Companies Searching for a Balance in Customer Perks
A range of companies are pulling back on perks as they chase higher margins.
Raising the Bar
Some of the biggest shifts in customer perks have come in the airline industry.
During the pandemic, airlines allowed frequent flyers to hold on to their elite statuses. They ended that perk as travel rebounded, and customers racked up loyalty points on co-branded credit cards. Carriers including American Airlines, Delta Air Lines, and United Airlines also have raised the number of miles customers need to earn elite status as the ranks of those with the benefits swelled.
"When you have that many customers in the so-called premium tiers, it doesn’t feel that special anymore," said Yuping Liu-Thompkins, a professor of marketing at Old Dominion University’s Strome School of Business who researches loyalty programs.
Retail’s Reality Check
While the airline industry has turned profitable during the post-pandemic travel boom, retailers have faced a host of new challenges.
Inflation has squeezed consumer spending, said Marshal Cohen, chief retail advisor for Circana, the market researcher formerly known as IRI and The NPD Group. As shoppers buy fewer discretionary and big-ticket items, companies have taken a harder look at expenses, he said. If they can’t boost sales, they can try to impress investors with better margins.
"Retailers and brands have had to step back and look at all of their components of their business and decide which ones are working, which ones are not," he said.
Porous Entry
As retailers make shoppers think twice about returns, Netflix and Costco have also cracked down.
For Netflix, subscriber growth has stagnated as customers spend less time on the couch and more time out in the world. The streaming service responded by reining in password sharing and introducing a lower-priced, ad-supported option.
Costco also noticed a trend of people using membership cards that belong to someone else. It is now checking photo IDs, even in self-checkout lanes, to verify cardholders.
Chasing Big Spenders
Airlines and retailers alike have taken a harder look at the customers they will try hardest to keep.
Simeon Siegel, a retail analyst for BMO Capital Markets, said the sudden halt in sales for discretionary retailers when the Covid pandemic hit, then the stimulus-fueled spending, gave companies a moment to rethink how they cater to shoppers — and if they’re giving away dollars for little loyalty in return.
That led some companies to take a new approach to markdowns. Certain businesses also became confident that they could tack on a fee without losing their most valuable shoppers.
"It does seem like the companies are doing this because they’re able to, not because they have to," Siegel said. "From 2008 to 2020, consumers felt they were entitled to whatever they wanted and corporations would wait on them hand and foot and that changed during the pandemic."
Conclusion
The shift in corporate strategies highlights the delicate balance companies must strike to maintain customer loyalty and drive profitability.
While some customers may welcome the change, others may prove disappointed by the reduced benefits. Companies must carefully weigh the potential impact on their bottom line against the potential loss of customers and revenue.
FAQs
Q: What are some of the biggest shifts in customer perks?
A: Airline and retail industries have seen significant changes in customer perks, including reduced benefits and tightened return policies.
Q: Why are companies pulling back on perks?
A: Companies are trying to chase higher margins and increase profitability. With reduced sales and increased competition, they must be more strategic about how they allocate resources.
Q: What are some of the companies that have cracked down on customer perks?
A: Airlines like American Airlines, Delta Air Lines, and United Airlines have raised the number of miles needed to earn elite status. Retailers like Urban Outfitters, Anthropologie, Abercrombie & Fitch, and J.Crew charge for returns. Netflix and Costco have also introduced new policies to limit password sharing and membership card use.
Q: Will this trend continue?
A: Yes, as companies continue to navigate the post-pandemic landscape, they will likely continue to reassess their customer perks and loyalty programs to prioritize profitability and efficiency.
