02/28/2013 04:44 pm ET Updated Dec 06, 2017

When Loyalty Programs Go Bad

Businesses create customer loyalty programs to encourage repeat and referral business. Increased airline status can motivate travelers to pick one airline over another. Professional sports teams offer "gifts" to recognize season ticket holders. When executed properly, these programs make good customers feel appreciated.

Beware of the Ugliness

There is an ugly side to these programs, however. Initially, they are centered on the customer experience. Over time, the "loyalty program" can easily shift away from "loyalty" and can become about administering the "program." Let me cite two recent examples:

Professional Sports

As a season ticket holder for professional sports, each year we receive a gift to show the team's appreciation. This season, they switched from printed tickets for each game to a season ticket holder card that holds all of your tickets. Just swipe your card, and you're in.  Great idea!

After a recent game, we saw the pickup location for the gifts. I handed them my season ticket holder card. They said "Sorry, you need to print out the ticket to redeem the gift." Dozens of fans approached the table, each walking away in disbelief with anger at the response. I'm betting the team's owner had envisioned a different result.

I then saw a familiar face -- the head of customer relations. Having had four seats for 15-plus years, I knew he had three options:
  1. Offer to go to the ticket office to print the ticket on my behalf and return for redemption;
  2. Hand me the gift, thank me for my business, and deduct the certificate from my online account the next morning; or
  3. Tell me there was nothing he could do and I'd have to remember to print the certificate, and bring it to a future game when it might be less convenient for me.

Say it Isn't so

Historically, they have done the right things. In this rare instance, the manager focused on the "program" and not on the "loyalty reward" when he picked option . I left annoyed. They turned a reward into a negative.

The Less Than Friendly Skies

I used to be at the highest status level with one airline. I stopped traveling for a few years and reverted to mere mortal status. I recently sent a note to them saying I am traveling extensively between speaking engagements. Did I have to start at zero? I figured my 750,000 miles of loyalty would count for something.

They offered me a "challenge" to fly a certain number of miles over a 90 day period to qualify for an elite level. Here is where it went wrong: They said the trips I took between the date of my note and the date of their response would not count.

They initially forgot that their goal was to get me to fly their airline. After a back-and-forth, they reconsidered and back-dated the qualification date. Someone initially got caught in the administration of the program, and they forgot about their goal of loyalty. Though they eventually agreed, the exchange turned loyalty to resentment.

What Can You Learn From These Examples?

You might have a formal reward and recognition program like the ones that E Group implements for companies. You might have a less formal process. Maybe your recognition program means taking good clients or employees to dinner, a show, or a sporting event.

Remember why you made the invitation. Make things simple. Don't make them jump through hoops to get their reward. Deliver the tickets, rather than asking them to pick them up. If you send a dining gift card, include a list of locations and perhaps suggestions of your favorite dishes. If sending them to a sporting event, include advice about dining or parking.

Above all, recognize them, and do not ask for something in return (remember -- this is a "thank you" not a "You owe me one"). If you remember to reward and recognize loyalty, you'll earn all the benefits that come with it. Remember that the right loyalty program can drive repeat and referral business. So, don't leave success to chance by handing it to the newest, most junior employee.