Loyalty is a fiercely debated topic today, with opinions clashing over its relevance and future trajectory. To harness its full potential in the digital age, it is critical to take a step back and re-visit the fundamentals.
Loyalty thrives when it is founded on four drivers:
1. A shared sense of purpose
Purpose is the emotional force that guides decision-making. When people and organizations align on a common purpose – whether it is ethical growth, social equity, national progress – stronger emotional connections are formed. This connection inspires loyalty that transcends price or product.
Organizations that clearly communicate a broader mission are more likely to resonate with today’s values-driven consumers. Loyalty, in this case, is not transactional – it is emotional and aspirational.
2. Mutual respect
Every enduring relationship rests on mutual respect. In a business context, this means recognizing and responding to the human experience behind each transaction.
Consider a passenger traveling for a family emergency. All touchpoints – from booking to boarding – must reflect empathy, not just policy. Similarly, customers need to respect the staff working under pressure to deliver on brand promises.
Mutual respect also demands transparency – whether in pricing, policies or customer service. It sets the tone for trust and ensures both parties feel valued, not commoditized.
3. Perceived value creation
Value is subjective – shaped by age, income, geography and personal preferences – and constantly evolving. In the airline industry, for example, on-time performance once served as a key differentiator. Today, it is expected. Real value now lies in personalization – anticipating what a specific customer wants and delivering it consistently. This shift moves loyalty from a blanket offering to an individualized experience.
To stay relevant, organizations need a structured approach to decode these nuances, segment customers meaningfully and drive continuous innovation.
4. Consistency in delivery
Bruce Lee famously said, “I fear not the man who has practiced ten thousand kicks once, but I fear the man who has practiced one kick ten thousand times.” The sentiment holds true in customer experience as well – loyalty is built not on novelty, but on repeated excellence.
Customers return to brands that deliver reliably. In aviation, this means safe, on-time travel and a seamless experience from booking to post-journey. Achieving this requires co-ordination across complex internal and external systems, from flight operations and maintenance to sales and marketing.
Disruptions are inevitable, but how an organization responds – through preparation, training and empathy – determines whether customers will stay loyal or look elsewhere. Repetition with quality earns trust over time.
1. A shared sense of purpose
Purpose is the emotional force that guides decision-making. When people and organizations align on a common purpose – whether it is ethical growth, social equity, national progress – stronger emotional connections are formed. This connection inspires loyalty that transcends price or product.
Organizations that clearly communicate a broader mission are more likely to resonate with today’s values-driven consumers. Loyalty, in this case, is not transactional – it is emotional and aspirational.
2. Mutual respect
Every enduring relationship rests on mutual respect. In a business context, this means recognizing and responding to the human experience behind each transaction.
Consider a passenger traveling for a family emergency. All touchpoints – from booking to boarding – must reflect empathy, not just policy. Similarly, customers need to respect the staff working under pressure to deliver on brand promises.
Mutual respect also demands transparency – whether in pricing, policies or customer service. It sets the tone for trust and ensures both parties feel valued, not commoditized.
3. Perceived value creation
Value is subjective – shaped by age, income, geography and personal preferences – and constantly evolving. In the airline industry, for example, on-time performance once served as a key differentiator. Today, it is expected. Real value now lies in personalization – anticipating what a specific customer wants and delivering it consistently. This shift moves loyalty from a blanket offering to an individualized experience.
To stay relevant, organizations need a structured approach to decode these nuances, segment customers meaningfully and drive continuous innovation.
4. Consistency in delivery
Bruce Lee famously said, “I fear not the man who has practiced ten thousand kicks once, but I fear the man who has practiced one kick ten thousand times.” The sentiment holds true in customer experience as well – loyalty is built not on novelty, but on repeated excellence.
Customers return to brands that deliver reliably. In aviation, this means safe, on-time travel and a seamless experience from booking to post-journey. Achieving this requires co-ordination across complex internal and external systems, from flight operations and maintenance to sales and marketing.
Disruptions are inevitable, but how an organization responds – through preparation, training and empathy – determines whether customers will stay loyal or look elsewhere. Repetition with quality earns trust over time.
Why the Need for Loyalty Programs?
If companies deliver well on the four drivers above, are loyalty programs even necessary? Recent research offers a nuanced view:
BCG found that while loyalty programs subscription was rising – with the average European consumer enrolled in nine programs and US consumer in over 15 – most people engaged meaningfully with only a select few.1
McKinsey reported a steady decline in the influence of airline loyalty programs on consumer behavior between 2017 and 2023.2
The report further identified that Gen Z and Millennials considered 1.7x more brands and transacted with 1.3x morethan Baby Boomers, indicating a more fluid and exploratory approach to brand relationships.
Despite this shift, many successful travel and hospitality brands still operate loyalty programs or are re-designing them entirely. Consider two contrasting examples:
Indigo3 and Ryanair4 have long functioned without traditional loyalty models until recently, with Ryanair even introducing a non-traditional subscription-based model.
On the other hand, programs like Delta SkyMiles5 and United MileagePlus6 have become valuable business assets, helping airlines raise billions through spin-offs or customer data monetization.
Loyalty programs do not work on a one-size-fits-all model; they must align with an organization’s broader vision and strategy. To determine the right approach, it helps to understand the forces that drove their rise. Why did loyalty programs gain traction in the first place?
The Value Proposition of Loyalty Programs
1. Resource prioritization
When analytics and tech infrastructure were limited, loyalty programs offered a way to prioritize high-value segments, focusing limited resources on engaging repeat customers and driving greater wallet share.
2. Risk mitigation
In high-disruption industries like travel, loyalty programs provided a buffer during service breakdowns (e.g., delays, cancellations, baggage mishandling). While brands were expected to resolve issues for all customers, loyalty members were assumed to be more forgiving, owing to a longer-term relationship with the brand.
3. Brand advocacy
Before social media, influence was driven by celebrities, business leaders and public figures. Attracting these individuals into loyalty programs elevated the brand. Unlike today’s cross-promotional world, early influencers typically stuck to one brand, giving programs added exclusivity and aspirational appeal.
4. Segmentation and personalization
When global air travel was under a billion passengers per year,7 personalization was feasible through organized human effort – remembering names, preferences and milestones. Loyalty programs served as a manageable way to offer tailored service to a smaller group.
5. Differentiation in a uniform market
Full-service carriers used to operate similar routes with similar prices. Loyalty programs – offering better service, upgrades and perks – became a key differentiator. With limited fare comparison tools available, these extras played a significant role in driving preference.
Where Did It Go Wrong?
As markets and customer expectations evolved, loyalty programs have failed to keep up. Key factors that contributed to their decline include:
Price disruption by low-cost carriers
Low-cost carriers re-defined pricing structures: A USD 200 ticket with perks was undercut by a USD 100 no-frills fare without compromising on the core travel aspects – safe, secure and swift mobility. Loyalty members began questioning whether their benefits truly offset the price gap. The perceived value of miles and upgrades eroded.
Organizational inertia
Established airlines were slow to respond to changing market conditions. Many continued using outdated points systems that no longer reflected customer spending or engagement. At the same time, tech advances created more agile, personalized options that airlines failed to adopt.
With no mechanism to personalize offerings or respond to real-time feedback, airlines lost their edge. Social media amplified customer dissatisfaction, exposing the gap between promise and delivery.
Declining value of points
Loyalty used to offer clear value – earn miles on business trips; redeem for personal vacations. However, as points became increasingly tied to credit cards and partnerships, this value was diluted. Customers found themselves holding miles across programs, with none sufficient for redemption.
Meanwhile, loyalty communications became mass-produced and irrelevant, leading to disengagement. Poor e-mail targeting and a lack of contextual relevance made programs feel generic, not exclusive.
Shift in generational expectations
Millennials may still commit to a brand that consistently meets their needs. However, Gen Z and Gen Alpha prioritize experience, ethics and alignment with their values. For them, brand identity matters less than brand purpose.
Consistency, transparency and respect are still important, but they are now baseline expectations. Purpose-driven offerings and real-time relevance are the new differentiators.
Overextension and Complexity
Loyalty programs scaled membership but could not scale personalization or service quality at the same pace. As a result:
- Tier rules became restrictive
- Points expiration caused resentment
- Redemption processes were frustrating
- Communications lacked relevance
Rather than making customers feel valued, programs often left them confused or disappointed. The core goal – strengthening the relationship – was lost.
Price disruption by low-cost carriers
Low-cost carriers re-defined pricing structures: A USD 200 ticket with perks was undercut by a USD 100 no-frills fare without compromising on the core travel aspects – safe, secure and swift mobility. Loyalty members began questioning whether their benefits truly offset the price gap. The perceived value of miles and upgrades eroded.
Organizational inertia
Established airlines were slow to respond to changing market conditions. Many continued using outdated points systems that no longer reflected customer spending or engagement. At the same time, tech advances created more agile, personalized options that airlines failed to adopt.
With no mechanism to personalize offerings or respond to real-time feedback, airlines lost their edge. Social media amplified customer dissatisfaction, exposing the gap between promise and delivery.
Declining value of points
Loyalty used to offer clear value – earn miles on business trips; redeem for personal vacations. However, as points became increasingly tied to credit cards and partnerships, this value was diluted. Customers found themselves holding miles across programs, with none sufficient for redemption.
Meanwhile, loyalty communications became mass-produced and irrelevant, leading to disengagement. Poor e-mail targeting and a lack of contextual relevance made programs feel generic, not exclusive.
Shift in generational expectations
Millennials may still commit to a brand that consistently meets their needs. However, Gen Z and Gen Alpha prioritize experience, ethics and alignment with their values. For them, brand identity matters less than brand purpose
Consistency, transparency and respect are still important, but they are now baseline expectations. Purpose-driven offerings and real-time relevance are the new differentiators.
Overextension and Complexity
Loyalty programs scaled membership but could not scale personalization or service quality at the same pace. As a result:
- Tier rules became restrictive
- Points expiration caused resentment
- Redemption processes were frustrating
- Communications lacked relevance
Rather than making customers feel valued, programs often left them confused or disappointed. The core goal – strengthening the relationship – was lost.
New Loyalty Playbook
While the traditional model has faltered, loyalty is far from obsolete. What’s needed is a re-design, rooted in the four original drivers but modernized for today’s consumer expectations and technology capabilities.
1. Move Beyond Transactions
Points and discounts are not enough. Loyalty must be built on emotional engagement, that is, creating experiences that make customers feel understood, respected and valued.
2. Focus on Curated Experiences
Offer differentiated, human experiences – such as priority boarding, exclusive access, curated itineraries – not just monetary rewards. Customers remember how you make them feel more than what you give them.
3. Prioritize Experience for Emerging Generations
Design loyalty initiatives with Millennials, Gen Z and Gen Alpha in mind. Their loyalty is fluid but can be earned through authenticity, personalization and purpose-driven engagement.
4. Consider Subscription-based Models
Subscription loyalty models offer consistent engagement and deeper data insights. Ryanair’s pivot is an example. These models can deliver stickier relationships when paired with meaningful benefits.
5. Elevate Omni-channel Engagement
Customers want consistency whether they engage online, through a call center or at a check-in desk. Ensure that service standards, tone and value delivery are seamless across all channels.
6. Focus on Fit, Not Volume
You do not need millions of passive members. Identify the right segments – those aligned with your brand’s purpose – and design personalized journeys for them.
7. Use Technology for Hyperperonalization
Leverage data and artificial intelligence to create timely, relevant and context-aware offerings. The future of loyalty is built around anticipating customer needs, not reacting to them.
The Way Forward: Loyalty, Re-imagined
Loyalty has not disappeared, but the expectations have changed. Today’s customers want more than points. They
want purpose. They want respect. They want value tailored to their individual needs, and they want brands to deliver
it consistently.
The brands that win loyalty today are those that:
Align with a clear and meaningful purpose
Demonstrate mutual respect across all interactions
Continuously innovate to create real value
Deliver reliably, even during disruption
Loyalty is evolving from a program to a philosophy and companies that embrace this shift – while avoiding the mistakes of the past – will find themselves with customers who return not just out of habit, but with conviction.
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References
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Loyalty Programs and Customer Expectations Are Growing | BCG
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Reinventing travel loyalty programs | McKinsey
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Boost your travel experience! Understanding IndiGo’s BluChip Loyalty Program and credit card synergies - Airlines/Aviation News | The Financial Express
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Ryanair's New 'Prime' Membership Flight Service Explained | Northern Ireland Travel News
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Delta Air Lines To Use SkyMiles Program To Raise $6.5 Billion
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United Airlines Raises $5B Backed By Loyalty Program | Aviation Week Network
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World air passenger traffic evolution, 1980-2020 – Charts – Data & Statistics - IEA