Terry Maxon gives coverage to a study Deloitte has been pitching about frequent flyer programs, claiming customers aren’t especially loyal so the programs are failing and they need to take a more tailored approach.

Consulting firm Deloitte and Touche surveyed frequent travelers to gather their thoughts on their airline loyalty programs. It concluded that the programs aren’t working as intended – to nail frequent fliers to one airline and one loyalty program.

“Our findings strongly suggest that the state of airline loyalty is less than what carriers would like it to be. More sobering is our finding that airline loyalty programs are far from effective in engendering that loyalty,” Deloitte executive Adam Weissenberg wrote in the foreword to the study.

“We conclude that airlines should approach any effort to improve loyalty programs as a customized exercise. Or, put differently, when it comes to airline loyalty programs, one size most certainly does not fit all,” stated Weissenberg, vice chairman and leader of Deloitte’s U.S. travel, hospitality, and leisure area.

Since I viewed the piece as just a sales pitch for Deloitte’s consulting work (guess who can show loyalty programs how to take this tailored approach recommended in the study…?) I wasn’t going to pay it much mind.

But Terry has many influential readers, so I decided to walk through the piece and explain why it doesn’t come close to showing what it purports to.

The full .pdf is available for anyone wanting to read through it, but here’s what they describe as their key findings in their media pitch:

Key findings from the survey include:

• 72 percent of high-frequency business travelers participate in at least two programs, while one-third participate in four or more.
  
• Two-thirds of overall respondents are receptive to the idea of switching to a competing loyalty program — even after achieving the highest status level with their current program.
  
• Travelers overall ranked loyalty programs as only the 19th most important attribute when selecting an airline (out of 26 different attributes)

None of this surprises me, and it doesn’t say that much about airline loyalty.

Being a Member of Multiple Programs Doesn’t Mean Loyalty is Failing

The first claim – that 72% of “high frequency” business travelers participate in at least two programs — actually I’m surprised it’s that low. And I’d bet it’s a higher percentage than for the occasional traveler.

There is no cost or barrier to sign up with most programs (there are exceptions, of course – Australian residents pay AU$82.50 to join Qantas Frequent Flyer unless they sign up during a promotion).

Eventually you wind up flying an airline other than your primary one, you might as well join their frequent flyer program rather than getting nothing. Eventually you wind up staying at a hotel chain that isn’t your preferred one — perhaps you’re attending a conference and staying at the conference hotel, or maybe you’re loyal to Hyatt (about 500 properties) or Starwood (about 1000 properties) and travel somewhere that doesn’t have a hotel in your preferred chain. I like the Hyatt hotel program, but the only hotel in Portland they have is by the airport so last month I stayed at the Embassy Suites (Hilton) and on my previous trip there stayed at The Nines (Starwood).

The point is that claiming most regular business travelers are a member of more than one program says nothing whatsoever about their loyalty, whether they choose one brand or another when they can, whether they’re willing to pay a little more or choose a hotel that’s a little less convenient to stick with their preferred brand.

And we know that the most frequent travelers, even though a small percentage of total customers, contribute an outsized portion of revenue.

Answering a Survey That You’d Consider Switching Programs Once You Hit Top Tier Elite Doesn’t Mean Loyalty is Failing

Being “receptive to the idea of switching to a competing loyalty program — even after achieving the highest status level” says little. Airlines offer status matching opportunities to make it easy for competitors’ customers to make the move, they even market the opportunities. Hotels have similar options. And yet enrollment is relatively modest. The ranks of each elite program tend to be quite stable year-over-year. There isn’t actually rampant switching.

That said, once you’ve achieved the highest status level is precisely when many top elites consider doing some business elsewhere. They’ve already achieved what they can with one program so they consider whether it makes sense to ALSO have status with a second. Airlines have learned to combat this, though, with programs that offer additional rewards (like more miles and more upgrades) for elites who keep flying even after hitting top status. See, for example, this year’s “Elite Rewards” from American.

Frequent travelers may be loyal to one primary airline but may still fly another on occasion — not as a sign of disloyalty but because the other airline offers unique routes or direct flights the traveler needs. So they spread out their spending a little, even if giving the bulk of it to one carrier (or one hotel chain).

Deloitte’s Survey Data Doesn’t Say What They Think it Says

While “[t]ravelers overall” may rank loyalty programs as 19th “most important attribute” when selecting an airline, travelers overall aren’t a good metric for assessing whether those programs are driving loyalty and therefore purchasing decisions.

Responding to a survey of what’s important, customers are going to say safety matters most. But consumers aren’t differentiating most airlines on the basis of safety. What’s important is actually the factors that distinguish an airline and drive a purchasing decision, not what consumers say is “most important.” That’s just silly survey design if you’re trying to get at understanding what drives business.

And “high-frequency business travelers” actually show up in the survey as ranking loyalty programs as the number two most important attribute when picking an airline (ahead of safety). These are the elites airlines covets, and the Deloitte study seems to suggest that loyalty programs are doing a good enough job to be highly important to them.

Loyalty Programs Aren’t a Monolithic Entity and the Report Doesn’t Really Distinguish Them

Loyalty programs aren’t all alike and some do better jobs than others.

Loyalty programs aren’t the same thing to all customers, etiher. They encompass both (a) better treatment like upgrades for elite frequent flyers, and (b) points to be redeemed for all members of the program.

Someone might say “I don’t do this for the frequent flyer miles, I do it for the upgrades” — does that count against frequent flyer programs?

The programs may not be a motivator (based on survey responses, not behavior) for general members who don’t have elite status. But the programs are still quite profitable working with those members. They sell miles to the banks and make billions off the general membership. It may not drive purchase decisions for each and every one of, say, United’s 80+ million members but the program has been the most profitable part of the airline overall over the course of the past decade.

This Study Doesn’t Mean Airlines Need to Hire Deloitte’s Consulting Teams

Deloitte says programs need to “make rewards more personally meaningful.” They suggest tactics which harken back to instant win scratch offs, and suggest data analytics to understand customers and give them what they’ll value.

But the data in the study doesn’t suggest that loyalty programs are not working. They might not be, but the proof isn’t in their surveys.

But even if they are failing, the data doesn’t suggest that “making rewards more personally meaningful” will materially move the needle on the metrics in the report. All they do is lay out a problem and say they can do better, they offer suggested paths but without evidence for the efficacy of those paths.

Ultimately this is a sales pitch for frequent flyer programs to bring in Deloitte’s House of Lies team. There are lots of things programs can do better — for their customers and for their bottom lines — but this document doesn’t suggest that Deloitte has special insight into what those things are.

---

You can join the 30,000+ people who see these deals and analysis every day — sign up to receive posts by email (just one e-mail per day) or subscribe to the RSS feed. It’s free. Don’t miss out!