Diminishing Customer Rewards: Companies Reevaluate Perks Post-Pandemic

A trend of reduced customer rewards is emerging across various industries, signaling a shift in how companies attract and retain customers in the wake of the Covid-19 pandemic. Airlines are raising the bar for earning elite status, retailers are tightening return policies, and brands like Dunkin’ and Sephora are revising birthday treats. This adjustment in customer perks comes as businesses adapt to evolving consumer spending habits and cost pressures while aiming to maintain customer loyalty.

Finding the Right Balance: Companies are navigating a fine line between cutting benefits and alienating customers, with the challenge of striking a balance that doesn’t adversely impact brand perception and loyalty.

Airlines Resetting Loyalty Programs: In the airline industry, significant changes are underway, including stricter criteria for achieving elite status. Carriers such as American Airlines, Delta Air Lines, and United Airlines have increased the number of miles needed to earn elite status as more customers qualified during the pandemic.

A New Focus on Premium Seating: Airlines are witnessing an uptick in demand for premium seating options. Delta, American, and United have reported growth in revenue from premium seats, indicating a willingness among travelers to pay more for added comfort.

Airline Loyalty Programs:Airlines are taking a two-fold approach to their loyalty programs, aiming to enhance the experience for participants while simultaneously implementing measures to manage costs and maintain exclusivity. While many carriers are indeed expanding privileges and benefits for loyal customers, a contrasting trend is emerging where some airlines are curbing certain privileges or increasing the requirements to attain Elite Status within their loyalty programs.

Retailers Responding to Inflation: Retailers are facing a different set of challenges. Inflation has led to decreased discretionary spending, prompting businesses to reassess their costs and margins.

Return Policy Changes: Retailers are imposing fees for returning items, with some charging customers for return shipping. Even Amazon, known for its free shipping, has introduced a fee for returning packages at UPS stores.

Selectivity in Spending: As shoppers become more selective with their spending, retailers are adjusting return policies to encourage responsible purchases. Some have shortened return windows to get products back on shelves promptly.

Emphasizing Membership Value: To counterbalance the reduction in perks, companies are enhancing loyalty programs and offering added value to members. Companies like Costco and Netflix are cracking down on password sharing to ensure genuine membership.

Retail Loyalty Programs: Retailers like Target, Walmart, and Best Buy are bolstering their loyalty programs, extending privileges and benefits to customers who participate. Macy’s, for instance, charges a return fee for non-members but waives it for members of its loyalty program.

Striking the Right Balance: Companies must carefully balance scaling back rewards with maintaining customer satisfaction. While some customers might exploit freebies without generating profit for the company, an overly strict approach could lead to customer attrition.

Companies are reimagining their customer reward strategies in response to shifting consumer behaviors and economic dynamics post-pandemic. The delicate task at hand involves finding ways to provide value while ensuring the business remains sustainable and appealing to its customer base. Balancing these considerations will be key in the ongoing evolution of customer reward programs.