QUESTION: Are FF programs designed to benefit airlines, customers, or both?



If customers, why are there so many complaints by customers and why do we, the customers, sense so much indifference from the airline employees who have close customer contact?



If airlines, why are we, the customers,not content to accept the benefits or bonuses the programs give us and see them as just that and not as honors and our rightful due?



I hope these questions will begin a thoughful exchange on this board which will do two things: help everyone to better understand the programs and thus the airline objective and, second, help the airlines who may or may not read these boards understand us, the customers. Not that it may do much good or result in much improvement but hope does spring eternal in the heart of a FF customer.



For what it is worth, I will give my view later, after others have exchanged theirs.

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nathan detroit

Think this is an excellent idea for a topic!
I will add my thoughts in the next few days when time allows.
Thanks for the idea...

Ultimately, the programs are to benefit the airline by filling more of the seats more of the time. If tomorrow, some bright accountant produced some figures that showed they'd make more money with some other marketing scheme, the FF programs would vanish like the Dodo bird. These figures would have to include the costs of the inevitable lawsuits and loss of goodwill for canceling.

Within the context of making more money for the airlines, the programs are for the customers. By rewarding customer loyalty with free tickets and perks the airline keeps the seats full. It is a case of what�s good for the customer is good for the airline. However, only so much customer loyalty and happiness is deemed worth their effort. They don�t need to care if you grumble, only if you get annoyed enough to change airlines.

The Internet and venues like FT are good for the pax. Communication between pax is now much better and the airlines must worry much more about whether I grumble loud enough to convince someone else to change airlines or not switch to the airline in question. Also, we can compare notes and look for patterns. An isolated incident might get brushed aside; a complaint that is endemic to an airline can be recognized and dealt with.

Some folk grumble because they don�t understand the basic economics of the situation and that the programs are ultimately to make more money. Most of the people here understand, but feel cheated if the airlines don�t follow their own rules. At the most basic, if person A agrees to give company B some money for a service, B must then deliver the service as stated.

We buy our airline tickets with an understanding that part of what we�re paying for is the stated benefits of the FF program. This may include giving up cheaper tickets or timelier routing on another carrier. The airline offered the FF program to get our money; we agree and give them the money. The airline must now hold up their end of the bargain.


[This message has been edited by QuantumLeap (edited 07-27-1999).]

nathan - its easy to see where you are coming from, since in both scenarios you list the customer seem to end up with some kind of raw deal (as you state it).

pgupta: quite the contrary; there is no bias in my phrasing. Note my words "thoughtful exchange...." Let's see what others have to say. It is difficult, if not impossible, to correct a heresy which is a truth that has been bent without knowing the truth. My question is made to draw out the truth from those who know it a priori better than most others, through their experiences as customers, good or bad, up or down, nothing more, nothing less. It is not made to provoke any kind of argument. Perhaps they, the airlines, expect too much, perhaps too little; perhaps we, the customers, expect the same. We'll see.



Quantumleap: go to the head of the class. You are very close to the metaphysical truth.

[This message has been edited by nathan detroit (edited 07-27-1999).]

I think we both benefit (i.e customers and airlines) but probably the airlines benefit more since most customers are not as passionate about their miles as the Flyer Talk group. Many of us get lots of value out of our frequent flying and are trying to stay ahead of the airlines!

On the other hand, I know several people that just have a few miles here and there and others who travel lots but don't care if miles are posted etc etc. That means more opportunities for those of us who are well-informed and well-prepared.

The airlines get our loyalty and for the extra cost hidden in our tickets, we get a "kickback". Essentially the customers are the ones who pay to be loyal to an airline or alliance.

If you work it right, you can capitalize on the situation, pay reduced fares, earn lots of miles by travelling frequently and getting bonuses etc. In the end you could earn business class or first class reward tickets that cost less (ie. fares paid to actually earn the miles) than they would if you had to buy the business or first class tickets. It's like getting two for the price of one.

A lot of people cash in their points on economy seats that probably should have been bought at a discount so they would have earned status or other miles. I (and many others on this board) have come to appreciate that economy reward tickets are not the way to get the best value out of the system.

So for the few of us that maximize our benefits I say cheers--keep the info coming. I'm happy and the airlines seem to be stuck in something they don't want to or can't get out of

Essentially, frequent flyer programs are discounts on future flights that only frequent travelers can take advantage. Instead of lowering prices for everyone, they have developed an 8%(assuming 1 in 12 is free) discount/reward that only their best customers can take use.

I think the true intention is to provide the members with free tickets for seats that otherwise would go empty. So, to me, the programs are designed for the airlines, but benefit the members.

ALL airline, and for that matter hotel, car rental, etc, frequent customer programs are designed to follow 3 very simple rules.

Rule 1: MAKE MORE MONEY.
Rule 2: See Rule 1.
Rule 3: See Rule 1.

They are in Business to Make Money, everything they do is for that purpose.

Of course, giving good customer service and free trips to good customers cost them money, the do it because, ultimately(or at they think so) it make them even more money.
If the customer wins also, thats a plus. If the customer loses in the deal, well as long as they remain a customer, then thats ok also.

Continental Airlines doesn't fly me all over the place, and give me upgrades to first class on discount fares, and tons of bonus ff miles because Gordon Bethune is a nice guy( I'm sure he is) or because they like. They do because they MAKE MONEY doing it. The fact that I get a good deal is part of the equation, but only in that if I'm happy I tend to fly them more, thus they MAKE MORE MONEY.

Of course the programs are run to benefit the airlines. The folks who run them should be fired if they have any other priority. (Yes, airlines should help social causes, but frequent flyers aren't one no matter how strongly we feel we should be.)

That said, airlines are in a competitive business and they know it. Customers will choose Airline X over Y only if they perceive that X offers them additional benefits. So, the programs can only achieve their marketing objectives (keep big spenders loyal) if they offer something perceived as benefits by customers. This isn't their objective, but it follows inevitably from their objective.

The trick, from the airlines' point of view, is to figure out how to maximize perceived benefit at minimum cost. This includes things like early boarding (free), award seats that would have been empty (nearly free), upgrades when a first-class seat would have been empty otherwise (nearly free, though expanding first-class cabins to meet increased demand costs money), luggage tags (nearly free), special phone numbers (free; the call would eventually have to be taken anyhow) and so on. Some benefits cost money (extra-mileage awards for a seat the airline could have sold) but airlines are pretty good at keeping a lid on these.

The trick, from our point of view, is to look at the mix of "benefits" and pick those that benefit _us_ the most. I've gotten a midweek BOS-SFO round trip for 25000 miles which otherwise would have cost US$2000+, and a round trip BOS-LHR upgrade from cheap coach for 50000 miles which otherwise would have meant a $4000+ fare difference. Both of these work out to award "value" of over 8 cents per mile. People with different travel patterns and preferences might make other choices. (I've also given award tickets to my kids and step-kids. Their financial value may have been a lot less than these two examples, but their emotional value was incalculable. Our then-12-year-old was in heaven for months after a Virgin Upper Class trip to visit family in London!)

FlyerTalk forums are excellent ways to get information that helps maximize the benefits. Thanks to InsideFlyer for providing them, and to all the loyal participants for sharing their tips!

Of course the programas benefit the airlines. They are in teh business of making money as Boomer pointed out. And getting people to remain loyal to ONE airline, they make their money.

But the airliens have to keep the customers to make money. Thus: upgrades, bonueses, customer service, etc. SO it's up to us to make the most of the programs so we can win a few...

I think the bottom line for the airlines is... the bottom line. They would not allow a concept as large as frequent flier programs to continue if they didn't see some profit out of it. But additionally, I think most fliers do not take full advantage of the programs, and therefore, they lose out to some degree.

Of course, I don't include myself in that category. Before I reached Premiere status with United, I never flew in Business or First. Once I did hit Premiere 6 years ago, I was able to upgrade on about half of my flights, usually at no cost to me. Did I have to buy more airline tickets for the status? Nope, I simply concentrated my business and personal flying on United and soon made Premiere Executive for 2 years. Then the miles really started to pile up. The only time I recall taking an extra flight was at the end of one year when I flew from LAX to San Diego for Christmas (instead of the 2-1/2 drive) just to make sure I requalified for Premiere Executive. The cost: about $75 as I recall. I don't need to explain the benefits accrued the following year for that relatively small fee.

On the other hand, my family looks at the free trips and upgrades I earn (some of which have been shared with them) and takes a superficial approach to duplicating my success. It doesn't work, and they don't quite understand why. First, they don't fly often, so qualifying for an elevated status is almost out of the question. But even when they do fly, they take a scattered approach to bolstering their miles.

So, my parents and siblings each fly once or twice a year, but all have at least two FF accounts. The whole family went to Paris last month, and bought 6 tickets on United, despite the fact that not one of them had a Mileage Plus account (though they all signed up for one). The reason: United had the lowest fare. This is a good reason to be selective, but American (where they already had accounts) had a fare that was only about $50 a ticket more than United's. Plus, American had a 10,000-mile bonus for departures from LAX! I know the math, but they didn't think it through.

Fortunately, I was able to talk sense into my parents when they booked their upcoming San Diego-Boston trip. Least expensive fares were averaging $650 -- pretty high for coast-to-coast -- and they were all set to purchase the tickets so they could earn the miles. I had to remind them that they had 6000 American miles expiring this year, and this was exactly the time they should cash in the 50,000 miles for two free tickets!

I think the airlines count on the fact that a majority of their members cannot or chose not to take a long view of the programs, and fail to fully maximize the benefits.

I think you all have nailed it:
As Econ 101 taught us (when we weren't asleep in the back row - or was that just me), firms are profit maximizing. All behavior in a rational environment must be traceable back to profit. Of course, the programs were designed as a win-win. Why not throw our best customers a couple of bones -- make them happy and feel special, while engraining loyalty? Air travel in the broad sense is largely commoditized. Any airline can get you from point A to point B. It is only smart for them to do everything they can to encourage people to prefer their airline consistently. It is very simple - it is in their best interest to make it seem like FF programs are to our benefit. But when push comes to shove, the bottom line is the motivating factor. In many cases, making customers happy has positive profit impact. It is just when those two interests conflict that we have problems...

Many many interesting ideas and good reading in the preceding posts. IMHO, (1)any program designed by a seller....mostly benefits the seller, and (2)any program designed by a buyer....mostly benefits the buyer. I think this summarizes almost all the above in one sentence.

Captain B and Misternice: join Quantumleap at the front of the class. We are now approaching the point of metaphysical certainty.



Next question for consideration:



why do a few customers feel that they deserve more and complain when they don't get more when airlines and probably hotels, too, really are generous, almost to a point of excess, for elite ff's. For example: I can easily qualify for PremEx and Plat, the ones I know, for no more than $2,500 in fares paid and for this I get....well, you all know the benefits. Isn't that generous, even very generous?

I'm sorry, but I'm losing you here on this next question. It seems that most FF, like me, complain only about not getting what they are entitled to according to the rules that are established by and applied at the discretion of the specific carriers.

I'm sure that most FF, unlike you, don't get to PremEx at $2,500. in tickets- maybe just Premier, with planning? And the Plat? And most importantly, what is it you are driving at? Do you think the airline/hotel companies are too kind to their regular customers by being too generous? Perhaps at times for some, but they would be just about right as long as they just consistently delivered on what they promise!