Pizzaman

So, I was reading this thread....http://www.flyertalk.com/forum/showthread.php?t=593589

and the thought came to mind that as the FF programs have evolved, there seem to be *less* reasons to expire miles then before. To wit:

1. Perception: There's no way a customer can see it as a plus to have less time to use their miles.

2. Cost: While I know FF miles represent a significant liability on the books, I would assert that it also costs them money to remove the liability. :isclaimer:: I don't claim to be an expert on this subject. However, if the government has established enough "value" in miles/points that some programs charge a fee to offset taxes for transfers, it would seem that when an airline expires miles, the government would consider this similar to voiding a gift certificate. In these instances, the states usually require that revenues be disgorged to the states as unclaimed funds.

I'm not 100% sure my logic on #2 is correct. Nor do I think there's any chance the airlines would see it this way. I guess I just don't see the value in encouraging people to burn or lose. Since airlines are much more likely to raise the "price" of an award than lower it, letting them sit on the books would seem to increase the likelihood they don't get redeemed.

So, why eliminate something a customer earned but might not use when the act of taking back what they've earned might cause them to go elsewhere?

Sunnyhere

If all airlines have expiring miles, they all win. If one airline cheats, that airline wins at the expense of the others.

Kiwi Flyer

Maybe someone having earned miles years ago from credit card or other spend isnt really a valuable customer for the airline? It costs money to have active memberships where the members are no longer (or never were) customers - eg save on material mailed/emailed, cards, etc.

Plus of course the airline/FFP benefits from the reduced liability. Both directly and also indirectly (if mileage balances are lower then less pressure for the airline to reserve lots of award seats, thus they can sell more revenue seats).

Bobster

The program mileage expiration dates encourage people to fly frequently. That's why it's called a frequent flyer program.

uva185

Except that any mileage activity counts. I guess either way you earn miles the airline is making money, but it would make more sense IMO if you did have to fly to keep your miles from expiring.

I see it like a frequent buyers card at a coffee shop, you buy 9 coffee's and the 10th is free. Most of those cards have a expiration date because it is meant to reward frequent shoppers.

Eastbay1K

Once upon a time, when computer storage was at a premium, I could see that there would be costs involved in maintaining accounts - these costs no longer exist (i.e., all communications with some programs, such as AS, are all by email). Between mail and storage costs, there were real costs. But each non/low-activity account must cost not much more than pennies a year to maintain. It has to be all about the liability on the books, and a relatively-quick way to show profits sooner rather than later.

StSebastian

There's a cost in giving out all of those miles and having them stored for possible redemption later. Part of it is the liability on the books, and part of it is expiring out as many of the miles as possible so that they're never used. If they get expired as never used, then that's free money to the airline for selling a product that's never consumed. It's a similar reason why expirations or fees are commonly put on gift cards (when allowed).

There's no reason to let them sit around forever, because then people could potentially collect a large amount of miles and then just wait until they needed to travel at any point in the future and use them at that time. By expiring inactive accounts after three years (or less) the airline removes the liability from their books (which helps the financials) but also forces those users to come back and purchase a ticket.

The airline's dream is someone that keeps coming back to them to buy tickets to get additional miles for their account but never manages to redeem them for a free ticket and somehow lets them expire.

Counsellor

Certainly. Basic games theory.

Of course, the same can be said for mileage granted by Frequent Flyer programs for flying. If they all disappeared, all the airlines would "win"; but if one airline began awarding miles again for flying, that airline would "win" at the expense of the others that didn't.

When AA started the first Frequent Flyer program, they were immediately followed by others -- in self-defense, more than anything else. This is also why a promotion by one airline is frequently picked up by competing airlines.

There is competition between the airlines and between their programs as well.

- Some of the competition (the "good" competition from the consumer's viewpoint) is to try to gain customers by adding value to the program for the consumer. You could call that the "race to the top". It's usually driven by marketers rather than accountants.

- The other type of competition (the "bad" competition from the consumer's viewpoint) is the race to "save" money by removing benefits -- through what the airlines always call "enhancements" because you can't expect them to be honest and call the changes "retrenchments" -- where the airline tries to see how much it can withdraw from the program without losing customers. You could call this the "race to the bottom". It's usually driven by accountants rather than marketers.

What we're seeing here is a race to the bottom. Usually in such case the customer loses, and frequently the airline loses as well, because they miscalculated just how much a customer would take before moving elsewhere. I suspect that will be the case here.

I could also go on about how the airline accountants have failed to factor into their equation the huge number of miles that are not awarded for flight-related activity, and how "expiring" those miles decreases their attractiveness, but that's a subject for a later post.

Globaliser

If an erstwhile customer doesn't travel on your airline - or on any of your partner airlines - for 3 years (to take the traditional period), and in addition cannot be bothered to do anything at all to keep their relationship with you alive (by adding a mile or two to the frequent flyer account), that customer is an extremely, extremely, extremely low-value low-importance customer. Almost every single one of them would never again choose your airline on the basis of the past customer relationship anyway.

Marathon Man

Hmmm,

While we are often guilty of playing into the very marketing that "gets us," it should be noted that the marketer is guilty of, well, "getting us!"

The crafty marketers entice us as consumers, playing on all the psychologies and teasers that we cannot fight to get us to sign up for this and that deal, this and that credit card, and this and that airline.

Miles are no exception, in my opinion. I think the reasons they expire in shorter time frames now has to do with the fact that the whole concept got more popular, it's currently really easy to get miles everywhere, and they need a way out because too many people have them now! Simply put, we got used to what they thought they GET US on, so they gotta GET US again!

They get us to sign up with a belief that we will GET something and actually get to USE IT, but unless you really can play along (like a good FTer should), it aint for you! To some people, what we do here in FT is totally unknown, unbelievable and they think we are nuts for even liking it. We chase the deal and then the expiry date like crazy monkeys let loose in a concert hall or something... they keep making us chase.

But some ads are down right totally unbelievable and sometimes comical, yet some of those strange offers out there actually WORK on an entire other sector of the public:

That's right Metal Heads and Motor Heads!
See:
Dio, Danzig, Dockin, Uriah Heap, Talus, Tesla, Motor Head and Anthrax!

Sunday
Sunday
Sunday
!!!!!!
Don't Miss David Hasselhof and the Amazing Kit Car from the TV show Night Rider administering a Vulcan Mind Meld to Captain Stubing of the Love Boat Live on Stage this weekend as Heather Locklier sucks a basket ball thru a garden hose!

The guys from the Ford team say the guys from the Chevy team are a bunch of pussies with no power!! See Skol Bandit Shelly Muldaney take her Monster Truck 40 feet into the air over 13 open roofed school busses with school children inside into a giant MUD PIT!!!!!! See Andre The Giant and Big Daddy Don Garlitz live on stage!! Wait til they see the power bill for this one!!!!!

Bring your Gideon's Bible and get in for
FREE!!!!!!!

(Note: from growing up hearing many radio and TV ads like the above funny, my friends and I used to sit and make these up and then receit them with the deap radio voices to get a laugh here or there I hope you enjoyed it).

FACT: people BUY this stuff or they sure seem to get excited over it! (just like MILES get us excitied!)

But some ads for things are down right criminal! (one type I hate is the rebate offer woven into a seemingly low price, because they actually have metrics on how it will always make the company money because they KNOW a certain percentage of people will fail to claim it or screw up when they try! AND, it got you to look and possibly even sign up, but actually spend more money than you originally thought. Genius, but disgusting!)

And, more on the side of tricky advertising, I saw one ad just the other day--while not an airline related thing--that made me want to vomit!

"Pay only $20.97!*" (I think that was the amount--it was something obscure like that) This bold text was on the bottom corner of a nicely designed poster with a picture of a guy working out at a very popular Boston area gym/sports club network. It is something you'd see in clubs and bars all over the city but this one was actually pasted above the Urinals at a popular high end restaurant of all places, and I was there for lunch last week with a business associate. Sadly, when you read the small print below it, this bold text was only PART of the initiation fee and then, of course, monthly dues and sign up fees were to be added on if you signed up. It costs A LOT more to be a full member of the club (I cannot be sure but I wanna say at least $80 a month per person, plus you need to have a year contract and there's a fee to sign up) As well, the ad expired Jan 31 but it does have an affect! I mean, after all, here I am talking about it now and I do need to get in better shape again! (also, you'd think the sign would be gone by now because of the exp date of the offer, but those who put it there or suggested it would work there must know people use the toilets --I also think it should have been placed elsewhere anyway because I could SEE the fine print right up close and they don't really want that, now do they?)

Here is their current link and while they have a new low cost promo, it's only for 2 weeks but if you look further, you will spend some money to be a member here: http://www.mysportsclubs.com/regions/BSC.htm and I have not looked further. It's a decent gym network but I am not a member and I dont like fees, contracts and "*'s" in my life.

We get lured in and we almost like it. We LET them show us the FREEEEEEEEEEEEEE!!! or PAY ONLY $0.00!!! or ZERO % FINANCING!!!

They know this but then, if the deal changes, THAT becomes the problem.

Look, Mr. Marketer... do your thang, but if I DO sign up and agree to pay all the stuff found in the fine print without complaint, PLEASE don't now go change the deal on me to stick iit to me once again!!

Changing the expiry of miles is kinda the same thing! We can do nothing, but they have made a sweeping move to clean house and it forces us to be really savvy or get burned!

Many people I know who DO NOT play the miles game have told me that one reason is because it's too hard to keep up with it. Some don't want or have credit cards as the central part of their spending world, and some have tried to redeem miles but never had success for one reason or another. It's not for them--but they had been enticed at one time or another, and so some of them are kinda miffed at being "duped" now!

You mean I signed up for card X at airline Y on their promise of FREE FLIGHTS and big mile earnings to get 20,000 miles for this MasterCard I never use (because my wife and I agreed to not spend a lot on cards --or at all) only to find out that the points expired a year and a half later??

You mean to tell me when I go to redeem these miles I must race to a que that is already mostly full on the telephone 330 days out from my date of travel? I got 3 kids and a mortgage and the last thing I have time to do at home is get on a computer and research this stuff! There's NO WAY I can plan a trip that far in advance!

So they roll their eyes and throw their hands up. Not even worth it.

Those that ARE close sometimes find us and frantically try to redeem 35,000 UA miles for a trip to Maui like next month. Yeah, like THAT'll work!

BUt ya know? Those marketers over at United and at Chase do a really convincing job at making the bloke actually think it's possible!

Whose to blame? We must be savvy but do we all really have time to know EVERYTHING? Why, if we did, we'd probably be on the watch lists of every promotions company because they'd know we find too many ways to win, and they'd change the deals AGAIN.

Oh wait, that happens already

MM

Sunday
Sunday
Sunday
!!!!!!

Counsellor

That concept is, if you'll pardon my saying so, rather simplistic. It may be true for some, but for others it is simply not the way the world works.

The thing being overlooked with this analysis is that actually flying on the airline or actually buying anything from the airline (both of which being the activities that actually put dollars in the carrier's bottom line), is not what is being required. You could have a very loyal flyer who buys expensive tickets frequently but who would lose miles under the "new, enhanced" program.

"Never happen," you say? Not so fast.

One of the original members of this board used to do something similar. He wanted to be top elite in two Star Alliance programs, one of which would grant the status for two years at a time. He flew quite a bit, often on around-the-world tickets or on premium cabin tickets, and on both airlines, but he would put all of the activity on one of the Frequent Flyer programs until he got status with that program (and often, because of the bonus miles he then would earn because of his status, would continue that year putting all activity on that one program).

If this status was earned in the "good for two years" program, the next year he would put all of his activity on the other program. Or, he might arrange to "bunch" his travel so as to again qualify on one program during the "carryover" period the year after he failed to requalify.

[For example, a person might qualify as elite in the first two months of year 01; that elite status would continue for year 02 and the first two months of year 03. The flyer might credit no activity whatsoever to the carrier during year 02, and thus would not "requalify" for elite status, but if the flyer flew intensively during the first two months of the year 03, he would again "earn" elite status in year 03 that would take effect immediately (in February of year 03) and continue through year 04 and the first two months of year 05.

[Thus, for intensive crediting activity in early 01 and in early 03, he enjoys elite status for over four years. If one looked only at the crediting activity, though, it looks as though he had not flown on the carrier at all for 22 months!]

If you had someone like this would you say he was "an extremely, extremely, extremely low-value low-importance customer"? Would that be the sort of person you would want to force out of your program by changing the rules after he had earned his miles and his status?

You may argue that it would be easy for the person to save his miles by simply altering his crediting pattern, but the point is what would a sensible airline (which, remember, is selling this person thousands of dollars of tickets each and every year) think to gain by requiring the customer to modify his crediting behavior that is anywhere commensurate with what they have to lose by irritating him?

In any event, as has been repeatedly pointed out in this and other threads on the subject, the point of these programs is to try to increase sales. If an airline sells a flyer a ticket even only once every three years, that should more than pay for the administrative cost of keeping the account alive on electrons for another three years. This change of the rules after the consumer has done what was asked of him is economically unwise (and possibly legally perilous as well). It makes no long-term sense.

It is no coincidence that these "race to the bottom" changes are introduced at times when the load factor is high and the airlines sense prosperity; when the situation turns, whether from economic turnaround or from too great an increase in capacity, then you start to again see the "race to the top" changes. But what the short-sighted bean-counters fail to recognize when they alienate their customers is that it is easier and less costly to retain an existing customer than to entice a new one.

Globaliser

I don't pretend it's true for absolutely everyone, but the example you give is an extreme one.

And in any event, someone who is as savvy as that will have no difficulty finding a $10 purchase to make on a credit card that puts 10 miles into the UA account. They are not going to lose their miles. (I can confidently say this, because this is exactly what I do. Except that I've just had to put Ł177 worth of tickets on my UA Visa, because my normal Mastercard got dinged by a fraudster at the weekend and has been cancelled and I'm still waiting for the replacement to turn up.)

The people that this policy "hurts" are, almost universally, the people who don't care enough about their miles even to do this much. And if they don't even care that much, they are unlikely to be diverting their spending to UA when they would not otherwise have bought from UA.

For the few who really are caught out by this, the airline has obviously made a judgement that the downside is worth the structural financial benefits of the change in expiry. And in the absence of all the marketing information that the airline has, who are we to say that that judgement call is wrong?

Pizzaman

I would say there are lots of people who aren't savvy enough to follow your direction, but still represented profit to the airline when they earned their miles. But, as Counsellor and Eastbay1K said, how much more $$ does it cost for the miniscule amount of space on a server to keep their record (assuming my original theory that some unclaimed funds charges may mitigate their potential reduction in liability by eliminating the points.)

I disagree with this statement as well. What about the retiree who has 15K in miles and always remembered it being 25K for a ticket, until someone told her they have these new lower mileage awards? Oops, sorry. We already zapped your points. What about the business travel on DL who's company switches their allegiance to AA? 2 years later, his miles are toast if he doesn't take a purely recreational flight.

My point is that I don't see the reason to alienate a potential future customer when you've already paid them the benefit. If you weren't prepared to pay them the miles (and thus can't sustain the liability of them holding the miles), then the program shouldn't have been designed that way in the first place.

Personally, I don't agree with the expiration dates, but it doesn't affect me at all, since I keep my accounts active. Professionally, I'm in the burger business. If I told a customer who came to eat in my restaurant they could have a free soda the next time they came to eat, then told them when they came back, "Oh, you didn't get the e-mail? Sorry, instead of giving you a month to come back for that soda, we decided it should only be two weeks," I have very little hope of keeping that customer's business.

Globaliser

Of course, there are bound to be some people who will get caught out. But how many of them are there? You "would say" - ie, you're guessing. I'll happily admit to not having a clue.

But I tell you one thing: the airline knows. And it will have thought through all of this before doing what it's doing. We are in no position to second guess it. It will probably have a pretty good handle on just how much damage this might do.

And weighed it up against the benefits of doing so:-It's not server space. It's getting the miles off the balance sheet. How crucial is that? Given where UA is, I think we all know the answer.

Bobster

When I stopped flying USAir (before the name change), they offered to convert my miles into magazine subscriptions. They could have done nothing and let them expire. In spite of that nice gesture, I avoided the airline until they forced me fly them again by merging with America West.