it from another angle: the airlines are reaping a fortune in ancillary fees from the broader customer base and not the small subset of frequent fliers. People are willing to pay those fees — pure and simple. Remember the days when that idea would have been thought to be purely ludicrous?

      Just for the record, I have rarely posted articles at The Gate espousing tricks intended to minimize the value or maximize the benefits of frequent travel loyalty programs over the past nine years…

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