Don't get played by loyalty mind games - businesses are not your friend

Loyalty program? Pfft, what a misnomer. I feel no loyalty. Most of them were just one-night stands, where we both got what we wanted from a few hours between the sheets... my email address in exchange for their wifi password. The next morning, I gathered my things and moved on to the next.

So it was heartening to read this week that I'm not alone. A new study into loyalty in Australia has found that some of the lowest engagement is from members of hotel programs. Foreign airlines were also down the bottom of the list, while Australian airlines were close to the top, up there with the supermarkets and credit cards.

So, why are some loyalty programs more popular than others? That's what consultancy company Honeycomb Strategy set out to determine... with surprising results. It turns out that offering the best features wasn't what got some programs to the top of the list. The ones with the most engagement often did it by using mind games!

One of the behavioural science techniques that loyalty programs use is called 'loss aversion theory', which says that we feel the pain of losing something more than we feel the pleasure of gaining it. If you have a high frequent flyer status with an airline, you may be able to relate - giving up access to those lounges seems almost unbearable once you've had it for a few years.

In fact, Honeycomb Strategy uses Qantas as the example of loss aversion theory in its report, highlighting the way that an annual reassessment of your tier and big differences between the tiers compel many travellers to prioritise flying Qantas, while a lifetime status keeps people committed so they don't feel like they're wasting all those previous flights.

This flows on to the second behavioural science concept that programs use - 'social identity theory'. This is the concept that part of your self-worth comes from the groups you belong to. A lot of companies are able to do this with tactics like email newsletters offering exclusive deals or events for higher-status members. But travel offers even more physical opportunities, which is one of the reasons airlines have special areas like priority check-in counters and lounges, and hotels offer club rooms with free drinks and snacks.

You know those bag tags that come in different colours depending on your status? That's part of social identity theory because it allows you to subtly (or not so subtly for some people!) show what kind of member you are. Ahem, excuse me random person boarding behind me, did you not notice my prominently displayed platinum tag?

As consumers, we often do something called 'mental accounting', and this is the third behavioural science concept that loyalty programs use. It's the idea that we treat money and benefits differently, even if they actually have the same value. We are usually more likely to spend points or credit than we are to use a discount code, for instance.

One of the best examples in the travel industry is Booking.com, which has a loyalty program called Genius. Customers with a higher Genius level are offered bonuses with certain hotels, like discounts, free breakfast, a later checkout, or even a free transfer from the airport.

But, this is often not just mental accounting, it can also be creative accounting. You may find you're actually paying a bit more for that property than an equivalent one, or the final price is no different to booking direct. But the dopamine hit of being a loyal member and getting something 'for free' means customers are often more likely to go through the booking platform rather than directly through the hotel.

Travel companies are businesses, not our friends, yet people often have quite intimate relationships with their loyalty programs. This is partly explained by the 'reciprocity effect' in behavioural science, which says that you feel an obligation to give something back when you receive something unexpected or unearned. Often what you give back is respect or loyalty, which is why these programs might surprise you with a gift on your birthday, some extra points as a promotion, or even a free upgrade.

The final behavioural trend the report identified is called 'cognitive ease', meaning we are naturally drawn to experiences that are easier. Supermarkets do this really well by having your loyalty card on your phone and prompting you to scan it at the register. The best travel companies do this by including your membership number on the original booking so you receive all your benefits automatically, and by having sections in their apps where you can easily track how much you've earned and what you need to reach the next membership tier.

So, are you guilty of falling for some of these mental tricks? I know I am! But perhaps it doesn't really matter, as long as it's a fair value exchange. I like access to a lounge before a flight and am prepared to be loyal to an airline to get that benefit. But most of what hotels offer - maybe a welcome drink or late checkout - doesn't bother me much. Perhaps that's why there are so many neglected loyalty programs clogging up my inbox.

If you're happy with the programs you're a member of, that's great, make the most of the benefits. But if you ever start to think a company is offering you things because it's your friend, remember, it's all in your mind.