Carnival Corporation has recently reported record quarterly earnings, with revenues reaching $2.8 billion, surpassing analyst expectations. However, despite these impressive figures, the company’s stock dropped by 7%. The decline stems from concerns surrounding rising fuel costs and fluctuating demand in the Mediterranean region. Yet, there’s a more profound issue affecting Carnival’s future: its restructured loyalty program is causing unrest among its dedicated customers.
Carnival’s Loyalty Program Overhaul: A Source of Dissent
In June, Carnival announced the discontinuation of its lifetime loyalty program, a system that had been in place for decades. This program was replaced by a spend-based model, requiring customers to spend approximately $33,000 every two years to maintain elite status. The decision prompted swift backlash. Longtime cruisers felt frustrated and betrayed, believing they were losing something they had earned over years of loyalty.
The Emotional Impact of Change
- Customers had invested both time and money, building a relationship with Carnival.
- The sudden change resulted in feelings of betrayal as many felt their loyalty was unappreciated.
- Behavioral economists describe this reaction as the “endowment effect,” where people value what they believe they own more than what they do not.
For instance, a couple with 62 cruises under their belt expressed their disillusionment, emphasizing the emotional connection they had with the brand that was now undermined.
A Partial Response: Selective Loyalty Protections
In September, Carnival aimed to mitigate this backlash by announcing “enhancements” for its loyalty program. Diamond members, the highest tier, would retain their lifetime status, while Platinum and Gold members faced loss of their benefits after a grace period. Platinum members received an extension until 2028, along with promises of priority tender boarding and additional unspecified benefits.
The Mixed Reception
- Diamond members expressed relief, but Platinum members felt undervalued.
- Years of loyalty seemed disregarded with the message: “not loyal enough to matter.”
This selective protection has exacerbated feelings of resentment among loyal customers who were close to achieving Diamond status.
Understanding Customer Loyalty: The Missteps
Carnival’s adjustments reveal a significant misunderstanding of customer psychology. While offering priority tender boarding may seem beneficial, it fails to address the emotional loss felt by loyal customers. Promising vague “exclusive benefits” further highlights Carnival’s struggle to recognize the importance of emotional connections in loyalty.
A Cautionary Tale for Marketing Leaders
CMOs should take notes from Carnival’s challenges. The brand’s previous introduction of a surplus of elite members led to logistical issues, forcing changes that ultimately broke the promise made to customers. While evolving a loyalty program can be necessary, it must not come at the cost of eroding trust.
The Long-Term Revenue Risk
Despite Carnival’s record revenue figures, the company faces a threat to its long-term value due to the distortion in customer relationships. The new spend-based loyalty model may deter many loyal customers from returning. The high spend requirement is likely only feasible for a select group, pushing other customers toward different brands in search of a more meaningful cruise experience.
Moving Forward: The Importance of Recognition
To effectively retain customers, Carnival should reconsider its loyalty strategy. Simple gestures of recognition, such as special boarding announcements or personalized communication, can foster lasting emotional connections. In contrast, a purely transactional approach risks transforming loyal customers into comparison shoppers.
As Carnival navigates these changes, it must ask itself: How can it rebuild trust and loyalty with customers who feel undervalued? The answer may lie in prioritizing emotional recognition over mere transactional benefits.
