Delta’s SkyMiles Fiasco: A Cautionary Tale for Channel Leaders

The airline’s modifications to its popular customer rewards program show the potential negative consequences of making too many changes too fast.

By Larry Walsh

Here’s a tale about becoming a victim of your own success and the repercussions of moving too swiftly. This lesson emerges from an unlikely source: the airline industry.

Delta Air Lines, among the world’s largest carriers, has fallen prey to its soaring success. Its SkyMiles frequent-flyer program rewards customer loyalty by offering free upgrades, access to Sky Club airport lounges, and other complimentary benefits. So successful is this program that it now struggles to fulfill its commitments, with an overflow of members claiming rewards.

Earlier this month, Delta unveiled major alterations to SkyMiles, increasing reward thresholds, discontinuing benefits linked to Delta-branded American Express cards, and restricting lounge access. The airline attributes these changes to doubling its top-tier Diamond memberships over the past two years.

The response from devoted Delta patrons was swift. Disheartened SkyMiles members expressed their discontent, arguing that Delta no longer holds allure without the prospect of achieving status and gaining access to historical benefits. Many hinted at diversifying their flights — booking with other airlines, some of which offer more competitive rates than Delta.

Facing intense scrutiny, Delta is now reconsidering its stance. CEO Ed Bastian conceded that the airline acted hastily in balancing demand for top-tier Diamond perks with the burgeoning elite memberships during the pandemic. The company’s failure to consult with or adequately inform customers beforehand has eroded trust.

Delta has now declared it will re-evaluate and modify its 2024 plans, but no specifics have been provided yet, and it remains to be seen how SkyMiles members will react to the revised changes.

Delta’s recent backtrack offers valuable insights for tech vendors that design and manage channel programs, warning of the dangers of radical alterations that might alienate partners and jeopardize future earnings.

Much like loyalty schemes, channel programs grant partners a gradation of benefits based on performance metrics. Yet vendors need to tread carefully when modifying prerequisites and curtailing advantages to ensure continued partner engagement and efficacy.

Indeed, partners can become resentful when vendors abruptly amend program terms or hike revenue expectations. While they understand the occasional need for program recalibrations, they don’t take kindly to feeling shortchanged. It’s a delicate equilibrium to maintain.

Prudent vendors aim for a harmonious balance in their modifications, aligning participation conditions with partners’ operational capabilities. This involves ensuring that training, certification, business planning, and marketing commitments are in sync with revenue goals and pipeline development. Vendors acknowledge that not every partner will benefit, but they tailor changes to keep the dedicated and high-performing partners ahead.

Problems arise when vendors instigate radical shifts that clash with established expectations. For instance, Microsoft faced a backlash akin to Delta’s in 2019 when it abruptly ceased internal use rights (IUR) software licenses for its 300,000-plus partners. Despite Microsoft’s reasoning that cloud IUR expenses were escalating, it provided minimal notice of the change, leaving partners feeling slighted. Although Microsoft eventually reinstated the benefits, the relational strain persisted.

Both situations exemplify the hazards of impulsively overhauling incentive schemes without sufficient dialogue and transparency. Progressive, well-explained changes are the way forward.

Engaging stakeholders, explaining decisions, and soliciting feedback are all vital. Hastily implemented modifications can signal indifference to partner investments and concerns, and poor communication only exacerbates these situations.

Channel programs should inspire growth and evolution but also express commitment to partner success. While it’s sometimes necessary to heighten standards, vendors must balance backing their partners and advancing organizational objectives. The missteps of Delta and Microsoft, albeit rectified by active listening, serve as cautionary tales for others in channel programs.

 

Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide. Follow him on Twitter at @lmwalsh_CN.