Creative thinking that delivers results

02 Apr

Putting the L back in Loyalty: The Air Miles failure

Category: Marketing strategy
loyalty marketing, loyalty programs, marketing strategy

Loyalty programs have a fairly simple goal – to reward loyal customers for their continued patronage by incenting them to choose your business for current and future purchases. In doing so, businesses need to design loyalty programs that reward the right behaviour that will benefit the company’s bottom line while also providing fair value to its customers.

When loyalty programs fail, it’s usually because one of these latter two elements has gone wrong. This was the case last year for the ever popular Air Miles Program; the result was a PR crisis of epic proportions and a plethora of irate customers that willingly shared their stories with the public.

What went wrong with Air Miles

In 2011, Air Miles management made the decision to institute a 5-year expiry policy for customer’s miles. This was implemented to mitigate the financial liability associated with outstanding miles in customer accounts. As a result, miles would expire on January 1st, 2017. Other loyalty programs had recently done the same thing, including the ever popular Aeroplan program.

So what could go wrong? How about a major customer backlash from coast to coast and a PR nightmare of consumers being forced to use their miles but were having a difficulty time finding anything to buy! The story hit newspapers, TV and radio broadcasts and websites across the country.

Air Miles did little to deal with this potential problem in the lead- up to the January 1st deadline. This rather surprising given this public backlash and the fact Aeroplan faced a very similar situation a few earlier where they were forced to rescind this expiring miles policy. That Air Miles did little early on to address these concerns or the reality Aeroplan faced not so long ago was rather astonishing!

What marketers can learn

There are many lessons that marketers and communicators can glean from the mishaps encountered by the Air Miles Program. They would include the following:

1)      Being cocky is dangerous

Overconfidence is a dangerous trait in life and in business. Air Miles may have thought that Canada’s largest and arguably most popular loyalty program was impervious to a consumer revolt. The reality is that no company can make this claim in today’s digital world.

2)      Listen to your customers

Marketing 101 teaches all of us to listen and act on the needs and expectations of your customers. Air Miles failed to this for a variety of reasons and they paid the ultimate price – public scorn, ridicule and embarrassment.

3)      Design your loyalty program for your customers

As noted above, by definition a loyalty program must be designed to incent the right behaviour for both the customer and the business. When this falls short on the customer side, the company is bound to pay a big price in terms of an impact on the bottom line!

The recent changes the Starbucks Rewards Program made are a testament to the value of a customer-centric mentality. In listening to their clients, Starbucks redesigned their program to more highly reward customers who were buying $5 lattes as opposed to only brewed coffee.

4)      Respond quickly to customer complaints

While this can apply in many situations, companies need to respond quickly and sincerely to customers whenever they complain, but especially when these occur online. The risk of these complaints going ‘viral’ for all the wrong reasons is a reality. One of the big issues the program faced in the run up to the deadline was with regards to redeeming miles online or via their call centre. That it took them months to remedy this problem was highly unacceptable to many.

5)      Fix the problem quickly

Likely the worst thing that Air Miles did with this whole situation was downplay and basically ignore the pleas of its customers early on in 2016, only to rescind the expiry policy at the eleventh hour just before the January 1st deadline. By then many customers had already cashed in their miles for whatever they could buy rather than lose them. Many would go on to expect Air Miles to cancel these purchases and reinstate their miles after this latest policy change!

So the moral of this sad but true story is that businesses today need to be hyper-focused on the needs of their customers and be capable of communicating with them in a real and legitimate way. When customer expectations fall short, businesses need to look at themselves squarely in the mirror and assess if they’re doing and saying the right things and putting their customers at the forefront.

If there is any reason to doubt the effectiveness of their communications or policies when it comes to customer satisfaction, they need to act quickly and remedy this situation. Use common sense as your barometer and your business will be in a much better place.