Shoppers visiting Brickell City Centre in Miami, Florida on June 14, 2023, may have noticed a shift in the way companies are offering customer rewards. Airlines, retailers, and even companies like Dunkin’ and Sephora have become stingier with their perks, making it harder for customers to earn elite status, tightening return policies, and cracking down on birthday treats. This change reflects a reevaluation of customer attraction, retention, and reward strategies in a post-pandemic world where consumer spending priorities have shifted and businesses face pressure to control costs while increasing sales.
However, companies must strike a delicate balance. If they cut benefits too severely, they risk losing customers. On the other hand, being overly generous comes with costs of its own. According to David Garfield, global head of industries at consulting firm AlixPartners, reducing benefits or promotions can impact sales volume and change the way people perceive a company, potentially influencing others.
In the airline industry, some of the biggest changes in customer perks have occurred. During the pandemic, airlines allowed frequent flyers to retain their elite statuses. However, as travel rebounded and customers accumulated loyalty points, airlines like American Airlines, Delta Air Lines, and United Airlines raised the number of miles required to earn elite status. The aim is to maintain the exclusivity of these benefits and make them feel more special. Airlines like Delta have also taken steps to reduce overcrowding at airport lounges, such as raising membership fees and entry requirements.
Meanwhile, retailers have faced their own challenges. Inflation has impacted consumer spending, leading companies to reassess their expenses. If they can’t boost sales, they are focusing on improving margins to appease investors. The pandemic initially brought windfall to retailers due to limited travel and events. However, as costs for essentials rise and travel options increase, consumers have become more selective with their spending. To combat this, retailers have introduced return fees for shipped items, such as Urban Outfitters, Anthropologie, Abercrombie & Fitch, J.Crew, and Nordstrom Rack. Even Amazon, known for its free shipping policy, has imposed a fee for returns at UPS stores. Retailers have also tightened return policies and shortened return windows to expedite restocking and reduce clearance items.
Netflix and Costco have also implemented measures to ensure membership is not shared. Netflix has cracked down on password sharing and introduced a lower-priced, ad-supported option, while Costco now checks photo IDs, even in self-checkout lanes, to verify cardholders. These measures aim to convert freeloaders into paying customers and maintain fairness for members.
Both airlines and retailers are now focusing on retaining their most valuable customers. They have reevaluated loyalty programs and are offering the best perks to those who spend the most. Companies like Target, Walmart, and Best Buy have pushed their loyalty programs and ensure that members enjoy benefits such as free delivery and returns or additional privileges. Macy’s, for example, recently announced that it would charge shoppers at its namesake store for certain perks.
Overall, these changes highlight a shift towards more strategic and selective customer rewards. Companies are adapting their strategies to meet the changing needs of consumers while managing costs and maximizing sales.
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