Rob Alvarez
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My Barber Beats Airline Miles At Loyalty | Episode 446

 

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Get the free Core Drives in the Wild guide, behavioral design applied to real products: professorgame.com/WildCD

Episode Summary

Rob breaks down why the most durable loyalty has almost nothing to do with points, contrasting a typical airline miles program with a neighborhood barber who keeps a customer for ten years with no app, no tiers, and no expiring rewards. He shows how the same Core Drive can run in opposite directions: airline programs fake Core Drive 4 (Ownership and Possession) with a points balance they control and devalue, while the barber builds real ownership through a relationship the customer actually owns. Along the way he names the over-justification effect, the moment a relationship becomes a calculation, and how Black Hat motivation can win in the short term while quietly corroding loyalty. Listeners come away with a clear diagnostic and a way to tell a real loyalty program apart from a price promotion on a delayed schedule.

About the Host

Rob Alvarez is Head of Engagement Strategy, Europe at The Octalysis Group (TOG), a leading gamification and behavioral design consultancy. A globally recognized gamification strategist and TEDx speaker, he founded and hosts Professor Game, the #1 gamification podcast, and has interviewed hundreds of global experts. He designs evidence-based engagement systems that drive motivation, loyalty, and results, and teaches LEGO® SERIOUS PLAY® and gamification at top institutions including IE Business School, EFMD, and EBS University across Europe, the Americas, and Asia.

Key Takeaways

  • Most loyalty programs build a transactional dependency rather than loyalty: the customer ends up loyal to the points, not the brand, so the moment a competitor offers more points they defect.
  • Airline miles run on a Black Hat stack of Core Drive 4 (Ownership and Possession), Core Drive 6 (Scarcity and Impatience) through tier status, and Core Drive 8 (Loss and Avoidance) through expiring miles, which shifts the flyer from chasing something they want to avoiding a loss.
  • The over-justification effect is the damage mechanism: a flyer who genuinely liked an airline starts booking the worse flight (longer, worse time, sometimes pricier) purely because it earns miles, the moment the relationship becomes a calculation.
  • A relationship turned into a calculation is trivially beatable. A competitor with a slightly better offer doesn’t just win one trip, it reveals there was never loyalty to begin with.
  • A ten-year barber relationship survives real inconvenience (further away, closer cheaper options nearby) using the calm side of the same Core Drives: Core Drive 5 (Social Influence and Relatedness) plus genuinely owned personalization the customer cannot port to a competitor.
  • The diagnostic: strip the points, discounts, and digital rewards entirely. If the honest answer to “why would anyone stay” is nothing, it isn’t a loyalty program, it’s a price promotion with a delayed payment schedule.

Topics Covered

Get the free Core Drives in the Wild guide, behavioral design applied to real products: professorgame.com/WildCD

Mentioned in This Episode

  • Core Drives in the Wild (Professor Game free guide)
  • The Octalysis Framework and its Core Drives (Yu-kai Chou)
  • Black Hat and White Hat motivation
  • The over-justification effect

Free Resources and Get in Touch

Looking forward to reading or hearing from you,
Rob

Full episode transcription (AI Generated)

Loyalty to the points, not the brand

Rob Alvarez (00:00): What is the difference between a transaction and actual loyalty between a massive airline miles program and the barbershop down the street? The answer is the reason most companies spend millions on retention without ever building a single real connection. Most loyalty programs don’t build loyalty. They build a transactional dependency. The customer ends up loyal to the points, not to your brand. So the moment your competitor offers more points, they’re gone.

Rob Alvarez (00:29): Hi, I’m Rob. I am the host and the founder of Professor Game, and I head engagement strategy in Europe for the Octalysis Group, where we help companies turn motivation into retention. And in this episode, I’ll show you why the most powerful loyalty program has almost nothing to do with points. We’ll take apart the machinery behind airline miles, contrast it with a local service that gets loyalty right, and leave you a single diagnostic test you can run on your own product right away.

Rob Alvarez (01:01): And if you enjoy the kind of thing that we discussed in this episode where we break through real examples in the corporate world of the use of the Core Drives and how to do it right and wrong, you’ll definitely enjoy our free guide Core Drives in the Wild. It’s right below on the link in the description. Now let’s get into it.

The Black Hat machinery of airline miles

Rob Alvarez (01:16): Look at the typical frequent flyer program. It runs almost entirely on what we call Black Hat motivation, the drives that get you moving immediately, but don’t feel good over time. And don’t get me wrong, that can work under situations and it can be part of a very good mix. But let’s get started.

Rob Alvarez (01:31): First, we have the engine running on Core Drive 4 ownership and possession. Your accumulated miles feel like this kind of asset, something you’ve built. Something you don’t want to waste because it now belongs to you. You feel that ownership. That seems to work out pretty well. Then they start layering things like Core Drive 6, scarcity and impatience. The tier status is exclusive and just, you know, almost out of reach. So you make this stretch. You maybe do another flight or you switch from a more convenient flight to this one because you want to reach that status, for example.

Rob Alvarez (02:02): The problem is that then the trap snaps shut with Core Drive 8. Loss and avoidance. You stop flying and your miles expire. Your status drops. You’re not flying towards something you want anymore. You’re flying to avoid losing what you’ve already achieved.

The over-justification effect in action

Rob Alvarez (02:18): This stack can be brutally effective in the short term and at the same time be quietly corrosive for the long run. And the mechanism that does the damage in this case is the over-justification effect. Picture a flyer who genuinely enjoys, likes a certain airline. They’ve had, you know, good crew, smooth experiences, they’re overall generally happy. Then this thing called the miles program takes over the decision.

Rob Alvarez (02:46): Watch what happens when they’re at a booking. There’s a better flight, perhaps on another airline. It’s a shorter trip. It’s a nicer time of the day, maybe even a better price. And they booked the worst one anyway, because the worst one earns miles on their airline. Let me say that again. They book the worse flight, because it earns miles on their airline.

Rob Alvarez (03:15): They are now choosing the inferior experience to protect a points balance. That’s the moment. That is the exact moment when the relationship completely died and got replaced by a calculation. I fly with them because I like the experience and this airline is essentially better for whatever reason. I think that they are better. Became now I fly with them for the miles, and there is, let’s call it a humongous problem: when you turn the relationship into a calculation it is trivially beatable. A competitor who has a slightly better offer doesn’t just win over one trip. They reveal that there was never a loyalty to begin with.

Rob Alvarez (04:01): The person was never loyal. You weren’t ever loyal. You were doing math. And since points are so easy to beat, what does loyalty look like when there are no points at all?

The ten-year barber with no points

Rob Alvarez (04:13): I’ve been going to my barber for 10 years. When I moved, I tried, I moved, lived, it was literally like two minute walk where I used to live. I tried after that, I moved further away and tried two or three other places that were genuinely closer to me. It was objectively a lot more convenient to go somewhere else. I ended up back with her every single time.

Rob Alvarez (04:37): She has no app, no points, no tiers, no expiring rewards. By every metric that a traditional loyalty program is built to optimize, she would have completely lost me. The competition was closer to my door. Some of them were cheaper. What was actually holding that relationship together?

Rob Alvarez (04:55): Let’s enter Core Drive 5, social influence and relatedness. I’m not a transaction to her. I’m a regular. She’s nice to be around and I genuinely enjoy my time at the chair. That sense of belonging is not something a competitor can copy by being a few streets closer.

Same Core Drive, opposite direction

Rob Alvarez (05:11): Core Drive 4, ownership and possession. And this is one where I want you to sit with for a second because it is the exact same Core Drive that the airline was using. However, it is running in the exact opposite direction. The airline fakes ownership with digital points balance that they control. It’s a number on screen that they can devalue, that they can expire whenever they like.

Rob Alvarez (05:33): My barber creates a real ownership through a relationship that is actually mine because the relationship is Core Drive 5. But the part of ownership of that relationship is actually mine. She knows my hair. She’s personalizing for my hair, my history, my preferences. That cannot be ported to a competitor, that cannot be devalued overnight and it didn’t cost either of us a single point or dollar.

Rob Alvarez (05:58): Same Core Drive and human motivation. One brand manufactures a hollow version of it and spends a fortune to achieve that. Another person achieves the real thing for free.

Inverting Core Drive 8 into a safe choice

Rob Alvarez (06:12): And then there’s Core Drive 8, loss and avoidance. However, it is inverted in this case. Points programs are weaponizing this drive against you. You lose your miles, lose your status, keep flying, or else. They never say or else, all right? Don’t get me wrong. But when you get that email, you know that there’s an or else sort of hiding underneath it.

Rob Alvarez (06:35): My barber uses the calm side of the same drive, the absence of risk. I know exactly the haircut I’m going to get. Trying somewhere else new is a gamble. Coming back to her is the safe choice. The loss I’m avoiding isn’t a point balance. It’s a bad haircut.

Rob Alvarez (06:57): My barber retained me through real inconvenience. Yes. She didn’t introduce the inconvenience, but the inconvenience is real and it is there. And she achieved it by using nothing. Nothing almost, but Black Hat, White Hat drives. And an actual relationship. Airline programs spend an enormous fortune on Black Hat machinery to retain people who will defect the moment someone offers an overall better deal. The cheap version works better than the expensive one because it’s built on human connection instead of a trap.

Run the strip-the-points diagnostic

Rob Alvarez (07:36): So here is your prompt for today. Run the diagnostic on your own product or service. If you strip the points, the discounts and the digital rewards completely entirely, what’s left? What reason would anyone have to stay with you? If your honest answer is nothing or close to that, then you don’t have a loyalty program. You have a price promotion with a delayed payment schedule.

Rob Alvarez (08:01): Deep down, the argument here is that if you have to trick someone into staying, the real problem is that what you’re offering isn’t good enough to keep them on its own. Real loyalty was never about better traps. It’s about trust.

Rob Alvarez (08:14): So if you’re rethinking how you can manage your loyalty and you enjoyed the kind of things that we did on this episode of breaking down real examples, looking at the Core Drives behind them, how to do it right, how to do it wrong, then you will definitely enjoy and benefit from our free guide Core Drives in the Wild. You will get a daily email running through each and every one of the Core Drives, looking at past episodes of this podcast, how they were using the Core Drives, how to do it right, and what is my take as a consultant at the Octalysis Group.

Rob Alvarez (08:46): All you have to do is click on the link below in the description. You’ll be subscribed. And as a value added, you’ll eventually also be subscribed to my email list, where I’ll be sending regular emails, where I also add value from the perspective of motivation, Core Drives, and how to use this in real life corporate and enterprise cases. And as you know, at least for now and for today, it is time to say that it’s game over.

End of transcription