What are the Limits of Loyalty Programs, and Do They Work for Every Category and Brand?

Cruise Lines Illustrate Why you should be Building Loyalty Experiences, not just Loyalty Programs

Customer Loyalty is a representative term that practitioners use to describe a top of pyramid goal. Most brands are declaring their desire to become customer centric, and the financial benefit of this big-picture strategy is to create sustainable increase to Customer Lifetime Value across the spectrum of a customer universe.

At its core, customers who are rightly described as “loyal” are emotionally driven. This state of mind means the brand and the customer are working together in a relationship that is trusted and will stand the test of time. Despite the loftiness of this end state and the values that can be generated, it is “Loyalty Truth” that a loyalty program does not solve every problem that a business has related to its customers.

Loyalty programs are not likely to help to fix fundamental business issues, generate quick profits, or solve price and product issues. In fact, falling prey to the temptation to focus exclusively on your loyalty program does not ensure you will create loyal customers at all.

Loyalty in the Cruise Line Segment

We’ll pick on one market segment to as evidence of this Loyalty Truth. Don’t conclude that in doing so, we are casting doubt on the efficacy of all loyalty programs in the segment. There are a lot of cruise lines with loyalty programs. Carnival, Celebrity, Disney, Holland American, MSC, Norwegian, Princess, and Royal Caribbean all have them. You can learn about each one here. We know that most of these are well-planned and executed and would like to think that each one has distinct advantages and creates positive results for the brand.

But there is good reason to challenge to what extent the loyalty programs among major cruise operators can make a difference to frequent travelers. The article “10 Reasons I’d Rather Cruise on Multiple Cruise Lines Than Stay Loyal to Just One” raises valid points about why cruise line loyalty may be more of a "nice to have" than a marketing tool that breaks the tie in passengers deciding to book their next excursion on an individual cruise line.

The author expresses a personal view, and it is quite easy to extend the viewpoint to a large swath of cruise fans. In the article, the author cites a survey that found 40.4% of people chose to cruise on just one line. Almost 80% said they would choose to sail on 3 cruise lines or fewer. On the surface, that’s not a bad result, but you need to look more deeply at ten points of evaluation used by the author to reach conclusions.

The author explains 10 reasons you should at least consider branching out and trying multiple cruise lines. The assessment is fair and balanced as the author also expresses full support of any person who reader who chooses to be loyal to just one cruise line.

Ten Reasons to consider branching out and trying multiple cruise lines:

Where Loyalty Programs have Influence

Analyzing the list, only reason #2 and 3 are directly related to the effectiveness of a loyalty program:

• It’s an accepted best practice of program measurement that if the value proposition presented to the customer lacks punch, that the program will have minimal impact on purchase decisions. If loyalty points are not that rewarding, that means people will not factor the program into a future decision.
• When program status can be easily matched by a competitor, the switching cost between cruise lines is diminished. That’s great for the customer but not so wonderful for the cruise line who has first dibs on that customer and has a financial stake in retaining their business.

In a Linkedin discussion on this topic, David Slavick shared overall perspective on the segment and how they go about establishing loyal customers “To influence brand switching the sector provides Status Match so that lovers of one cruise line, say Norwegian might be willing to try out for the first time say a MSC cruise line and experience the Mediterranean. Experiential rewards, curated exclusions, unique dining events, private receptions are all leveraged to influence affinity and indeed create "equal" satisfaction between competitors.”

The Limits of Loyalty Programs

Read the other 8 reasons on the list and you will see that most are related to the unique brand attributes of each cruise line and the experiences they can deliver. In the same LinkedIn discussion as above, Richard Dutton, CLMP™ offered a story of friends who experienced the Haven on Norwegian cruise line in such a way that they have never looked back, and now are the most loyal “cruisers” you’ll ever find – but only in the Haven.

As much as we try to make loyalty programs the Swiss army knife of marketing, there are aspects of any business that operate outside the sphere of influence of customer loyalty. Situational geography is a big one. Just like the airlines, a customer’s proximity to an individual port of departure influences brand frequency. If you live near a particular port that is dominated by one cruise line, your options are limited, and your choices don’t translate immediately into an expression of brand loyalty.

Creating Loyalty Experiences

Maybe the composition of the list itself provides a glimpse of a solution. The loyalty program must be more than just a transactionally driven construct whose value to the customer is no more than a deferred rebate. Like loyalty consulting expert Barry Kirk CLMP™ once told me, the higher aspiration should be to create a Loyalty Experience or “Lx”, where the program is the facilitator of a more pleasing and differentiating experience for the customer. Loyalty programs will always be a means to the end of the top of pyramid goal – highly fortified customer loyalty that stands the test of time and endures the occasional disappointment.