Southwest Extends Loyalty
By John Hennessy
Members of Southwest Airlines’ Rapid Rewards frequent flyer program now have 24 months instead of the current 12 months to earn credits for free travel. Southwest announced this change.
Southwest’s extensive research and Rapid Rewards Member polling revealed that the most desirable changes flyers wanted were more time to earn credits and no system-wide blackout dates for Award travel.
As of Feb. 10, 2006, the carrier will remove system-wide blackout dates.
“The Rapid Rewards program is a generous and simple vehicle for our loyal customers to earn free travel,” said Joyce Rogge, senior president of marketing. “Customers have been asking for more time to earn Award Travel, and we are excited to make this change, which will give more customers the opportunity to take advantage of the Rapid Rewards program’s benefits and fly for free.”
In 2003 and 2004, more than five million awards were redeemed in Southwest’s Rapid Rewards program, among the highest redemption rates in the airline industry.
“We continue to look for ways to keep the program flexible and easy because we want our customers to earn awards they can actually use,” said Ms. Rogge. “The program’s ease – eight roundtrips equals an award – has contributed to its growth and popularity, meaning a high number of awards are being redeemed.”
Moderator’s Comment: What can retailers do to make an existing loyalty award programs work better for them and their customers? Are there specific retailer
loyalty programs that merit special mention?
It’s not often we read about a company making it easier for its customers to redeem rewards earned. The tendency of most programs is to change the rules
of the game after it has started to make it harder to redeem, earn and enjoy rewards.
Southwest listened to its customers and responded, despite their Rapid Rewards program already having one of the highest redemption rates in the airline
industry. –
John Hennessy – Moderator
Loyalty programs can tend to become stale as time wears on. A retailer (or airline) must keep it fresh and exciting to keep customers interested. If a customer signs onto a program, they expect to earn something of real value in exchange for their business. If they do not, or if it is too hard to earn, they lose interest. Keep it tangible with real value and keep it in front of the customer.
I agree with Eva May — the Hilton program is pretty bad. It’s nearly impossible to redeem a hotel award on short notice. Good loyalty programs should allow customers to redeem rewards instantly, without restrictions.
I learned from working in retail in a low income rural area that if you want more customers, take down the negative barriers. If the sign “no shirt, no shoes, no service” is keeping 50% of your customers from coming into your store, then take down the sign and change the rules. The same goes for loyalty programs. If you have too many stupid rules that irritate customers, then change them.
Since I am a low budget traveler (which my clients complement me on), I use Trip Rewards, which allows me to get points and many low cost budget motels. After just a couple of stays, I can get a $25 gift card for Target, Starbucks, or Denny’s.
One of the biggest problems with airlines now is that, because fares are so cheap, it isn’t worth redeeming miles for a trip that would only cost $200 anyway. I used to have a credit card that gave me one airline mile for each dollar spent. That meant I had to spend about $25,000 just to get a free ticket that was worth no more than $400. By switching to a 2% cash back credit card, the same $25,000 gets me at least $1,000.
Most programs require too much work on the part of the consumer for too little real reward. Others (and I’m quivering with disgust as I recall B&N’s program) actually CHARGE their customers for a reward card.
And I have categorically refused to accept another card I need to carry in my wallet to redeem rewards: the pizza place, the bagel shop, underwear, the car wash.
Loyalty program directors: Make it easy; remember what consumers want and need and stop changing the rules after you’ve gotten the business.
I am not sure that Southwest is being entirely generous about extending the expiration date. By extending the date, the airline is postponing the cost of flying passengers for free.
Generally, the complicated nature of loyalty programs as well as their proliferation reminds me more and more of the tax code. The programs are too complicated and there are too many of them.
Marketing ideas, like anything else, can get worn out. When American launched its frequent flyer program, it was unique and romantic. These days, redeeming frequent flyer miles is a chore, not a pleasure.
And I agree that adding more and more cards to one’s wallet is another pain. I’ve noticed that cashiers at drug and grocery chains now keep spare membership cards on hand for customers who forgot their cards, so that those customers can get the “member prices.” So what is being accomplished?
Bernice has it right – with all the scams and just plain poor loyalty programs out there, retailers and companies in general need to be careful to offer something of real value to consumers, and then deliver on the promise with real rewards. What is the point of hyping a rewards program, then ticking off your customers with rules and regulations that make it difficult or impossible to redeem those rewards?
The Barnes & Noble program is another matter. It would seem to take a real hard core book purchaser to want to fork over an annual fee (I think it’s $25) for the privilege of buying books at a discount. Especially when bigger discounts are available elsewhere.
Many of you have probably heard about the big splash with which Nectar was launched in the UK just a few short years ago. Hey, presto, you could get points in a whole load of different places all going into a single account. One of the biggest names associated with it was Barclaycard, one of the most popular (and, I think the first widely used) credit card over here. Several other high street retailers plus a supermarket and petrol (gas) company were part of the gang. As per usual, I took one look at what you got for what you spent and chucked it away but millions of people fell for it. Guess what? Barclaycard has just pulled out, at very short notice, leaving all those millions having to find things to buy quickly before they lose their points. Talk about forced sales. Never mind saving up for the big redemption; it’s now or never to find enough smaller, cheaper, purchases to justify all that so-called loyalty.
Tom said it best. The key is REAL value. The other elements all these programs ought to have are simplicity (i.e. it should be easy to collect what you believe you have coming); transparency (i.e. you should believe the reward is an actual reward, not some vehicle for price manipulation); real recognition (i.e. the customer ought to walk away with the sense that the offer was tailored to him/her); and finally tangible, unique benefits. If you want to see the opposite in action, go to any airline hub and watch them board their “preferred” flyers — everyone at the gate tries to board at once from the silver to the platinum.
Let me add my voice to the choir criticizing Hilton HHonors. Its expiration policy plainly stinks. I too had a large points balance wiped away a couple of years ago. I wrote the VP of marketing personally about this misguided policy and received a response. Get this: HHonors told me it had to cancel accounts like mine due to the cost of maintaining the computerized account! And yet it continues to waste money attempting to solicit me as a new member.
This is evidence of a mis-alignment of the company’s CRM efforts. Apparently its metrics value expensive new customer acquisition much more highly than economical customer retention. If I were the boss, heads would roll over this.
Hilton HHonors is a dis-loyalty program. By comparison, the efforts by Southwest Air to liberalize its reward redemption policies seem very sensible indeed. True, Southwest can’t take you to Tahiti using your reward credits, but at least it communicates the sentiment that customers matter enough to keep.
Southwest is a great airline yada yada, but their loyalty program isn’t a shining example of rewarding customers, at least for me. They fly from secondary airports in many cases, i.e. Islip and Hartford instead of LGA. Then, you have to get in line early to make sure you’re near the front of your boarding group if you want a decent seat. I didn’t even realize their loyalty program required eight flights in two years. To me, that’s a big negative, as most of the major carriers’ miles never expire. So, kind of like shopping at Wal-Mart, when I fly Southwest it’s for one reason – PRICE. When I want service, I go elsewhere. Maybe there is hope for traditional retailers after all – the cheapest price often comes at a price – reduced service.
I believe that loyalty program miles/points/etc.. should never expire. Most hotels and airlines keep you informed on a monthly basis of the points you have available for rewards, and make it enticing to get those extra couple thousand points to reach another level. However, Hilton has a policy of completely eliminating your miles/points if you do not stay there in a 12-month period. I had over 50,000 points that were completely wiped out. And then the following month, I received an offer to join the Hilton HHonors program and be upgraded to an automatic gold level. While normally I would take that type of offer, I threw it out, and will never stay at Hilton or be an HHonors member again.
In general, I believe that most hotel and airlines have fairly strong loyalty programs, and are good about motivating flyers to stay fairly loyal to their airlines. Supermarkets such as Lowes Foods in NC are offering points with every purchase – the old S&H Green Stamps program – I’d much rather earn points AND save $ with my loyalty card, than just save with my loyalty card. Makes me a loyal shopper to Lowes!
They can do exactly what they know they should be doing – listen to their customers and, as much as possible, do business as their customers want them to. Everyone acts as if effective loyalty marketing is some dark secret to be unlocked; it is nothing more than making it easier for your customers to buy from you than from someone else. I learned the basic building blocks of loyalty marketing on the very first day of my first marketing class: “Serve the customer as they want to be served, at a profit”. It isn’t rocket science, folks.
First of all, congratulations to Southwest on its very consumer friendly approach to business; and IMPORTANTLY, engaging, listening, and taking action with its customers’
issues and needs!!!!
SW, with this action, has built more shopper loyalty, combined with its unique approach to business to include its stewards’ (men and women) funny and different attitude towards the passengers. Additionally, SW has found a way to give its customers value with its very reasonable plane fares.
However, SW didn’t just rely on lower priced fares, as the above notes!! Said another way, utilizing marketing practices and building Brand equity has, and still is, paying multiple dividends!!!!
(SW’s quarterly financial results are “proof-in-the-pudding,” if you will.)
In our grocery industry, few have tried or taken a page from SW’s business approach; especially, engaging, listening, and responding to its target audience, and loyal customers.
Interestingly, however, we should note the supermarkets that have their number one assets in mind, and respond to the shoppers’ needs – through marketing efforts, like Nugget in No. California, Publix, Ukrop’s, Lunds, Haggen’s in Seattle, the old Dominick’s (before Safeway), Henien’s, D&W… to name a few.
Finally, the number one supercenter operation is stating its desire to utilize marketing and a Brand structural organization now. Somebody noted the value of consumer marketing, furthering its shopper base, and modifying its business model!!! Hmmmmmmmmmmmm