Are you a member of a loyalty program?
Chances are you are a member of multiple programs because many major companies want you to return to their outlet to collect points you can later redeem for products and services. The whole idea behind loyalty programs was to build ongoing relationships with customers.
Is there any real benefit of being a member of a loyalty program?
The cost of administering and running the program adds to the cost of what consumers have to pay at the checkout. Being a member of the program doesn’t provide you any additional savings except the ability to accumulate points that can be later redeemed for merchandise or travel.
Talk to any number of loyalty program members and you will hear the harsh reality of what the majority of collectors face. You will hear many complaining that it is too long to accumulate points and when you get close to the “dream item” it suddenly cost more points than you have.
For loyalty programs to be effective at maintaining customer loyalty, they have to be steep in trust. Consumers must not only see value in the program and the points collected but they must also trust the company to administer the program transparently. Otherwise, changes to how the program is administered have the opposite effect, destroying trust and effectively ending the relationship with the collector.
Air Miles broke from the ranks of trusted loyalty program to one that is now perceived as being underhanded, lacking any form of transparency.
On December 28, 2011, Air Miles announced chances to its collector program that would see all accumulated points have a 5-year expiry. The changes were set to come into effect on January 1, 2012. How was that for notice?
This announcement was included as small note at the bottom of a company press release and the changes to the program effectively destroyed years of credibility, trust and relationships built with thousands of customers.
The negative backlash was immediate. Consumers were quick to express their displeasure on the Air Miles Facebook page. Many have contacted both Air Miles and sponsors indicating their displeasure.
Points expire from other loyalty programs, what’s the problem with Air Miles expiring points?
While it is true points expire on other loyalty programs. Aeroplan points expire in 7-years and West Jet has a 5-year expiry on their points. The expiry of Air Miles points would be in line with these comparable loyalty programs.
However, there was no advance notice given to customers of Air Miles and there was an obvious attempt to bury this announcement over the holiday season.
Air Miles did nothing to grandfather existing miles to make miles collected up to December 31, 2011 exempt from the program. It arbitrarily assigned a 5-year expiry date without consulting with any of its collectors. Additionally, several sponsors contacted were not aware of the changes to the loyalty program and were surprised this was done without any consultation considering they pay a sponsorship fee.
In taking this approach, Air Miles violated one of the fundamental principles of relationship building. By not being transparent and attempting to bury this announcement when most people are oblivious to news, Air Miles negatively impacted its trust relationship built with collectors over the last 20 years.
Some have indicated the backlash can be weathered by Air Miles and the announced program changes would not have do any long term damage to the program.
Is it the program that Air Miles should be concerned over or the damage to the many thousands of relationships it has built with collectors?
A quick check of the Facebook fan page shows over 2,000 negative comments about the program changes in a little over a week. These negative comments have been served up to the social feeds of these people, making the potential reach of backlash towards these program changes hundreds of thousands of people. This doesn’t take into effect Twitter, blog traffic or negative press.
Air Miles may have made program changes in lessen the liability to its shareholders but in doing so has created a much larger problem for the company.
As a long term collector myself, I’m switching away from BMO Mastercard to a new Scotia Momentum cash back card. I will also be returning to shop at local companies, avoiding Air Miles sponsors where possible.
Trust relationships and loyalty programs do go hand-in-hand. Air Miles made a tactical error and the true impact of this decision is yet to be seen.
What are your thoughts on loyalty programs, trust relationships and the Air Miles program changes? Drop a note in the comment box below!