Creating a New Airline Loyalty Status Tier – (Pt 1)
From both internal and public perception – new loyalty tiers are exciting!
They ooze optimism and are a sign of strength for the loyalty program.
In recent years seen a bunch of new airline loyalty tiers hit the market – including some realignments. Most notably, these include:
Why do airline loyalty programs introduce new tiers?
What are the financial and non-financial benefits?
How do you set the qualification criteria?
In part one of creating a new airline loyalty status tier, we’ll explore the underlying logic through the loyalty marketing lens.
Part two will dive into the thought methodology from both a loyalty member and loyalty program perspective.
Why introduce a new airline loyalty status tier?
Frequent flyer loyalty status tiers are excellent drivers of behavioural change, and that is generally the primary reason for creating a new status level.
Underneath the umbrella of behavioural changes is the foundation of loyalty program economical drivers and business-logic reasons why an airline would want to roll out the new tier.
There is no one single formula when designing a new status tier, although there are common themes in human behaviour which apply to most airline loyalty programs.
The approach from a program perspective:
Loyalty psychology as a behavioural driver
All successful loyalty programs (in both travel and non-travel) are explicitly engineered to change the behaviour of the member base to drive a particular type of engagement. The loyalty psychology of a program can have massive impacts on program revenues.
The desired output, or goal-in-mind approach to where the loyalty program wants members to act within, requires clearly defined boundaries and rules for which the member can do whatever they choose. By engineering the program in a way where it’s highly desirable for members to play within the box, the loyalty program can continually move that ‘sweet spot’ box and the members will modify their interaction with the brand to remain in that box.
When a new loyalty tier (new loyalty box) is introduced into the program, for segments of the member base, the goalposts will move, and a new set of loyalty rules will apply to their interaction with the program. These new sets of loyalty rules are the member’s emotional desire to either want to or not want to be in a new loyalty tier (box).
The shift or increase in that member’s behavioural engagement with the loyalty program will create a new revenue delta in what that members predicted transactional trajectory would have looked like without any new tier (box), versus the new projection from that member/affected segment with the creation of a new tier.
The uplift (or decrease) in that member’s engagement/transaction/revenue can then be attributed to the introduction of the new loyalty status tier.
As the centre of gravity (sweet spot) of the program changes from around the mid-tier level (Gold in the example below), and shifts upwards after the introduction of a new top-status tier, the effect creates risk for the program with members who previously were in a sweet spot, and with the change in program dynamics, are no longer in that sweet spot.