Can an airline loyalty program become “too popular”?
That, according to a story in the South China Morning Post, is precisely the fate that has befallen Cathay Pacific’s Marco Polo program.
How can it be a bad thing for a loyalty program to be too popular? Isn’t that like a public company being too profitable, or a super model being too beautiful? In this case, “too popular” seems to be code for too generous. Because there are a limited number of award seats and upgrades and lounge seats, more generosity for the many means less generosity for the few. And those few—the airline’s most profitable customers—are apparently feeling underappreciated.
Commenting on the story, an airline official was quoted as follows: “Airlines all over the world are recognizing the anomalies created by a mileage or sector-based reward and recognition system. We are carefully studying the impact of this and the possible implications for the Marco Polo Club in terms of how members earn their status and what benefits and recognition they should be receiving based on the value they bring to the airline.”
If that sounds vaguely familiar, it’s probably because similar thinking, whether explicitly communicated or not, was the business-case driver behind Delta and United’s decision to convert their programs to revenue-based schemes in 2015. Rewarding customers according to their spend, rather than according to the distance they fly, assures that big spenders will get the most perks. And conversely, because there are only so many perks to go around, those who fly infrequently, on discounted coach tickets, will find the programs much less rewarding.
Like other major carriers around the world, Cathay Pacific is no doubt aware of the moves being made by Delta and United, and the logic underlying those moves. And the airline’s public comments strongly suggest that it finds that logic compelling and intends to convert Marco Polo from a mileage-based program to a revenue-based scheme.
When that transition takes place, likely within the next 12 months, there will be winners and losers. What there may not be is much in the way of alternatives. For better or worse, spend-based programs are the new industry standard. And in a year or two, there won’t be many mileage-based programs left.
Reader Reality Check
Will you be a winner or a loser in the new world of spend-based travel rewards programs?
This article originally appeared on FrequentFlier.com.
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