The promise and peril of elite status in loyalty marketing

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Every quarter I contribute an article to Colloquy, a trade organization that specializes in loyalty marketing. This is reprinted from that publication.

As many major organizations know, elite status is a powerful weapon in a loyalty marketer’s arsenal. On the business side, awarding the best perks and privileges to a brand’s most valuable customers is likely to inspire repeat business. For travelers, elite status is about more than just bragging rights; it leads directly to smoother travels and greater rewards.

That said, loyalty marketers looking to maximize the marketing effects of elite status should carefully consider the implementation of perks to ensure customers understand what they are and how to use them. Marketers must also consider what effects changing benefits will have on customer loyalty, and weigh carefully any proposed devaluation of benefits against customer perceptions.

I’ll explain why with a couple firsthand examples.

Starwood Hotels: An elite line to nowhere

I have been a Starwood Preferred Guest (SPG) elite member every year for more than a decade. I like the brand portfolio, love the loyalty program and the 4:00 p.m. late checkout can’t be beat.

One thing has always puzzled me at check-in, however. Like airlines, Starwood makes a point to recognize its elite members during the check-in process. Most hotels have a sign and a carpet indicating recognition and priority for these valuable repeat customers. What most hotels do not have is any sort of clear demarcation of check-in lines. Envision this:

You walk into a hotel lobby. Straight ahead is the front desk, staffed with three employees to welcome you to the property. Each is already helping a guest, and there are two more guests waiting. On the right side of the long front desk is a sign for SPG elite members, matched by an SPG carpet in front of that part of the desk. There are not any sectioned lines, either for regular check-in or for elites.

As an SPG Platinum member, perhaps in a rush to check-in and get to a meeting, what do you do? Do you join the regular line behind the other two people waiting, forgoing your elite benefit? Or do you stand on the elite carpet and wait there for the next available employee, cutting in front of the other two waiting guests?

Airlines don’t have this issue, as they set up clearly delineated places for elite members to check-in, avoiding the long queues that often form for non-elite customers. The simple act of presenting a more organized check-in process would both reinforce an elite benefit and reduce the awkwardness of a customer having to figure out what to do. Elite perks should be crystal clear and easy to use.

Taking toys away: United’s reduced elite benefits

Sometimes the powers behind loyalty programs decide to reduce costs by reducing program benefits. While the wisdom of reducing benefits for elite members is a subject for an article of its own, let’s just take some space to review a recent program devaluation by United Airlines, which left many of its members scratching their heads and questioning their loyalty.

Flying without status can be a hassle. Long check-in lines, low boarding priority and poor seat assignments can turn a flight from tolerable to terrible before the plane leaves the gate. Until early 2015, United MileagePlus elite members could book award tickets for family or friends and “loan” their status to them for that trip. That meant priority services at the airport and complimentary access to Economy Plus seating, among other benefits.

Then, without much notice or explanation, United eliminated this benefit, consigning the family and friends of its most valuable customers to status-less travel.

While there are good arguments to support United’s policy change, any financial gains the airline makes from it may well be outweighed by the negativity generated among its best customers.

As an example, a client of mine with top-level Premier 1K status recently booked an award ticket for his wife and daughter, but was unable to assign them Economy Plus seats without paying a fee. In the end he paid the fee, and later expressed to me his resentment at the “nickel-and-dime behavior of the airline.” This gentlemen spends about $20,000 annually with United, and its recent reduction of flights in his home base has him looking to competitors such as American Airlines.

Elite status in a loyalty program can be a strong anchor to a platform that keeps valuable repeat customers content. If the organization has to reposition that anchor, here are a few considerations:

  • If you offer elite status and benefits, implement them in a way that is simple and intuitive to the customer, such as clearly marked service queues.
  • Ensure that implementation of benefits is consistent across the organization. Not only will this simplify things for customers, it communicates to them that you are committed to your program.
  • Changing benefits is necessary sometimes. If you decide on a change, communicate it proactively. Your best customers shouldn’t find out about benefits changes from your customer service agents. This is a recipe for dashed expectations.
  • Think through benefits changes before you make them. Consider if any monetary savings are worth eroded loyalty, which leads to lower sales.

If elite status in a loyalty program is a weapon, it is a double-edged sword. Used properly it can engender longtime loyalty and boost revenues; executed poorly it can cost you some of your best customers.

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Ryan has been a travel expert for more than ten years. His journeys have taken him to all six inhabited continents, including living in the Middle East and backpacking across Australia, Asia and Europe.

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