While loyalty programs that put rewards front and centre can keep customers coming back, Qantas has another behavioural trick up its sleeve where making members reluctant to lose what they already have is a massive win.
Loyalty programs have become a competitive battleground for Australian brands, with businesses across airlines, supermarkets, retail and hospitality fighting to keep customers coming back. But while many programs focus on offering more points, discounts and perks, market research agency Honeycomb Strategy says the brands getting it right understand what actually motivates people to stay loyal.
Qantas is a case in point. Its Frequent Flyer program combines tiered benefits, expiring points and a broad network of earning opportunities to keep members engaged, tapping into a powerful behavioural trigger: people hate losing something they already have more than they enjoy gaining something new.
Honeycomb Strategy strategy director Kieran Collins told B&T how this principle influences loyalty, from the prospect of losing access to airport lounges when dropping a membership tier to the pressure to use points before they expire.
As Collins put it, “we hate losing more than we like winning”.
The insight comes from Honeycomb Strategy’s ‘Science Of Loyalty’ report, released earlier this month, which examined 60 loyalty programmes to understand what drives active engagement and influences where consumers spend.
Collins said the research also found other programs succeeding by tapping into different aspects of human behaviour.
Coles’ Flybuys, for example, ranked strongly by making loyalty difficult to ignore at the moments it matters most, while Mecca and McDonald’s demonstrate how community and immediate rewards can encourage repeat engagement.
“The interesting dynamic that has come out from the research is why loyalty is so important for brands, but also how effective a program can be in winning,” Collins told B&T.
A key distinction in the research is between simply having members and having members who actively engage with a program. According to Collins, that engagement can strengthen the relationship between a customer and a brand, ultimately influencing their spending decisions.
For Qantas, that means giving customers more than points to accumulate. Its tiered program creates benefits that members become accustomed to, making the prospect of losing them a powerful incentive to keep flying with the airline.
“When you reach a tier, your new expectation is now at that tier. Anything below that seems a lot worse,” Collins said.
Lounge access is a clear example. Once a member becomes accustomed to relaxing in an airport lounge, accessing priority boarding or receiving preferential upgrades, dropping to a lower status tier can feel like losing something they have earned.
That sense of loss can be more motivating than the promise of an additional reward, Collins said.
The report found 62 per cent of Qantas Frequent Flyer members actively favoured flying with the airline because of its loyalty program, while 44 per cent said they were more likely to choose Qantas over a competitor and 18 per cent said they used Qantas exclusively.
Honeycomb Strategy attributes the program’s performance, in part, to its alignment with the behavioural principle that people are more motivated to avoid losses than to pursue equivalent gains.
The airline’s points and status mechanics reinforce that behaviour. Expiring points can encourage members to transact before their balances lapse, while annual status qualification gives customers a reason to keep engaging with the program rather than allowing their progress to reset.
Qantas’ lifetime status offering adds another layer to that commitment, giving members a longer-term goal to work towards and making years of accumulated progress feel valuable.
However, Collins said the effectiveness of loyalty programs is not simply a matter of offering more benefits or finding a perk that competitors cannot match.
“I think going into the research, there might be a specific type of benefit that, if you offer it, would create a bigger impact and more success. But that wasn’t the case,” he said.
“Similarly, just offering more benefits doesn’t equal better engagement.”
Instead, Collins said brands need to consider how their programs fit into consumers’ existing routines, how easy they are to use and whether customers are being prompted to engage at the right time.
Why being ‘in your face’ can work
Flybuys offers a different lesson for loyalty marketers: visibility and convenience can be just as important as the reward itself.
Collins described the program as particularly strong at reducing friction, with reminders and opportunities to use Flybuys appearing throughout the grocery shopping experience.
At Coles, for example, customers can use their phone or a physical card at checkout, while prompts at the point of purchase remind them to engage with the program.
Rather than relying solely on customers remembering to use their membership, Flybuys makes participation part of an existing habit.
It is an approach that draws on another of Honeycomb Strategy’s behavioural principles: people tend to take the path of least effort.
“Quite often, the ability and the prompt elements are the bits that can be under-delivered from loyalty programs themselves,” Collins said.
He said brands often concentrate on motivation, such as offering a discount or a particular benefit, without making it sufficiently easy for customers to access that reward or giving them a timely reason to use the program.
The framing of those prompts also matters.
Collins said asking a customer whether they belong to a loyalty program can produce a simple yes-or-no response. Explaining the immediate benefit of joining, such as a discount on their purchase, gives the customer a more compelling reason to act.
However, making a program visible does not mean bombarding customers with communications.
Collins said loyalty works best when it is integrated into behaviours and routines customers already have, rather than requiring them to develop entirely new habits.
Partnerships can help achieve this, particularly for brands whose customers do not interact with them frequently.
Qantas, for instance, allows members to earn points through a wider ecosystem of partners rather than relying exclusively on flight bookings. That creates more opportunities for members to engage with the program between trips.
Collins said integrated program and partnerships are likely to become an increasingly important part of the loyalty landscape, provided brands choose partners that make sense for their customers.
“Not just partnerships for the sake of partnerships,” he said. “I think they’ll be really intentional partnerships that program create.”
The danger of making customers wait
While Qantas demonstrates the value of making existing benefits feel worth protecting, Collins said other brands can learn from program that deliver smaller rewards more immediately.
McDonald’s, for example, allows members to redeem points for items without necessarily having to wait until they have accumulated a substantial balance.
That can make the programme feel rewarding in the moment, rather than leaving customers working towards a benefit that seems a long way off.
The approach reflects another of Honeycomb Strategy’s behavioural principles: people want things now.
Collins said the research did not find that one particular type of benefit guaranteed success. Instead, effective program align their mechanics with the behaviours and expectations of their audiences.
Mecca provides another example, tapping into the idea that people buy in ways that reflect their identities and the communities they belong to.
Its beauty-box rewards can give customers a sense of belonging, particularly when members compare what they receive with others.
But Collins said understanding the audience remains critical. A reward that feels exciting to one customer may be irrelevant to another, making it important for brands to understand what their members actually value.
For marketers, that means a loyalty program cannot simply be built around a list of benefits and left to run. Its rewards, redemption mechanics and communications need to reflect how customers behave.
Loyalty is becoming harder to earn
The findings come as brands compete for attention in an increasingly crowded environment, with consumers exposed to more content, communications and competing offers.
Collins said Honeycomb Strategy had observed declining active engagement across a number of loyalty programs, making it increasingly important for brands to create experiences that are easy to participate in.
He cautioned against assuming that a large membership base automatically translates into a successful program.
“You want that active engagement to be as frictionless and seamless as possible,” he said.
For programs that are underperforming, Collins said there is an opportunity to move beyond simply increasing discounts or adding more benefits, and instead examine the behavioural reasons customers do or do not participate.
That could mean making rewards easier to redeem, introducing more relevant prompts, or building partnerships that give customers more opportunities to engage with a brand as part of their everyday lives.
And while the mechanics of loyalty programs will continue to evolve, Collins believes the underlying principles will remain important.
For Qantas, the lesson is that loyalty is not just about giving customers something they want. It is also about creating an experience they do not want to lose.
For its competitors, the challenge is to work out what customers value enough to keep coming back for, and then make it as easy as possible for them to do so.
