The Global Loyalty Organization hosted loyalty leader predictions for 2024. A lot of it was milquetoast, and not really actionable, as so much corporate speak is wont to be. But there were a few real insights here. Four things especially stood out.

1. Revenue-based status. Ben Lipsey who runs Air France KLM’s Flying Blue points out that Delta’s move to fully revenue-based status follows American. (The details are of course different, with American’s status levels far more attainable and many more activities with partners counting.) United has moved somewhat in that direction – they were first to say that ticket spend and not miles or flights is what mattered, and have now moved a little more towards credit card spend counting towards status. With the 3 largest U.S. airlines doing it, that’s a trend the world will be paying attention to.

   Frequent flyer programs are now “frequent spender” programs, which won’t work as well in Europe (unmentioned is credit card interchange limits which make selling miles to banks less profitable).

   

2. Experiences over stays. Mehdi Hemici from Accor says that emotional loyalty is created through access to experiences. The problem is that unique experiences, which members cannot access on their own without the program, are difficult to scale. And they’re difficult to match. I gave a talk to brands issuing Mastercards around six years ago telling them that to take advantage of Priceless Experiences they needed AI, learning about spend patterns and upcoming travel plans, to match customers with opportunities, because almost nobody scours the platform to come up with the right opportunity at the right time.

   

   

3. Simplification. Hemici says points and ‘point scales’ (award charts) are “difficult to comprehend so Accor does 2000 points = 40 Euros. That’s fine as far as it goes but it eliminates the opportunity for outsized value, the opportunities that actually create the emotional loyalty he emphasizes. You can always get simple average value but you might as well get a cash back card and not a co-brand (outside of contributions to status), because you’ll never leverage the program’s scale as the largest buyer of their company’s travel and its ability to liquidate unsold inventory at a discount to get access to travel you’d otherwise not be able to afford.

4. Loyalty is the brand. Kristi Gole, head of product for GHA, pointed out that Marriott’s new brand “Apartments by Marriott Bonvoy” doesn’t just have the chain’s name it has the loyalty program’s name.

   When Marriott bought Starwood, then-CEO Arne Sorenson argued that they needed need to invest in marketing for what would become 30 brands (and thus the brands didn’t even need to be that differentiated), all they needed was a sticky loyalty program and then customers would go to their website and book the hotel choices they were given.

   It used to be that brands leveraged names you knew, and companies invested in those brands. Starwood tried to graft ‘good’ brands onto others (Element by Westin, Aloft by W). Now Marriott is grafting the loyalty program onto the rooms. Think of it as co-branded apartments, to replicate the success of co-brand cards.

   

5. Sustainability. This was raised by the COO of SkyTeam, and this is far more important in Europe than in the United States except that it matters a great deal to the current Administration here and there’s significant jockeying for subsidies.

   For hotels, at the high end sustainability is part of marketing to customers so that they can tell stories to themselves about who they are through their travels and at the middle and lower ends it’s usually about cost-cutting.

It’s one thing to talk about revenue-based status. It’s another to ask, which revenue? Frontier was actually ahead of American in counting all spend towards elite status. American realized that all mileage sales are much higher margin than flying people in planes.

Not all American activity counts towards status, loyalty points are also an opportunity to sell a new currency (without travel liability) to partners for incremental revenue. But American comes closest to rewarding the high margin activity they want to see from partners.

Ironically, because American underinvests in technology, ancillary revenue related to flights, like buy ups from coach to first class, don’t count towards status. So they have a ways to go! But they’re still ahead of other airlines here.

Meanwhile ‘simplification’ like ‘sustainability’ has often been a euphemism for devaluation. But if there’s one core point that loyalty executives ought to take away it’s that brands are harder to build and easier to destroy than ever before. Loyalty programs are a way to create not just permission-based marketing but really personal marketing. Even where a customer doesn’t trust the brand, they can trust the loyalty program, and then that trust carries over.

Fundamentally the idea of a loyalty program is based on trust. A customer is promised future benefits in exchange for their business up front. That’s one reason by the way that banks have to give up front bonuses to customers to take their rewards cards – it isn’t just to make those cards focal, but to frontload the opportunity to redeem, to convince the customer they’ve made a good decision, and get that customer to use the product more. Once the big investment is made in acquiring a customer, and realizing that the customer is valuable, it’s a big risk to undercut that value relationship.