Loyalty Binges That Leave Companies Starving


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I’m not a “buffet” type person. Those all-you-can-eat plans kind of gross me out when it comes to food. I’d rather get one of those tiny, overly-styled servings at a pretentious foodie restaurant. And, of course, I pay a ridiculous amount of money for my medallion of squab liver with rose petal foam.

But when it comes to data, I’m lining up at the feeding trough with the rest of the gluttons. And AT&T doesn’t like that, according to Randall Stephenson, AT&T’s CEO. Stephenson expressed regret earlier this week about offering an unlimited data plan for the iPhone. AT&T has since discontinued its initial $30/month unlimited data plan in favor of tiered pricing. But like many others, I’m a legacy user. I’m burning data at a flat rate, while AT&T has to pay for it at a variable rate, so I’m costing them money.

Some loyalty programs are making similar mistakes – United Airlines, American Airlines and Southwest got a shout out in the Chicago Tribune for offering “too good to be true” rewards for their airline credit card programs. Benefits include free bag check for up to eight travelers, cash back and enough bonus points to qualify for a free flight almost immediately.

As LoyaltyOne CEO Bryan Pearson points out in the piece, it’s only a matter of time before the airlines figure out that – like AT&T – it’s costing them more than it’s worth to bring customers in. When it comes to rewards programs, it’s easy to get so caught up in the excitement of offering compelling benefits that marketers sometimes forget to do a little basic math.

For a value proposition to work for members and the company, it must be sustainable. How do you know? Turn to your customer data for insight.

First, determine who your target customers are, so that you can allocate your resources more profitably. Perhaps AT&T would have found that I’m a high-value, high-potential customer worth offering unlimited data to. And they would have segmented out the lower-tier customers for a pay-as-you-go plan.

Second, use a rich combination of customer-specific data, transactional data and demographic information to create accurate predictive models to determine who will respond to which offers. Maybe unlimited data wouldn’t speak to your high-value segment, but a dedicated tech support line or upgrade benefits would. Hearken back to the Catalog Diva to learn more about resource allocation.

The point is, calculate whether or not your target customers want it, and if you can afford it before offering the plan. As for AT&T, I’m staying with them as long as I can keep binging on all-you-can-eat data. Unfortunately, it sounds like that’s not the kind of loyalty they are looking for.

Phaedra Hise
As Senior Editor, COLLOQUY, Phaedra leads the creation of new editorial pieces for multiple distinct content platforms in the COLLOQUY media enterprise: COLLOQUY magazine, the Enterprise Loyalty in Practice journal, COLLOQUY web site, COLLOQUY social media blog, COLLOQUY Network Partner content commitments as well as other LoyaltyOne vehicles.


  1. Phaedra –

    Agree with all of your points about loyalty program challenges. As you note, one of the most prevalent and serious issues centers on program value proposition, i.e. how well do members and non-members understand it, and does the loyalty program sponsor solicit insight from both members and non members. Beyond data and predictive models, customer advocacy research can help organizations optimize performance of their loyalty programs and attract valuable new members. I addressed this in a CustomerThink blog from earlier this year: http://www.customerthink.com/blog/ongoing_loyalty_program_value_challenges_and_how_to_fix_them


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