Originally Posted by
greenpau
I always enjoy this annual thread - and especially new contributors and perspectives!
I have only ever been given one piece of direct, confirmed input from UA on this, which is supported by all the data and sound business sense:
Yield matters most.
Speculated often as CPM, but the profitability margin of each dollar spent matters. CPM is a crude metric and these days is likely far more sophisticated, spanning direct UA spend and direct revenue sources such as credit card income. Plainly put, spending $60k but all on P/Y Fares and a high number of segments won’t get you there and never will. UA uses different language around this - “frequently book fully refundable Premium Cabin fares”.
Also playing into this yield concept is if your cost to serve is high. It’s more squishy about what that means and how it’s calculated - but I can guarantee in the age of AI/ML then this is more nuanced and sophisticated than many years ago. The description above from another poster is so spot on - they are building and annually refining a data model.
As always, we shall see - but a “very high yield” traveler is still very much a customer they want to attract and retain.
If they're not considering demand elasticity as well, then they're missing half the equation. I'd bet that some of the highest-yield OPM customers need the least enticement to remain with United. If you're indifferent to price/value, then you're indifferent to price/value...
By contrast, someone like me who spends ~$50K of their own money is pretty sensitive to the value received. You can talk margin all day long, but at the end of the day, I bought $50,000 worth of tickets at a price that United was happy with.
The fact that I was able to remain GS for 10 years at way less than $.20 cpm (to use the ludicrous FT metric) testifies to the value of keeping that. BTW, that's $50K of revenue that United will no longer receive because they've delivered sucky value for the last couple of years.
Also, I'm not sure you should take United--an airline with a long track-record of deceit and duplicity--at their word, when they say you need to buy expensive refundable tickets to qualify. That would be a great way to get suckers to up their spending. Just sayin',,,