Examining the Air Miles Expiry Debate
Editor’s Note: Since the publication of this article on September 22, 2016, Air Miles has retracted their decision to have rewards points expire in response to the customer issues outlined within this text. More information on these changes can be found here. Please be advised that the text contained in this article does not take these changes into account as it was written as a direct response to the customer-initiated lawsuit filed in September 2016.
Customers all over the world are reeling in the wake of the new Air Miles expiry clause. Introduced in late 2011, this program rule stipulated that as of January 1, 2012 all points would expire five years from the day they were earned. This statement affected customers at all levels of participation, as loyal customers were told that any points earned prior to 2012 would expire in December 2016.
Since this announcement was made, more and more customers have been coming forward to express their dissatisfaction with the Air Miles program. From limited and hidden rewards to poor communication about program changes, customers are unhappy with the changes that have been made and are even going so far as to seek legal action.
At first glance it may be easy to side with the customer. After all, Air Miles did a poor job of communicating the program’s changes, and has been relatively silent on how they intend to make amends with their understandably frustrated customers. However, in order to truly understand the impact these types of changes have on the loyalty industry we need to understand both sides and consider why these changes might have been introduced.
In an attempt to properly address these issues, I’ve consulted a number of Loyalty and Engagement specialists. Together, I hope we can better understand the implications of the changes to the Air Miles program and use it as a model for exploring best loyalty practices moving forward.
The Impact of Air Miles Expiry
At its inception, Air Miles was selling the concept of Dreams to customers all over the world. As a coalition loyalty program, Air Miles customers were able to shop at a variety of retailers while earning rewards that could be redeemed for travel miles in the future. Suddenly, program members found themselves in a position to afford vacations they had only ever dreamed of, banking their miles until they had earned enough to redeem them for a trip somewhere truly spectacular.
By introducing Air Miles expiry dates, these dream vacations become much more difficult to obtain. Now customers need to spend significantly more in a shorter period of time in order to earn the same reward, causing many customers to feel cheated, betrayed, and lied to.
To make matters worse, there was very little communication provided about these changes. In fact, customers need to specifically request expiry information in order to see where their points lie, with additional information buried in the Air Miles’ FAQ section to find these instructions.
Alex McEachern, a Loyalty and Retention Specialist at Sweet Tooth, has a lot of experience with the long- and short-term impacts of loyalty program changes on members. When I asked him for his take on this issue, he explained how these program changes have the potential to minimize customers’ desire to participate, decreasing program engagement rates in the future.
In the short term, customers will begin to redeem miles for smaller ticket items (gift cards, small gifts, household items) as they worry that their points will expire and have zero value. The redemption of points for a reward is usually motivating, but in this case it likely won’t be as they would have preferred to save up for a large ticket item such as a family trip.
Long term, this could drastically alter the perception of this coalition program. The beauty of Air Miles was that members could earn all over the place and apply those “miles” to rewards that they just would not be able to get as part of a single store’s program. By making it difficult to save up points, Air Miles is changing what made them appealing to many members.
Alex’s observations hint at another emerging problem: rewards redemption. Since the Air Miles expiry was announced customers have been experiencing difficulties redeeming their miles, complaining that they’re blocked from obtaining certain rewards despite having saved enough miles to redeem them. These challenges are perceived by customers as deliberate attempts to make redeeming difficult, with some members going so far as to claim unfair treatment.
The Justification for Change
While the tendency may be to respond with anger and annoyance, it’s important to look at these changes from both sides and ask why. What would have prompted Air Miles to make these significant changes when the risk of customer resistance was so high?
As a Retention Specialist, Alex has had significant experience working with merchants in an effort to boost their program engagement while also increasing revenue. One of the biggest liabilities for any merchant is unredeemed rewards and, as he points out, expiration dates can work to encourage shoppers to redeem points in a timely fashion.
“When you have outstanding points balances it means that you have an obligation to pay someone for the redemption value, or what those points are worth,” he explained. “Adding an expiration period is a smart move for the accounting team, because it allows them to periodically wipe away a chunk of that outstanding liability.”
It’s important to remember that the Air Miles expiry change isn’t the first example of a company making significant changes to their program. Best Buy’s Reward Zone still enforces a strict expiration of points, and many other retailers require their customers to spend a certain amount within 12 months in order to remain qualified.
Scene Rewards is another great example. In 2015, the program announced significant changes to their earning and redemption procedures that required customers to spend more points on rewards that have been available since the program’s inception. Similar to the Air Miles expiry, these changes were met with negative responses from customers. However, the biggest difference is that Scene customers were given adequate communications regarding the change.
Sweet Tooth’s CEO, Mike Rossi, believes that this is the larger issue at hand. “The truly great loyalty programs clearly communicate with their customers whenever something is happening with their points balance, status, or anything else that could be important,” he said. “This wasn’t done here, which is leading to confusion and frustration.”
The Effect on Air Miles’ Reputation and Future Success
Mike’s remarks clearly highlight the risk Air Miles took by adjusting their program’s structure. With limited communications and customer experience challenges, many program members have vilified the company by painting it as an untrustworthy organization that takes advantage of its customers. These reactions have sparked many debates regarding the value of the program, further emphasizing Alex’s belief that the long-term effects of these changes could be significant.
In an effort to better understand the ramifications of these changes, I brought Steve Deckert into the conversation. As a Partner Development Rep and Loyalty Expert, Steve has had considerable experience with larger agencies and companies whose success relies on building and maintaining strong relationships with their clients and customers. Leveraging this considerable breadth of knowledge, Steve believes Air Miles might have made a significant mistake.
“A rewards program’s goal is to create a positive emotional response within consumers,” he explained.
When a consumer is given a reward and they have a positive emotional response, they associate that with the brand that is rewarding them. Then they are much more likely to take action to earn more rewards in the future; like purchasing a product that earns Air Miles instead of a product that doesn’t earn Air Miles.
When a consumer has a negative emotional response to a rewards program, they are significantly less likely to take action to earn those rewards in the future. Negative emotional responses – or the lack of a positive response – is what causes a reported decline in the number of active loyalty program members, despite the total number of loyalty program memberships increasing.
Ultimately, he concluded that unless Air Miles can turn a detractor into a promoter consumers’ desire to participate in the program will be minimized, prompting them to take fewer actions to earn Air Miles in the future.
Regaining Lost Trust
While this discussion might sound like a condemnation of the Air Miles expiry clause and the program at large, all hope is not lost. For decades, Air Miles has been a prominent loyalty solution in the larger retail landscape, and has provided customers with the opportunity to travel and experience things they might not have without the aid of the Dream rewards program. These positive feelings can return, but not without some effort on Air Miles’ part.
One of the best and simplest ways to begin rebuilding trust would be through a public apology. Since the program changes were announced, Air Miles has been quiet, letting the customer complaints pile up. By acknowledging and owning their customers’ dissatisfaction, Air Miles could help re-establish their brand as one that understands and appreciates their customers. These types of communications also add a human element to a brand, further reminding customers of why they signed up for the program in the first place.
The Sweet Tooth team built upon this suggestion. “An obvious fix,” Mike said, “would be to ‘make things right’ and exceed customers’ expectations with some kind of corrective action. This could be removing the policy, extending it, or something similar.”
Steve piggybacked this recommendation, suggesting that this could easily be turned around in Air Miles’ favour. He noted that “since consumers only get value – and positive emotional responses – out of a rewards point/mile when the spend them, this is a golden opportunity for Air Miles to delight their collector base and breath new life into their program.”
Steve suggested that the program expand its reward offerings and make them more accessible to more customers. The genius of this approach, he said, is that “this will get consumers more engaged in the Air Miles program and they’ll be much more likely to do things to earn more miles in the future.”
This stream of thinking is cropping up in other parts of the loyalty industry as well. Brandon Carter is an Engagement and Loyalty Analyst who manages an extensive database of loyalty data, and when I broached the subject with him he agreed that more needs to be done for customers short-term. “People need to see value early and often,” he commented. “It’s not so much the reward as it is generating those constant, frequent touchpoints.”
Ultimately, his thoughts align with Steve and Mike who agreed that focusing on the negative monetary gain of rewarding customers is a short-sighted strategy. Designing a loyalty program with nothing but your best interests in mind paints a picture of your brand as being cheap, resulting in money saved in the short-term but lack of participation and support in the long-term.
Finding a Winning Solution for Air Miles Expiry
So what can we take from this? Did Air Miles make the right move? Is rewards expiry truly the best way to get customers to engage with your loyalty program? Brandon isn’t convinced. “Yes, it isn’t good to have so much tied up in accrual liability,” he conceded, “but the bigger prize is engagement and loyalty.”
While Alex agreed with this, there’s still something to be said for points expiry. “A points expiry period is one effective way to get customers engaged in a loyalty program. If you want your members to be truly engaged you need them to be spending points for those rewards.”
Even though we here at Sweet Tooth believe expiry can work, we do agree with Brandon and believe that there are a multitude of other ways to encourage program engagement. We’ve even compiled a number of methods and put them together in a free ebook called “Boosting Loyalty Program Engagement”.
Regardless, it’s undeniable that the Air Miles expiry issue is an excellent loyalty case study. With an outpouring of customer feedback, it has helped shape conversations around best loyalty and engagement practices while highlighting the need for clear and repeated communication of program changes. Now the ball is once again in Air Miles’ court, begging the question of what they’ll do next. We, along with millions of customers, can’t wait to find out.
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