The Problem with Loyalty Programs

Loyalty programs can destroy a company’s ability to win new customers. This week I experienced it firsthand. And it was infuriating.

I bought a last minute full-fare First Class ticket on an airline I rarely fly. It is routinely rated one of the best airlines in the United States.

From the moment I boarded, the entire cabin experience revolved around loyalty members.

The crew thanked status passengers one by one.

I received nothing.

They warmly welcomed their frequent flyers.

I received nothing.

They moved through the cabin by status tier taking meal and drink orders while connecting with loyalty members.

I was greeted last.

Because I was last on the order list, I did not have a meal option. I was offered what was left.

Throughout the flight the crew regularly attended to their status passengers. At one point I had to walk to the galley myself just to get a drink refill.

Then came the finale.

Status members received handwritten notes from the flight attendants.

They were thanked by name as they deplaned.

No one used my name once. No note.

By the time I stepped off that aircraft, I had made up my mind that I will not fly this airline again unless I have to.

My full-price ticket, sitting in a cabin full of free upgrades, earned me absolutely nothing. I did not expect special treatment, but I did expect at least parity.

And the most extraordinary part of this failure?

The airline had a perfect opportunity to win a new customer.

Instead they missed every single moment that mattered.

When organizations become so over-indexed to loyalty programs that they ignore everyone else, two things happen:

They fail to convert new customers.

And they create brand detractors who will actively share their bad experience.

The problem runs deeper in most companies:

Loyalty program leaders operate inside narrow metrics and silos.

Companies organize around existing segments instead of opportunity.

Executives assume brand damage only occurs when something goes wrong.

Very few recognize the damage caused by something else entirely.

Being ignored. While you watch others being lavishly served.

I see this problem frequently in luxury. Organizations obsess over rewarding loyalty while overlooking the most commercially valuable moment in the journey:

The first time someone chooses you.

That moment is not a loyalty moment. It is an acquisition moment.

Handled well, it creates a long-term client.

Handled poorly, it creates a detractor with a story.

Most organizations know how to design loyalty experiences. You already know the customer. Designing for someone you know nothing about is far harder.

A first-time customer is an unknown variable.

No history. No signals. No profile.

Yet that moment is where the future relationship is decided.

Many companies invest millions in loyalty programs.

Far fewer design the experience that wins the customer who is not loyal yet.

Loyalty does not begin with status. It begins with the first experience.