Pampering Your Best Customers... Hurts

Every business has some customers that are just that much more valuable than the rest. They provide a combination of higher revenues, often at a higher margin, with greater consistency than other customers.

Every business wants to isolate the very best of these customers and treat them better: special support, direct access, gifts, dinners, whatever it takes, depending on your industry.

The airline industry figured this one out quite a whole ago with its frequent flyer programs. Everyone is welcome to join and collect miles, but the more you fly in a given year, the higher your status. I personally have been a 1K member on United for several years, which is their top "official" or publicly listed tier. The rules for achieving 1K are clear and well known, as are the benefits.

Yet most airlines - including United - have an "open secret" tier, an invitation-only club that the very best spenders are invited to join. American Airlines has Concierge Key, British Airways has Premier Elite, and United has Global Services. The rules are not clear to anyone outside the airline, even the members of the elite club, and membership can be cancelled at any time.

The airlines pamper these flyers to no end, special escorts and lounges, rumoured holding of flights, sometimes even miles-free awards, and many other benefits.

United Airlines decided to pull back the veil a bit on its program  in a weekend article in the Wall Street Journal. The reason, to me, is obvious. Airline passenger competition, especially at the top level, is fierce, and United wants those who spend heavily on other airlines to know what they can get by switching to United. The article in the Journal is free high-class advertising, and since the Journal is heavily read by business travelers, the target audience is perfect.

From a business perspective, this makes perfect sense: the mixture of top-level pampering, combined with a certain amount of secrecy and mystery, makes achieving the program desirable, and membership within the program a very compelling barrier to exit for those inside.

But the lack of transparency has a downside: it is hard to remove someone without losing them entirely.

John is a world-traveling consultant, does 200,000 miles a year, and easily qualifies for AA Executive Platinum or United 1K. He may also qualify for AA Concierge Key or UA Global Services, depending on their secret formulas. So our consultant is offered and happily accepts Global Services, and enjoys it for two years. Is John's job changes suddenly, and he only travels 55,000 miles a year, he knows and understands that not only is he not getting back into Global Services, but he will also drop down to Premier Gold. The minimum mileage is right there in black and white.

But if his travel patterns change such that he no longer qualifies for Global Services (however they figure that out), but still does 200,000 miles per year, it is extremely hard to take him off the program without upsetting him and likely losing him as a customer. From his perspective, not much has changed, as he still travels 200,000 miles per year, and still spends tens of thousands per year on travel.

Without an explanation and transparency, John has no understanding why all of these great benefits were taken away from him. Intellectually, he understands that something must have changed, but without knowing what that is and being able to apply that reason, all he is left with emotionally is feeling shortchanged.

Our still valuable customer, John, is very likely to be on the phone with American Airlines as soon as he finishes his (very disappointed) phone call with United.

Mystery and secrecy are valuable... but the price you pay on the far side may be too high.