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Should Company Stock Be the New Loyalty Reward?

The airlines and hotels have covered a lot of ground in expanding the awards options available to members of their loyalty programs. Today, members of larger programs may convert their miles to other currencies and redeem them for all manner of travel services, merchandise, gift cards, and so on.

But the best value for program members remains the program operators' own products. Because of the underlying economics of the programs, it will always be cheaper for an airline to give away its own unsold seats than to give away, say, a rental-car day or an Apple iPod.

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That disparity is reflected in the price of the awards. Whereas it's a simple matter to squeeze 2 cents or more in value from miles cashed in for flights, it's all but impossible to get as much as 1 cent per mile when redeeming for non-flight awards. Which explains why consumers' take-up of the non-travel awards has been tepid, and always will be.

Companies do have another resource, however, that so far they've been mostly unwilling or unable to leverage as a loyalty reward: shares of their own stock.

There's only one precedent for stock awards that I'm aware of. In 2005, Atlanta-based Jameson Inns began offering customers shares of company stock through its newly launched frequent-stay program, Jameson Stock Awards.

Customers who stayed at a Jameson Inn or Signature Inn for three nights during a 12-month period received 10 percent of their room charges in the form of Jameson stock. The program's tagline: "Invest While You Rest."

As I said at the time, "the powerfully self-reinforcing aspect of such an approach to loyalty marketing should not be underestimated. Awarding customers with stock in a company vests the recipient with a compelling stake in that company's success, which encourages the stakeholder to do more business with the company, which earns him even more shares, and so on."

Jameson dropped the program after a couple of years, presumably due to lack of interest. But that doesn't mean that adding company stock to the award catalogs of Delta's SkyMiles or Marriott's Rewards programs might not be a win-win for the companies and their customers.

If a small company like Jameson can address the operational and regulatory issues of offering stock awards, then certainly Fortune 500 companies like Delta and Marriott can as well.

Whether or not they should depends on consumers. As compelling as the idea may seem in theory, if program members don't see real value in company stock, then it's just another gimmicky addition to the novelty section of the award catalog.

Reader Reality Check

So what say you: thumbs up or thumbs down on stock awards?

This article originally appeared on FrequentFlier.com.

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