Are loyalty programs inflaming the rage over income inequality?

Special to The Globe and Mail
Published Friday, May. 22 2015


Everyone remembers the Occupy Wall Street movement of a few years ago. While the disgruntled 99 per cent could have honed their message a bit, the lightning rod of anger was the growing inequality of income distribution. The tent villages and drumming circles may have vanished, but the widening gap between the rich and the poor has not – and it’s almost certain to return to public-policy debates in the near future.

There’s no agreement on how to solve the problem of income distribution – or if it’s even an issue. But most would agree that if we’re going to figure out how to address it, we shouldn’t do anything to fuel the flames of resentment and make the situation worse. Yet that’s precisely what certain customer loyalty programs do.

Airlines have special boarding lineups (or non-lineups, really) for their preferred customers. In front of the huddled masses in the boarding area, they call on the “Super Elite” to board first. Virgin Atlantic refers to its favourite fliers as “Upper Class.” Does no one else find this strange? It’s one small step away from inviting rich people to board first – or at their leisure.

Hotel loyalty programs do this as well, with special check-in counters for their “Platinum” or “President’s Club” members. Those with such status can stroll into the hotel, jump to the front of the line and check in ahead of everyone else.

The defence for this form of discrimination is that companies like to recognize their loyal and most valued customers. Those customers have paid more for Upper Class seats and should therefore receive better products. This isn’t about discriminating against the poor, it’s about rewarding repeat customers.

Low-income earners are entitled to the same queue jumping if they are frequent customers, but the fact is they are not. If you’re Super Elite, you’re either wealthy or you have an employer paying for your flights – and no one earning $35,000 a year gets sent on that many business trips. It’s the 1 per-centers who are the loyal customers.

Notice that loyalty programs don’t work in markets focused on the 99 per cent. There’s no queue jumping at Tim Hortons for the frequent double-double enthusiasts. There’s no Super Elite lounge with free Chardonnay and hummus at the bus station (although Greyhound offers one free ride after you’ve taken 16 trips).

But here’s the important distinction: The problem isn’t offering loyal customers a superior product, but offering them superior treatment. It’s not the wider seats or the rooms with better views that are an issue; they’re a completely different product and should cost more. No one would fuss over a bigger steak served to a person who can afford it. But you might raise an eyebrow if the waiter told you, “Your steak was almost ready, but a wealthier customer just sat down and ordered the same steak, so we gave it to her.”

I’m not suggesting loyalty programs are a bad thing (full disclosure: I participate in a few of them). It’s fine to reward the faithful hotel customer with a bottle of wine in her room on her 10th visit, or a frequent Greyhound rider with a free trip. But if the superior treatment of the Super Elite customer results in eroded treatment for the regular Joe on the same plane, it’s going to eventually cause resentment.

Besides, Canadians don’t like queue jumping – not even if they’re the ones doing it. It’s awkward, and in the case of boarding an airplane it’s unnecessary. Everyone on the plane will arrive at the very same time. Being the last one on the plane is actually the best spot to be in. In a recent lineup of us non-elites, I overheard two women talking. “Aren’t you Elite status? You don’t have to stand in this line – go to priority boarding,” said one. “I know. But it’s too embarrassing,” said the other.

While we figure out how to address the serious problem of growing income inequality, shouldn’t we at least try to avoid calling rich people Upper Class or Super Elite? Let’s not fan flames of anger in the name of customer loyalty.

Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.