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What Businesses Can Learn About Loyalty Programs From Airlines' Frequent Flier Debacle

The U.S. Supreme Court is weighing whether a major airline crossed the line by kicking a customer out of its frequent flier program. We parse the implications for loyalty programs.
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The customer is always right, regardless of what some airlines will tell you.

In recent months, two major U.S. airlines (Delta and Northwest) booted two customers from their frequent flier programs allegedly without much notice, and in both cases banned them from ever reapplying. One of those thwarted customers, Lynn Harrell, a world-renowned cellist, made it onto Comedy Central's The Colbert Report, while the other--Binyomin Ginsberg, a Rabbi from Minnesota--is now getting hearing before the U.S. Supreme Court.

While both of these cases involve a bit of "he said, she said" debate, it's not my intention, nor my proper role, to take sides. However, a closer examination of these cases does provide some incredibly valuable lessons for companies of all shapes and sizes relating not just to rewards, but the complex dynamics of how you build and enhance a relationship with your customer.

The value of feedback
Every company, including Delta and Northwest, want to provide the best service possible, especially to their most loyal customers. It's one of the main reasons frequent flier programs exist. But as the old saying goes, you can't please all the people all the time. There will always be customers who find something to complain about. It could be that all, or many, of Ginsberg's complaints--he reportedly lodged 24 complaints over an eight-month period--were circumstantial and/or no fault of the airline, but to what degree did the airline sift through his complaints to determine their merit?

Assuming some, or even all of Ginsberg's complaints were legitimate, what Ginsberg was doing was actually valuable for the airline. If acted upon in a meaningful way, the airline could use a loyal customer's complaints to improve their product and service, and not just for Ginsberg, but for the many thousands of travelers who were less inclined to share feedback.

The bottom line is all feedback and engagement is ultimately positive for a brand to receive. While the message may not always be rosy, it's much better to have a customer that cares enough and feels invested enough to share their thoughts and concerns. The alternative? Passively engaged, fickle consumers who don't say anything at all. They just leave.

Customers rule like never before
We live in a world where customers are empowered in ways that they never have been before. Right alongside Ginsberg and Harrell, there was another related incident with a musician and United Airlines. After having his guitar broken by the airline after it was checked, Dave Carroll wrote a song and posted it to YouTube. By the end of the first day, the song had been viewed 150,000 times prompting United to reach out to him directly. The video has since been viewed 13 million times--likely not the image that the airline is looking to portray.

With a myriad of social networks, tools and communication vehicles we all have at our disposal (and in our pocket for that matter), it's easier than ever to share our thoughts and opinions with large groups of people. Sometimes they can be positive and other times negative.

But no brand is able to silence their customers--nor should they try. Instead, embrace positive advocacy when it comes and work just as hard to understand negative sentiment. By directly addressing your customers' concerns you have the potential to inspire even greater loyalty, and potentially, to turn an outspoken critic into your greatest fan.

Have the right tools in place
In an era ruled by big data, social media and technological advancement, it's now easier than ever to know who your customers are. Their preferences, buying habits, locations, likes and dislikes are practically an open book. And while loyalty and rewards programs have long been considered a great way for companies to gather relevant customer information, truly effective programs dig deeper.

Too many of today's loyalty programs fail to leverage the multiple sources of available data. Instead, they employ a one-size-fits-all approach: Spend this, get that. Consider what gets lost, or worse, what surfaces once you realize you could have done more.

In the cases of Harrell and Ginsberg, It's likely that neither the passengers nor the airlines wanted this outcome. Harrell and Ginsberg have now lost their hard-earned miles and status while the airlines have lost two valuable and loyal fliers--and inherited a PR mess along with it.

So what could they have done? Rather than terminate these obviously loyal customers' memberships, I'd argue that there should have been additional steps in between. Conversations (with senior-level representatives) should have been had, and accommodations (on the part of both parties) should have been made.

While the airlines will likely say they did try to ameliorate the situation, it's hard to argue that the system didn't break down. Quite simply, it doesn't have to be this way. Once brands learn how to employ and master the technologies at their disposal, we can all once again, as one brand used to say, come fly the friendly skies.

IMAGE: Shutterstock (2)
Last updated: Dec 6, 2013

IRVING FAIN | Columnist

Irving Fain is the CEO and co-founder of CrowdTwist, the provider of omni-channel loyalty and analytics solutions for brands such as Pepsi, Nestle, Vizio, the Miami Dolphins, Sony Music, and Zumiez. Fain previously served as director, digital marketing and content at Clear Channel, and before that was an investment banker specializing in raising capital for early stage companies. He holds a B.A. from Brown University.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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