Top 5 stories from CX Dive

When Lowe’s launched its updated loyalty program for professional customers in February 2025, the company knew what features of the loyalty program were working. It designed MyLowe’s Pro Rewards to remove unnecessary aspects without sacrificing what customers liked.

"We had the benefit of having a great program that acquired a lot of members, but we had a lot of value packed into it that our pros just really weren't realizing,” Amanda Bailey, VP of customer marketing and loyalty at Lowe’s, told CX Dive.

Lowe’s overhauled its pro and DIY loyalty programs by stripping away complexity while maintaining their core value proposition. 

For it’s pro loyalty program, Lowe’s studied how its pro customers interacted with the preceding MVP Pro Rewards & Partnership program. The retailer determined that the rewards and tools still needed to be there, but it streamlined how customers accessed them.

The company also took learnings from its DIY customer-focused MyLowe’s Rewards program, which rolled out nationwide last March. The positive response to the DIY loyalty relaunch, which also emphasized simplicity, provided inspiration for MyLowe’s Pro Rewards. 

“How can we take the best of both worlds to create a great experience and value proposition for all of our customers?” Bailey said. “That was really the advantage and the learning that we had in bringing this new pro program to life.”

Both loyalty programs offer members points for every dollar spent. The points can be redeemed for rewards like MyLowe’s Money, which offers credit toward eligible purchases, and members that spend enough with the company can reach higher tiers with greater benefits.

Finding Lowe’s flavor

While many customers are seeking simple loyalty programs, the best offerings manage to stand out with unique, but unobtrusive, features.

For example, immediate benefits just for signing up are table stakes in modern loyalty, according to Bailey. They are easy to understand and a great incentive to get a customer’s foot in the door, but they won’t help the brand or the program stand out.

Lowe’s looked to its customers and their relationship to the business to strike the proper balance between simple but common and unique but complex features in a loyalty strategy.

“We could have done a lot of different things with the loyalty program, and every retailer has a little bit of a flavor,” Bailey said. “But what we really remain focused on is: What makes your experience with Lowe's different? How do we serve these customers?”

Rethinking an existing loyalty program, rather than starting from scratch, proved beneficial in this endeavor, according to Bailey. Lowe’s was already paying attention to its customers and their behavior, which made it easier to pinpoint the truly relevant features and elevate them.

Baseline customer knowledge was combined with “lots of research, lots of talking to customers, lots of talking to associates,” all in pursuit of understanding how people shop with Lowe’s, according to Bailey.

The customer-centric approach helped Lowe’s differentiate each of its loyalty programs for its target demographic while keeping the core value proposition simple. 

Incentives and gifts are essential for DIY loyalty members, according to Bailey. These customers plan their visits around the occasional home improvement project, and Lowe’s wanted to give them reasons to come into a store more frequently.

“They love a reason to come into the store and get their free gift, and they love having those extra little perks on top,” Bailey said. “They'll go the extra mile, and they'll make that extra visit because we can make it fun and experiential for them on top of the great rewards that they're getting.”

Pros, in comparison, are already visiting Lowe’s daily or weekly to purchase their supplies. As a result, MyLowe’s Pro Rewards puts an emphasis on features that save time, like jobsite delivery, or save money, like bulk volume discounts.

“The pro customer over indexes on convenience, and they really want more value out of their rewards,” Bailey said. “They have a lot of choices, and we want them choosing us.”

Loyalty lives at the center of CX

Loyalty programs can go beyond encouraging purchases and become a direct line between retailer and customer. Lowe’s builds on this connection to help the brand power its broader relationship-building efforts. 

“The loyalty program, for us, is about the whole experience,” Bailey said. “Getting that direct relationship with them, getting to know more about them so that when they shop with us, it feels more tailored to them and more relevant to them.”

Lowe’s loyalty program lets the retailer know that a homeowner likes to garden and a professional works as a plumber and tailors their experience accordingly, according to Bailey.

The MyLowe’s Home platform offers loyalty members access to manuals and warranties and helps customers shop for compatible replacements or parts, all based on their past purchases.

“It's not just a marketing program or a transactional rewards program,” Bailey said. “It's a way that we build relevancy and stickiness with customers that go well beyond the time of transaction.

A growing number of brands are using AI to improve customer experience with loyalty programs and streamlined operations.

These brands are using the technology to offer more personalized experiences and automate highly repetitive, manual processes. 

The technology is a game-changer, particularly for customer analytics. Loyalty program leaders have been able to segment customer data for years, allowing them to target offers to specific groups, said Patricia Camden, EY Americas loyalty leader. “But with those segments, you're still just talking to a broad, generalized group that you've put into a bucket.”

AI, on the other hand, takes it a step further. The technology enables brands to target offers to specific individuals by helping them understand “what each human values” instead of “pushing the same reward to everyone” or those within a particular segment, Camden said.

AI also allows loyalty programs to actively shape consumer behavior and habits while deepening a brand’s relationship with a customer, Camden said.

“It really allows the brand to tailor the rewards, messaging, offers and experiences to individual preferences and behaviors in real time,” Camden said. “That's probably the most powerful thing about AI and how it can improve loyalty.”

A fast casual restaurant, for example, could send a customer unique offers for new items to help “unlock a secret reward” designed for that customer or provide them additional points for their loyalty, Camden said.

“It’s really loyalty gamified but in a way that feels personal, not gimmicky,” Camden said.

Those changes have the potential to disrupt existing customer relationships and establish new ones.

“Loyalty will become less about what a brand wants to push and more about how consumers want to engage,” Camden said. “AI is going to completely rewire the role loyalty plays in the customer experience.”

Making loyalty programs more efficient

AI can help loyalty program leaders stretch their limited resources by helping create content for hyperpersonalized offers and optimizing campaign spend.

“It really saves marketing teams time and budget,” Camden said.

Instead of assigning staff such tasks as exchanging and reconciling transactions between program partners or providing individual customer preferences to hotels and retailers, AI can manage such tedious tasks, said Brendan Boerbaitz, senior manager at Deloitte Consulting.

AI can also improve predictive analytics. One EY client, for example, uses its loyalty program to ensure that customers renew their relationship with the brand each year and now uses AI to identify and target offers to customers who are likely to churn, Camden said. 

More and more loyalty programs are using AI for fraud detection, too. Unlike humans, AI can quickly “connect dots at scale” to ensure points and benefits are issued correctly, said John Pedini, principal analyst at Forrester.

“It can help flag unusual patterns before they become expensive problems,” Camden said.

Developing strong use cases

However, before integrating AI into their customer loyalty programs, brands must “develop use cases that provide clear and measurable value,” including personalization, segmentation, variant testing and low- or no-code campaign development, Pedini said.

It’s best to focus on applications of AI that take an existing process and make it better, more efficient or cheaper, Pedini said.

Starbucks, for instance, uses its proprietary AI platform dubbed Deep Brew “to drive automation, operational efficiency and loyalty engagement by identifying and incentivizing specific members with personalized offers and rewards,” Pedini said.

But not all use cases need AI. Forcing AI on business problems that could be solved via more conventional, lower-cost solutions is a “big pitfall,” Boerbaitz said.

When deciding whether to implement AI, Boerbaitz urges brands to consider the following questions:

• If AI were stripped from the document, would it be clear what problem is being solved?
• Do I truly understand the specifics of the problem we’re solving down to the level of the user?
• Is this problem underserved by other tools and techniques?

Data, cross-department collaboration are vital to success

AI adoption is a “team sport” that requires cooperation to avoid redundant work and conflicting initiatives, and build data sets, tools and models for multiple applications, Boerbaitz said.

“It takes engineering, architecture, strategy, change management, data and loyalty teams all coming together to make AI programs in loyalty successful,” Boerbaitz said.

It’s also important not to rush the process. 

Brands should avoid launching an AI model too soon because the technology depends on high-quality data to deliver on its promises. Launching a model with outdated or incomplete data could lower accuracy and create “more issues than it solves,” Pedini said.

“The worst thing you can do is have incomplete data sets,” Camden said. “If the AI makes assumptions based on what it knows, you can end up sending something that is not appropriate or not what the client expects to see.”

That can take away the “emotional element” of loyalty programs, Camden said.

“If a brand lets AI take the wheel without real human guardrails, the customer experience could start to feel impersonal, off base and overcurated,” Camden said. 

Loyalty program managers should ensure their data is comprehensive, including all channels and touch points, and properly labeled, Pedini said. Sound data governance of policies, standards and procedures is also vital to ensuring privacy, preventing bias and complying with regulations, Pedini said.

It’s also essential for humans to be involved in loyalty programs because first-party data can help businesses improve their product strategy, brand positioning and service design.

However, that won’t happen “if the machines take over,” Camden said. “AI should not be used to replace our thinking.”

With 30,000 restaurants globally, KFC has access to a massive amount of customer data. The challenge is coming up with a customer listening plan that can tap into worldwide trends while digging into individual markets as necessary. 

The foundation of a great customer listening program is data collection and storage, according to Rob Swain, COO at KFC. The restaurant chain is dealing with extremely large datasets, but it turned to Qualtrics' software to extract the full value of its customer insights.

“Once you've done the work around how we're going to house the data, where we're going to get it from, how we're going to do that listening, the beautiful advantage is when you do have the data, it opens up so many possibilities about what you want to do with it,” Swain told CX Dive at the Qualtrics X4 conference in Salt Lake City in March.

KFC’s experience management program, KFC Listens, aims to encourage buy-in from every relevant team member, whether leadership or restaurant management. 

With a careful approach, KFC has been able to keep its teams from chasing scores over outcomes and ensuring customers have a great experience even on their first trip — before the restaurant has any personal details about them.

The program is designed to collect data from a range of sources and to disseminate the findings to an equally diverse set of business teams via the KFC Listens portal. The goal is a unified source of truth that is as useful for pinpointing how menu items are performing on a local basis as it is for tracking macro customer trends.

Communication at scale

Identifying potential customer pain points isn’t difficult, according to Swain. The real work is coordinating across the company to solve any issues.

“Conversations are much more about the solution than identifying the problem,” Swain said. “Identifying the challenge actually is now the relatively straightforward part. The interesting thing is, how quickly can you work cross functionally against these challenges?”

Even though KFC is collecting data from thousands of restaurants around the world, it all comes together as a single point of truth. Marketing, CX and supply chain teams might all sit in the same meeting and look at the same data, with the value coming from each team looking at shared facts from a different perspective.

“We launched a new menu item, and we thought there might be some changes required from a customer point of view,” Swain said. “All of those teams might sit in the room and think about, ‘What do we want to do differently?’” 

The process of creating this unity starts from the top down, according to Swain. 

KFC Listens was launched with buy-in from the global leadership team, and the company recommended that its business units not include data from the program in operational performance reports for the first year. 

The goal for that launch window was to focus on implementation, according to Swain. KFC worked with Qualtrics to understand how users were accessing the customer listening tools on a daily, weekly and monthly basis as leadership worked to drive adoption.

“That was really the rallying cry in the short term,” Swain said.

How to avoid chasing scores

While data can help companies elevate CX to the next level, it can also make the numbers, rather than the outcomes, seem like the goal.

Over the years, quick-service restaurant data collection has evolved from individual mystery customers to numerical feedback and open-ended surveys, which has helped companies collect better information, according to Swain. The introduction of new channels, like digital ordering, expands the available dataset even further.

However, as metrics proliferate, leaders need to be careful that they don’t lose sight of what really matters.

“I think the challenge of that is, in QSR broadly, restaurant teams are very focused,” Swain said. “We've got scorecards and performance metrics. So I think what can happen is people start to chase a score. They're consistently going, ‘But how do I beat the score?’”

A great score doesn’t necessarily match how a restaurant is doing in reality, according to Swain. As KFC developed its customer listening program, the restaurant chains discovered that there was a disconnect between what its survey tools found and what some of the other data points said.

Teams can connect the dots between the metrics and the bottom line by studying the link between their key performance indicators and business performance. Putting the end result first, then tying that back to the metric, can help avoid putting scores on a pedestal. 

“You've got to have a link to financial outcomes,” Swain said. “Fundamentally, whether it's a franchise business model or the restaurants we own and operate, of course we want to be an organization that is rooted in service and experience and taste at the same time. We want that to deliver better financial outcomes.” 

Nailing that first experience

Companies with an established link between their metrics and customer outcomes are in a good position to use their data to perfect what may be the most important interaction — a customer’s first experience with the brand.

In the early stages of KFC’s Qualtrics software rollout, the company studied one of its pilot markets with a large data set and confirmed that customers who had a good first experience spent more money and came back more often, according to Swain.

Getting the first experience right can be tricky because it calls on leaders to understand the needs of customers who haven’t shared any information yet. 

By examining customer data points from support centers, marketing and more, KFC came to the conclusion that the most important element of its brand experience is taste, according to Swain. If the company could ensure customers consistently liked their food on their first visit, financial benefits would follow.

However, identifying the key aspect of the experience and executing on that aspect are two different challenges. KFC’s next step was to strategize across the company on how it could deliver — and its strategy encompassed everything from equipment to training processes to restaurant operations.

Piecing together every element to make first experiences great requires collaboration from leadership through frontline staff, regardless of the brand’s most important element, Swain said.

“When you can harness the collective power above the store leaders on, for example, systemic challenges, execution, delighting guests in the Facebook review, how we advertise and what our market is, and then you add the power of our restaurant teams, I think that's when you get the real magic,” Swain said.

Cigna announced in February that it would tie high-level executive compensation to net promoter scores as part of a larger strategy to improve customer experience. The measurement will affect the C-suite as well as bonuses for thousands of other executives.

Cigna is in good company. Half of CX leaders say their firms pay employees for hitting NPS targets, according to Forrester research. 

Companies commonly view a connection between compensation and net promoter scores as a way to ensure executives take customer experience mandates seriously. However, experts question whether tying a CX metric to pay is the right way to make experience central to a company’s culture.

“I think that's a fundamentally flawed idea that will destroy the business in 95% of the cases — unless it's only senior executives and it's tied to relative performance,” Fred Reichheld, Bain & Company fellow and the creator of NPS, told CX Dive.

The net promoter score is based around one question: How likely is it that you would recommend a company, service or product to a friend or colleague? Companies ask respondents to rate their response on a scale ranging from zero, for not at all likely, to 10, for extremely likely. The final score is calculated by subtracting the percentage of detractors — those who respond with a six or less — from the percentage of promoters — those who respond with a nine or 10.

NPS is designed to be part of a learning system focused on improving customer outcomes, according to Maureen Burns, partner at Bain & Co. Putting the focus on compensation at the expense of creating a culture around learning and improvement can limit the metric’s potential.

Companies that want to make NPS part of their compensation should take a cautious approach, experts said. Tying up a customer satisfaction metric with monetary incentives runs the risk of warping how the business handles customer insights and can even influence how customers respond to surveys.

How impacting compensation can affect objectivity

Perhaps the biggest potential pitfall of tying a metric like NPS is that it can alter how the people measuring the number approach their duties. When NPS is tied to compensation, the metric often becomes warped, according to Mark Lipton, professor emeritus of management at The New School and Parsons School of Design. 

“Whenever something is going to impact my compensation, my odds of a promotion or my very stability in keeping my job here, I am going to be driven to see how I can influence those numbers,” Lipton told CX Dive.

If people are being punished or rewarded based on NPS, they’ll find ways to make the score look good, especially if it affects their paycheck, according to Lipton. 

“I'm not indicting the folks who do that,” Lipton said. “It's just what we do in our organizations. We manage to the metrics.”

Senior leadership isn’t immune to this phenomenon. No one likes being criticized, whether directly or through the implication that the business they run has a significant problem.

The way to overcome this problem is to create a culture of learning and improvement around NPS, according to Burns. The process starts at the top and works its way down and is essential for getting the most out of the metric regardless of whether it’s linked to compensation.

However, even an objective approach has its limitations. Executives can’t really say they’re doing a good job based on NPS in a vacuum, according to Reichheld. What really matters is how the score is changing relative to competition. 

“If I'm Delta Air Lines, I want to look at how America and United are doing on net promoter. I’ve measured apples to apples,” Reichheld said. “When you go to that level of precision, it's brilliant.”

The downsides of tying employment to NPS

Even when connecting NPS and compensation makes sense for top executives, the practice shouldn’t trickle down to the rest of the company, according to Reichheld.

“It's usually well intentioned, but it's just a horrible idea because your team starts caring more about their score,” Reichheld said. “That drives their bonuses or their continued employability, and so you get begging and pleading for scores.”

The effect becomes more pronounced as it reaches frontline employees. No one wants to get their Uber driver fired just because they were a little late, which means they’ll give a top score even if their ride wasn’t actually perfect, according to Reichheld.

“You would think that's a promoter at five stars, but it's not,” Reichheld said. “It just means no fireable offense, and when you get that kind of grade inflation you weaken real feedback. It's just a big waste of activity if it only captures the criminals and the real underperformers.”

While NPS shouldn’t be tied to employability for frontline workers, it still holds value for these employees as a learning tool, according to Burns. Negative feedback in particular can be very valuable, which makes it important that surveys are conducted with objectivity.

“The system can lose its power if it becomes gamed,” Burns told CX Dive. “You want people to welcome the feedback and to say, ‘You know, every once in a while, I'm gonna get a bad score, but I'm gonna learn from it and get better.’”

Just over one year into Tony Roach’s tenure as head of customer experience at Southwest, his priority remains the same: “We're still at the trust game,” Roach said.

The goal, however, has changed.

The carrier wants to make fundamental changes to the way it does business without eroding the customer-friendly image that differentiates the Southwest brand.

Two pillars of its unique approach have fallen by the wayside. The airline eliminated open seating in favor of assigned seats last year, citing customer preference, and ended its marquee “bags fly free” policy in March.

But Southwest also added the option of more leg room and expanded some loyalty membership benefits while rolling back others. 

Amid the rapid changes, Roach faces a challenge akin to walking a tight rope: keeping loyalty among longtime customers while enticing a new cohort.

Trust remains front of mind as new business realities and pressure to increase profit alter what Southwest offers customers.

“It may be more important now because at the end of day, it's a matter of our people — are they going to trust that we're just the Southwest that they've always enjoyed with a better experience?” Roach told CX Dive in an interview. To compound the challenge, the airline is simultaneously working to gain the trust of a new group of customers who weren't previously in the picture, Roach added.

CX Dive spoke to Roach in January — ahead of last week’s changes and prior to his promotion from chief customer officer and SVP to EVP of customer and brand. He now leads customer research, customer experience, digital, product and loyalty, marketing, corporate communication, customer care, and culture and inclusion.

Profit pressure

Activist investor Elliott Investment Management has been pressuring Southwest to increase profits for months. 

Last year, the hedge fund, led by Paul Singer, announced it had amassed an 11% stake in the company and began to wield its influence to demand changes — it even tried to oust CEO Bob Jordan. Disappointed with Southwest's earnings results, Elliott launched a pressure campaign.

In fiscal year 2024, Southwest’s operating revenue grew 5.3% year over year to $27.5 billion, while its net income from non-operating expenses remained flat, according to a fourth quarter 2024 earnings report. But its stock has fallen since 2021.

In the long arc, Southwest has been profitable while leading the industry in customer experience, according to Jon Picoult, founder and principal of Watermark Consulting. It reported 47 straight years of profitability until the pandemic and turned a profit in 51 out of 52 years.

“There's no other airline that has any kind of track record that comes close to that,” Picoult said. “I'm not denying that they are in a rough patch right now. Sometimes companies that are customer experience legends, they encounter rough patches.”

In September, the airline rolled out “Southwest. Even Better,” which promised to revolutionize customer experience to boost profits, a move experts said was meant to appease Elliott. In October, the airline came to an agreement with Elliott for Jordan to remain at the helm. At the time, five Elliott-nominated individuals were appointed to the board.

Then, last week, Southwest announced a spate of changes: It eliminated its bags-fly-free policy for most customers, set an expiration date to flight credits, changed the number of Rapid Rewards points customers earn on flights, introduced variable pricing to redemptions, and will now charge change fees for basic fares. 

While some of these shifts in policy are the industry standard, they fly in the face of the airline’s brand.

“It seems clear to me that this is all driven by Elliott,” said Ben Mutzabaugh, managing editor of The Points Guy.

In addition, the airline had its first major layoffs in the company’s 53 years in February.

“It definitely feels as though Southwest is trying everything that they've sort of never had on the table before in an effort to generate more revenue,” said Katy Nastro, a travel expert at Going.

Eliminating its marquee free bag policy for most customers is the clearest example, she said. Previously, at a September 2024 investor day presentation, the airline had said that it would not touch its bag policy.

The airline had always looked at its bags-fly-free policy as a loyalty discussion, Southwest’s Roach said prior to the airline rolling back the policy.

“It's about if giving you two bags brings you back, does it make you choose us over people who will charge you for those same two bags?” Roach said. “And as long as we feel like the loyalty outweighs the revenue we would get from the fees, it's in our best interest to go after the loyalty.”

But at a JP Morgan Industrials Conference last week, Southwest changed its tune. The free baggage perk had cut into profits, Jordan said.

“And on the revenue front, over many years, we also fell behind in revenue generation as our peers introduced a host of things that we did not pursue at Southwest, like bag fees, basic economy, assigned and premium seating monetization, dynamic pricing, redemptions and much more. The cost increases, combined with not pursuing these key revenue opportunities resulted in margin contraction at Southwest compared with our better-performing peers,” he said.

Bag fees generate billions in profit for airlines, according to the Department of Transportation. American Airlines, for example, made $1.36 billion in bag fees in 2023 to Southwest’s $73 million.

But activist investors often do more damage than good by focusing on the short term, said Fred Reichheld, a fellow at Bain & Co. and the creator of the net promoter score. The problem, he said, is that Southwest doesn't “have the evidence that they're making progress with a rigorous enough case, a database case, to sort of stave off the short-termers.”

While charging for bags may generate short-term profit, experts are skeptical whether the move will serve Southwest in the long haul.

“Come the third quarter, does this really make a difference profit wise, or is this going to be the worst gamble that they've ever taken?” Nastro said.

What do customers want?

In July, when Southwest announced it was saying goodbye to open seating after more than 50 years, Jordan said the change stemmed from customer preference. Among potential customers, 86% preferred assigned seats, Jordan said on a July earnings call. Notably, 80% of current Southwest customers said they prefer assigned seats.

“Further, when a customer defects from Southwest to one of our competitors, our open seating policy is cited as the No. 1 reason why," Jordan said. “The answer is clear: There is more demand for Southwest Airlines with an assigned seating model.”

Roach’s teams conducted months of research to look at different seating methods, cabin layouts and consumer preferences writ large.

“That robust research turns into a business case turns into, ‘Alright, we're going to go transform,’” Roach said. The company’s new plan, “Southwest. Even Better,” is “about delivering experiences that customers want in 2025 that we're evolving to.”

Roach has also worked on how the airline handles customers who face travel disruptions.

“You expect that when you travel, something could happen,” Roach said. “What puts fuel on the fire, though, is when the airline just really botches how they handle that.”

Southwest has invested in technology to provide flyers real-time communication about their flights. It has upgraded its app and mobile channels to make it easier for customers to change or update their trip and for employees to remediate disruptions.

“What customers want at the time of need and despair, they want options,” Roach said. “They want context of what's going on. They want options on how to fix it. And they want to know that you care.”

The airline’s net promoter scores are all up year over year. It’s not just by Southwest’s metrics, either. The airline ranked No. 1 in J.D. Power’s customer satisfaction research in 2024.

The biggest change — and what Roach is most proud of — impacted customers who had their trips disrupted: Among those customers, Southwest customer satisfaction score improved by 34% year over year, Roach said.

But the changes made last week — including the elimination of two free checked bags — were met with uproar from loyal Southwest customers.

None of those changes are consumer-friendly, experts told CX Dive.

A Southwest email to customers announcing the shifts in policy acknowledged potential customer dismay.

“We recognize these changes may be a disappointment to some,” Jordan said in the email.

"We have heard and acknowledge the disappointment felt by some of our customers. There is a difference between what you are known for and what people value. We have been known for open seating and Bags Fly Free, but research shows that flexibility, value, and great service are what drive a customer to fly with us," Roach said in a follow-up email to CX Dive.

Jordan addressed the company’s reversal on bag fees at the JP Morgan conference. The airline has expanded how customers can buy Southwest flights — as of February, they can now book on Expedia — and customers on those channels don’t always care about free checked bags, he said.

“In contrast to our previous analysis, actual customer booking behavior through our new booking channels, such as metasearch did not show that we are getting the same benefit from our bundled offering with free bags, which has led us to update the assumptions,” Jordan said. “It's also important to note that while all of these initiatives are new to Southwest, they are not new to the industry. That adds additional confidence in the ability to execute as planned and in achieving the financial targets that are laid out.”

Roach concurred with that. Asked if there's any data that shows that Southwest customers were not coming to the brand for the two bags flying for free, Roach said the issue was it wasn't bringing new customers in.

"It’s the inverse of that, actually — we weren’t getting additional customers by offering two free checked bags. Our consumer research shifted as we entered new-to-us booking channels like Expedia and added distribution through meta-searches like Kayak, Skyscanner, and Google Flights. We weren’t getting additional value or customer share by offering a bundled product that included free checked bags, which led us to update our previous assumptions."

Keeping loyalty amid rapid change

Southwest has enjoyed unusual brand loyalty as a folksy, light-hearted airline. But as the company evolves, the challenge is to keep longtime customers while driving new customers to the brand.

“It’s going to be a tough nut for them to crack because in addition to backtracking on all of the things they backtracked with, the loyalty program itself has been diluted,” said Mutzabaugh. “If people feel any kind of disassociation with a brand over some of the policy changes, all of that makes the loyalty less sticky.”

Brand perception is at risk, too.

“Southwest has traditionally always been sort of marching to the beat of their own drummer,” Nastro said.

Bags-fly-free and open seating were marquee features of the airline. Without them, a Southwest fare starts to look like any other airline fare, Nastro said.

Customers primarily make flight decisions on price and convenience, so Southwest will be able to attract new customers, experts said. But it's always easier to keep loyal customers than to constantly be on the lookout to acquire new ones.

But Roach said open seating doesn’t make or break the brand.

“There's a difference between what you're known for and ultimately what people really value in what you provide,” he said. “But in the research, what people ultimately care about from us is the flexibility, the great service we provide. The value provided in changing your seating model doesn't necessarily prevent you from all of a sudden not being able to provide value, flexibility, transparency, all those types of things.”

The brand is adding more flexibility and offering more premium experiences, including the option for 5 inches of extra legroom — a desire seen among both potential customers and Southwest’s most loyal customers, Roach said.

It will also offer highest-tiered loyalty members free extra legroom, and Rapid Rewards A-list preferred members and customers on business select fares will be able to check two bags for free. Rapid Rewards credit card members will be credited one checked bag.

Southwest has expanded its loyalty program through a partnership with Icelandair, allowing customers to book international trips with points, too. And in January, the airline freed customers to use a combination of cash and points.

“Using currency for us is a good thing,” Roach said. “So giving people who may not have enough points to redeem for a full ticket the option for cash and points basically says, ‘Hey, even if you only have a lower amount of points, those are still valuable because you can put those to use now, just like the other folks that have more points in their account.’”

The goal, Roach said, is to make the program and points more valuable to customers.

“We want you to use them, and so making these things available is our way to do that,” Roach said.

Loyalty programs — and cobranded credit cards — are big business in the airline industry. Delta Air Lines, for example, brought in $8.4 billion in deferred revenue through its Sky Miles loyalty program in 2023.

A rewarding loyalty program also encourages a customer to fly more with that airline, Roach said.

“There's no question that when people become a member of the program, we see more loyalty, we see more flying behaviors from them, we see more engagement in the brand,” Roach said.

But some of the changes have experts like Nastro wondering just who is getting prioritized and pushed into the loyalty program.

“They're sort of caught in between the loyalty of these loyalists that choose to chase elite status and … these loyalists that aren't necessarily elites, but they choose to fly with Southwest because they're able to save on things like checked bags, and maybe they only fly once or twice a year, but they choose to do so with Southwest,” Nastro said. “Unfortunately, it appears that they're prioritizing the loyalists that are spending more.”