Devaluation: why do your loyalty programs always give you less?

Whether we’re talking about airlines or hotels, loyalty programs are a good way for industry players to build customer loyalty. But despite this, they continue to reduce the benefits they offer to their members. Paradoxical? Not so much.

Loyalty is consumed in different ways

It is a subject that provokes strong reactions from some customers and leaves others totally indifferent. Why is that? Not everyone has the same relationship with loyalty programs and it’s almost cultural.

You have people who travel frequently and try to maximize the benefits of their loyalty programs as much as possible. We are talking about business travelers or “big” leisure travelers. Often they are a bit of both.

And then there are the people who have taken out a loyalty card because it was offered to them but don’t travel enough to get enough out of the program so don’t make it a pillar of their travel policy, or even know what it can do for them. For them, optimizing the loyalty program makes more sense at their local grocery store than at Air France and this is logical. So whether their program is “devalued” or not, it doesn’t really matter. And they are right.

We can see that the subject is non-existent in the “travel” forums in France for example, whereas it is very hot in the USA, the UK and even in Germany. Countries where business travel is more developed locally and internationally? This would explain it in terms of educating the client on the subject.

The devaluation of a loyalty program in practice.

A loyalty program, whether airline or hotel, can be devalued in different ways without the customer necessarily perceiving it. Worse, in some cases, it is even sold as a benefit.

Statuses

For example, it can be made more difficult to access certain statuses that provide the most benefits. Or introduce new statuses that make it take longer to reach the highest ones. Ironically, in this case, there may even be a magic trick: the introduction of an intermediate status may allow some clients to move up a rank because they are in the upper bracket of the lower status (get it?) while they end up with the same or fewer benefits.

Award tickets and nights

One of the main interests that customers see in loyalty programs is the possibility of earning points/miles and converting them into totally or partially free nights/tickets.

The number of points required for a flight or a night in a given hotel changes regularly. And guess what? Very rarely to make them more accessible. This is where the term devaluation takes its full meaning as your miles/points lose value like money sleeping in a bank account while inflation is rampant! We had a great example at Marriott recently. At the airline level, recent evaluations of the Flying Blue scale show that the best use of your miles is to use them to fly…on partner airlines.

Another technique that can be presented as a benefit: cash & points. You don’t have enough miles to buy the ticket of your dreams, no problem! Use what you have and top it up with cash. For the program it helps to spend your miles faster and that’s good news (you’ll see why later) but between the exploding scale and the sometimes mind-boggling sums that are asked of you in addition, it happens that you get fleeced on both sides.

And then of course there is the reduction in the validity period of miles/points.

The “exemptions”

The use of miles/points may be made more difficult. For example, the number of seats per flight can be limited, and the purchase of nights with points on certain dates can be prevented (black out dates).

This is often seen when a loyalty program decides to “lower its prices” on a few product categories to show that it’s not just increasing its scale…and in the process it makes those products almost inaccessible.

We also see hotel programs that say that this or that benefit does not apply in certain chains or countries, as is the case with Accor to a point that is almost a caricature, but as seen above, Marriott is not left out either.

Suppression of benefits and fake benefits

This is the least subtle way to devalue the benefits of a program: to remove a benefit altogether or to move it up to a higher status, which is what happens when you introduce a new intermediate status.

More subtle, turning a “normal” service into a benefit. When a “premium” chain offers its elite members the “turndown service”, i.e. the preparation of the room for the night (closing the curtains and opening the bed), you should know that in theory this is a service offered to all.

Bon ça n’est qu’une liste non exhaustive de bonnes mauvaises pratiques en matière de dévaluation mais cela donne un aperçu assez large de ce qu’on peut constater.

But why devalue a loyalty program?

Now that we have seen what a devaluation is, let’s think about what makes an airline or a hotel chain alienate its most loyal customers?

Because miles/points are a liability

Your miles/points are a kind of currency within the loyalty program. But unlike Monopoly bills they also have a value in “real life”. Their value is recalculated in euros or dollars to land in the balance sheet of the airline or hotel group…or rather in that of the program which is a subsidiary activity most often with its own economic balance.

Points and miles are a debt to you because from one day to the next you are entitled to redeem them for something. We are talking about amounts in the hundreds of millions. No wonder there is an interest in :

  • cancel this debt as soon as possible (by limiting the validity)
  • by helping to consume them (cash and point, by offering the possibility to buy something other than nights and flights, such as concert tickets, spa treatments etc.)
  • by reducing the counterpart of what you have for 1 point or 1 mile (devaluation of the redemption scale, your Paris-New York is not worth 100 but 120 for example).

Because there are too many high status members

To make a program attractive we multiply the benefits and/or make the high statuses easy to reach. That’s what you do for a new program or a program you want to revive.

At a given moment there are too many people in the high statuses and some benefits are difficult to deliver: not enough premium rooms for upgrades, not enough space in airport lounges to accommodate everyone in good conditions etc. When the benefit is intangible it’s fine, when it has physical limits, too many high statuses harm the high statuses who themselves complain.

So as cyclically as they try to make the program attractive, they purge it or at least “clean” the top of the pyramid.

Because it is a cost

Of course, the very notion of a loyalty program implies that one is convinced that it is an investment that allows one to keep customers coming back without spending astronomical amounts of money to conquer new ones, but in the short term a loyalty program has a cost. And it will be one of the easiest to remove or reduce in case of crisis, of lean period even if the common sense says that in these moments it is necessary to consolidate the core of loyal customers who book in a chain or an airline by reflex without even looking at the competition.

Because one has a financial culture and not a marketing one

This is something I learned from a friend who works in the hotel industry. A hotel group or an airline, like any business for that matter, can have two cultures, two DNAs, which dictate their priorities.

Some have a culture of finance, of revenue. Sell the most, spend the least, fill the hotels at all costs, sometimes to the detriment of service and the customer.

Others, more rare, are more driven by marketing which teaches them that today their brand is the experience that their customer lives and that a loyal customer costs infinitely less to keep than a new customer to conquer.

Because one does not know how to manage hoteliers or member airlines

The big problem with a loyalty program is that it is managed globally to be applied locally. The program thinks group while the hotelier thinks about his own operation. Why give a gift or upgrade to someone who is coming to my property for the first and last time? Because if they come to you it’s because others have done their job well in another hotel of the brand and if you do the same others will benefit.

That’s the theory. In practice, and especially when hotels are franchised, it is not uncommon for hoteliers to be reluctant to fully implement the program unless the client asks for it (and even then…). They may even put pressure on the group to be exempted from certain obligations as we have seen at Accor or Marriott. Let it be said: except for notorious incompetence, there is no bad loyalty program to begin with, there are only people who refuse to apply it and methodically destroy the ideas of its designers.

But we also have the same thing in the airline industry. When United violates the alliance’s rules, the alliance changes certain benefits so that United is no longer at fault. Once again, the law is adapted so that the offender is no longer an offender…

So there are many reasons to devalue a loyalty program, some better than others and many ways to do it. But keep in mind that when a loyalty program evolves it is rarely in the customer’s favor.

Photo : loyalty card by Andrey_Popov via Shutterstock

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.
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