5 lessons from airlines: Applying loyalty programs to games (pt 2)

In part 1 of our D2C series, we discussed how airlines arbitrage the perceived value of loyalty points against their actual cost: airlines can give away a seat or upgrade to loyal customers for free and customers will take this as a huge win. The airline can afford to do this at pretty much zero cost (as long as that seat would have otherwise been empty) because their costs are driven by how many planes they fly - not by how many seats are filled. 

In gaming, it’s similar. The perceived value of a skin or chest of coins is high for players, but it doesn’t cost you anything to give these items away - as long as they wouldn’t be sold at full price, anyway. 

Keep reading for actionable best practices learned from airlines that you can apply to your game’s online loyalty program.

1. Follow the foundations of a loyalty program

Loyalty programs have been shown to increase both brand loyalty and profitability. But of course, it all depends on setup and strategy.

A rewards system must be:

• Scalable to handle customer activities
• Personalized by caching frequently accessed data and optimizing data 
• Flexible to handle changes and updates as they come

So let’s apply this model to airlines, and discuss how this directly influences the setup of a loyalty program for your game:

Scalable

Airlines: During COVID-19, airlines adjusted their loyalty programs for the 90% decrease in air passengers by extending the expiration dates of mileage status and reducing tier qualification requirements. Basically, they made it easier for customers to earn points, upgrade, and maintain their status tiers despite the temporary collapse in air travel. 

After the pandemic, however, airlines faced a huge surge in travel - and with it, they needed to adjust their loyalty programs to address this rise in demand. So they’ve shifted strategy again, reverting to pre-pandemic qualification requirements and raising the cost of miles (e.g. increasing the amount of miles needed for a free flight or upgrade).

Gaming: Just like your in-game economy needs to adjust as the game scales and players progress, your loyalty program should, too. As you tweak the economy to account for factors like inflation, make sure to do the same for your loyalty program: be sure to adapt its economics to balance monetizing players with rewarding them for their loyalty.  

Personalized

Airlines: Airlines personalize their loyalty programs according to customer preferences. They can just as well serve the weekly, business class elite tier member as the price sensitive, infrequent holiday traveler.  

How? Since these programs are D2C, airlines get direct access to tons of first-party data, like email address, booking history, loyalty transactions, and co-branded activity - which enables all of the following opportunities for personalization:

• Reminders that the member’s passport expires soon if they have an upcoming trip 
• Lounge passes or club offers triggered by long layovers
• Upgrade offers or free/discounted ancillary services (depending on tier status)
• Recommended itineraries with partner hotels and restaurants that also indicate the miles they could earn as further incentive
• Re-engagement messaging, incentives, etc. based on a decline in the member’s use of their co-branded card, which indicates they’re at risk of churning. 
• Free trials of more elite tier for those showing higher activity patterns, or “status tier matching” to attract competitors’ customers. 
• Tagging members for relevant future targeting who clicked something on-site. For example, if they click a photo of a beach sent out in customer email, they’ll be tagged with categories like “Caribbean vacation” and “beach traveler” so future communications can be tailored 

Gaming: Chances are, you already segment your players into different buckets for your UA campaigns and monetization strategies - apply this same segmentation logic to your loyalty program. Create variable rewards that match a member’s playing habits to serve both your ultra VIPs and your new users. You’ll even have access to valuable first-party data that can inform your larger personalization and segmentation strategy, enhancing your overall monetization and UA strategies. Basing it off of your existing logic just expedites the process and means you’re not starting from scratch. 

Flexible

Airlines: Mileage program rules flex to different business goals. Whether it’s encouraging retention, acquiring new customers, or driving traffic to D2C channels, these programs can adjust based on operational needs. 

For example, many airlines offer status match capabilities, letting passengers get an equivalent status on a different airline when they switch loyalty programs. Virgin Atlantic’s status match program lets passengers join an equivalent tier in Virgin’s Flying Club as their current statuses in other airline loyalty programs.

Essentially, airlines use their loyalty programs to both retain their members in the long-term - like through generous lifetime status tiers (e.g., lifetime Gold tier after 5 straight years in gold) - and attract entirely new customers with status match. It’s this kind of flexibility that allows them to accomplish multiple business goals. 

‍Gaming: Your loyalty program needs to adjust to suit changing business needs, just like airlines do with status matches. Let’s say a competing game enters the market with an attractive loyalty program. Your focus is now on retention and keeping players within your own loyalty program - or risk losing them to the competition. To do that, make adjustments like accelerating the ease with which players can progress through status tiers, offer them gifts, or construct a new status tier entirely. All of these strategies can promote stickiness and incentivize players to remain loyal to your rewards program.  

2. Set goals and measure performance

Airline loyalty programs set the stage as one of the first virtual currencies, letting travelers use points to make purchases. Games need to treat their loyalty programs like additional in-game currencies, too. Think about how you measure the impact of introducing a new resource or item into your game - follow this same approach to build, analyze, and optimize your loyalty program. 

The goals for airline loyalty programs are simple:

• Increase retention
• Boost monetization
• Drive traffic to D2C channels 

As we know, all of these goals increase LTV. For airlines, LTV is essential since service offerings between brands like Delta and American Airlines are largely undifferentiated and profit margins are slim. But by retaining customers through loyalty programs, airlines can nurture them to both increase spend and prevent them from churning. Plus, loyal and retained customers are less sensitive to prices - they’re willing to pay more for a plane ticket or ancillary service because they feel connected, seen, and/or incentivized by the loyalty program. 

Since they’re less focused just on pricing and have all these positive sentiments around the loyalty program, customers will then often buy directly from their favored airline’s website, without going through marketplaces or third-party booking sites. This means the airline doesn’t have to pay the marketplace a fee - it also means they don’t have to compete with other airlines on price comparison sites and can keep their tickets at full-fare (rather than discounting to stay competitive).  

Games’ loyalty programs share the same goals. Retaining your players and then monetizing them effectively is the key to boosting LTV, driving higher engagement, and encouraging them to spend more. Plus you can use your loyalty program to drive players to your own web shop, which lets you bypass the 30% commission of the app stores. 

With your goals set, now you can consider the most relevant success metrics to track outside of retention and LTV. These can include loyalty or channel-specific KPIs, like:

• Web shop share of player spend 
• Tier advancement rate
• Number of members/enrollment rate
• Point redemption rate

3. Keep an eye on your in-game economy

Ultimately, the most important aspect of your loyalty program is its effect on your game’s economy. You always need to make sure your loyalty program isn’t disrupting your core monetization metrics, inflating your currency, or over-cannibalizing sales. In other words, you need to be growing top-line revenue faster than the price reductions/discounts take away from it. 

For example, if airlines offer too many seats or upgrades to their loyal members, they may end up over-cannibalizing their sales and reducing their revenue. If they could have sold those seats at full price but instead continue missing out on that extra revenue, it ends up negatively impacting their bottom line. 

Games have an advantage here, however - since you can more easily control both how much virtual currency a player earns and how much they spend. It comes down to supply and demand. Just like you can increase the supply of virtual currency in your game, you can also control how much players consume that currency (the demand). 

This becomes clear in resource-based game economies, like the casino genre. In these games, you can adjust your supply based on a player’s progress by offering late-stage players a reward of 1000 spins, vs. just 100 spins to your newer players. How many spins you offer doesn’t come with an explicit cost - there’s nothing coming out of your budget to offer these 1000 spins. 

Similarly, you can also increase the rate at which your players consume their resources. For example, you can increase how much energy is needed for another spin, or adjust the rewards of your random mechanics. Use both supply and demand adjustments to optimize your loyalty program’s impact on the in-game economy and on your key objectives - whether those are related to retention, monetization, or engagement.  

4. Create your tiers based on existing spend segments

Once the outline of your loyalty program is in place, it’s time to consider the player experience that will encourage engagement, spend, and retention.

Airlines accomplish this through segmentation. Remember all that first-party data we mentioned they have access to through their loyalty programs? This acts as the base for them to build tiers - like American Airlines’ AAdvantage Gold, Platinum, Platinum Pro, and Executive Platinum statuses - that encourage their customers to spend more. With information like how many long-haul trips a customer booked in business class (and how many miles this totals), an airline can determine the appropriate points to set per tier and then create campaigns and/or incentives to push customers towards reaching the next tier.

Depending on your game’s genre, you likely already have your players segmented into spend categories and/or tiers. Building a loyalty program acts as a layer on top of this existing structure. And you can design your loyalty program around these tiers to drive higher spend or engagement. So if you have a group with a spend threshold of $400, create a loyalty tier at $500 - which will encourage them to increase spend so they can reach the higher tier. 

You can even do this by offering rewards at certain spend thresholds that aren’t necessarily tied to specific loyalty tiers. So even if you don’t create a program with, for example, bronze, silver, and platinum tiers, you can still segment users based on spend and offer rewards that encourage higher purchase values. Raid: Shadow Legends gives a good example of this, offering players additional rewards based on total purchase amount to drive higher average transaction amounts:

5. Communicate your benefits

After creating your tiers, consider the benefits you’ll offer to each group. Here, it’s key to maximize the perception of value while minimizing the value actually lost. For airlines, their actual costs are driven by operating costs (e.g. labor and jet fuel) and number of planes flown. So offering rewards like seat upgrades on an undersold flight doesn’t actually cost them much at all - those seats would have been empty anyway, but the loyal customer gets to feel like they just won big. Similarly, lounges are cost-effective ways of making the travel experience better without requiring any price adjustments or cannibalizing sales. 

Games should aim for a similar “high perceived value, low actual cost” balance. We crafted this table with examples of benefits, along with their costs to operate and likelihood of cannibalizing your economy. In fact, many of these benefits can be structured to minimize their impact on your core game economy:

Huuuge Rewards: a great game loyalty program in action

Putting these best practices into action, it helps to look at a standout example of a loyalty program in gaming - and notice the parallels it has with airline frequent flyer programs.

Huuuge is a great example of a studio that’s built out a loyalty program and is driving real results. In fact, this D2C channel was responsible for over 8% of the company’s $68 million in revenue in Q1 2024. 

Their rewards structure is tier-based, with seven cards representing each tier. Players are automatically enrolled in the rewards program and start earning Huuuge Points that let them advance through the tiers. 

At each new tier, users get access to benefits like higher reward multipliers, personalized offers, early access to new products, and can eventually reach VIP status. According to Huuuge, this exclusive tier - starting at the Diamond Card - “isn't just about status; it's about stepping into an elevated gaming experience rich with benefits and unique experiences.” And those benefits are felt in a real way, with Diamond Card holders getting their own account manager. 

Beyond VIP, there’s a tier called the Ultimate Card that’s so exclusive, only members of this inner circle know. These VIP levels and the exclusivity surrounding them aren’t a far stretch from the top tiers of airline loyalty programs. United Airlines, for example, advertises 4 tiers of their MileagePlus Premier program: Silver, Gold, Platinum, and 1K. The higher the status, the more perks customers get to create a better overall flying and airport experience.

But beyond those four, there’s a secret tier called Global Services that isn’t even published on the United website. Just like the Ultimate Card of Huuuge Rewards, the exact perks aren’t totally known but are likely to include:

• Chauffeured ground transfers in a 2023 Jaguar I-Pace HSE
• Complimentary Premier upgrades
• Dedicated reservation and support hotline

It’s all about motivation

VIP tiers in airlines and gaming serve similar purposes: Motivate users to spend more and stick around. It’s up to you to create a loyalty structure that encourages users to keep climbing the tiers and capitalizes on this desire to reach the highest status.

Join us for the next installment of this series, where we’ll be diving into the retail industry and exploring the strategies that have turned digitally native D2C brands like Glossier, allbirds, Warby Parker, and Casper into household names - and how to apply these best practices to gaming.