For Alaska Airlines's loyalty program, should we focus on offering more exclusive high-tier benefits or broaden lower-tier perks to increase overall member engagement?

Introduction

For Alaska Airlines' loyalty program, we're facing a critical trade-off between offering more exclusive high-tier benefits or broadening lower-tier perks to increase overall member engagement. This decision will significantly impact our customer retention, acquisition, and revenue strategies. I'll analyze this trade-off by examining our product ecosystem, key metrics, and potential experiments to inform our decision.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking our loyalty program might be underperforming compared to competitors. Could you share how our program's engagement rates compare to industry benchmarks?

Why it matters: Helps determine if we need to focus on retention or acquisition. Expected answer: Below average engagement, especially in lower tiers. Impact: Would lean towards broadening lower-tier perks to boost overall engagement.

• Business Context: Based on our revenue model, I assume a significant portion comes from high-tier members. What percentage of our revenue is generated by our top-tier loyalty members?

Why it matters: Helps balance the potential revenue impact of focusing on different tiers. Expected answer: 60-70% of revenue from top 20% of members. Impact: High percentage would favor enhancing high-tier benefits.

• User Impact: I'm curious about our member distribution across tiers. What's the current breakdown of our membership base across different loyalty tiers?

Why it matters: Helps understand which changes would affect the most members. Expected answer: Pyramid structure with a broad base of lower-tier members. Impact: Large lower-tier base might suggest focusing on broader perks for greater impact.

• Technical Feasibility: Considering our current systems, how easily can we implement and track new perks across different tiers?

Why it matters: Determines the feasibility and timeline of implementing changes. Expected answer: Moderate difficulty, requiring 3-6 months for major changes. Impact: Longer implementation time might favor simpler, broader changes.

• Resource Allocation: What's our current budget allocation for loyalty program benefits across different tiers?

Why it matters: Helps understand financial implications of shifting focus. Expected answer: Budget skews towards high-tier benefits. Impact: Limited budget for lower tiers might constrain options for broadening perks.