Cost-Cutting Axe Swings For Loyalty Rewards

Companies are trying to cut costs wherever they can. Employees? Pack your bags. Budgets? Slashed like your Prime Day prices. Birthday loyalty rewards? “Happy bday, now here’s how much you owe us.”

The Associated Press has reported several birthday rewards being toned down:

• Dunkin’ Donuts stopped their free drink last fall — offering triple loyalty points instead.
• Sephora now requires a $25 minimum purchase to claim their gift online.
• Red Robin requires a minimum $4.99 dine-in purchase for a free burger.

GlobalData’s MD Neil Saunders thinks “businesses are looking at all costs right now… to reduce expenses” (Axios). And loyalty rewards, while enhancing brand value, are at higher risk — due to the challenge of measuring their direct sales impact.

Customer satisfaction or earnings?

Companies choose earnings. Times are lean, and execs have shareholders to keep happy — becoming more stingy in the past year (beyond birthday perks).

• Loyalty programs: Earlier this year, Starbucks (NASDAQ:SBUX) changed how many stars are needed for rewards.
• Travel rewards: Airlines have made redeeming points more difficult or are requiring more points for free flights.
• No-cost returns: Several large retailers have removed free return options or reduced the time window to qualify.

In 2022, logistics platform Narvar found that 41% of companies had a return fee — up from 33% in 2021 — driven by a slowdown in e-commerce sales. But for the travel industry, a lack of award seats results from too much demand and operational issues that cancel or delay flights. All about that bottom line — and keeping it in the green.