Revenue not Miles to determine Status
 

Hey all you FF members, a recent airline management magazines discussed a concept about using revenue not miles to drive the airlines status/points offered.

It stated that it should be linked to the ticket price not how many miles a user has flown to determine how much the airline should offer to us FF.
The article mentioned how many other industry would never touch the method used by airline to reward customers for example supermarket use the value of the purchases to reward their customers.

Do we think that this would work?

Very interesting concept ... welcome to FT! http://www.flyertalk.com/forum/smile.gif

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Vasant

It would reduce the number of FF's that's for sure. They could add "fly x miles or spend y $$$ and get this status" To just go for the $$$ only figure would drive business away to the lowest cost competitor as many companies require low $$$ airline tickets these days.

Long term butts in seats keep airlines going (well you know what I mean). Seeing as certain people will fly only low priced tickets are you better to retain them anyways or have to spend money to attract new customers all the time as you lose cutomers to competitors?

Didn't some U.S. airline attempt to do something like this 3-4 years ago (or at least floated a trial balloon)? I think it might have been UA.

TWA tried it.

TWA went bankrupt.

National Airlines did it that way, BK

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dallasflyer

AA does a good job at this, offering mileage or Q-point qualification.

CO also does it by offering bonus status miles for full-fare tickets

Both of these methods allow high-revenue passengers to qualify more quickly without alienating repeat customers.


[This message has been edited by channa (edited 06-07-2003).]

The trouble with this reasoning is that FF programs don't exist to reward past business, even though that's how they operate. They exist to encourage future business. Specifically, they exist to encourage future business that the airline wouldn't get in any case (for example, because it objectively offers the best schedules/etc. between two points).

Rewarding past revenue does a good job of relating rewards to how much a customer has been worth in the past, but it is not clear that it has a significant impact on that customer's future value. One big problem with it is that people who buy F tickets often get many of the FF elite benefits without needing to have the status: lounge access, early boarding and the rest. If you get those on any airline you fly, why bother being loyal to one that gives you a fancy ID card? You might as well go for schedules or whatever else motivates you.

This scheme works in cases where the value of the merchandise is directly reflected in what a customer pays (like the supermarket example). For airlines it's different, low-fare paying passengers are valuable in their own way, by allowing for more frequent fare schedules and larger planes. Just those items that high-fare paying passengers need. So rewarding by just $$$ paid makes less sense.

It has struck me as odd that the hotel programs almost all award points based on revenue earned from the customer. Yet, they generally base their elite status on nights/stays. That seems somewhat inconsistent to me.

Maybe the airlines will take a page out of the hotel book and begin awarding points/miles based on earned revenue rather than miles flown. Would give me some comfort on my last-minute, $700 flights PHL-BOS (2 legs, 1000 miles) when I know I could be earning 5000 miles on a $200 cross country RT.

But TWA used it as an alternate. For example, you could qualify for TWA Elite by flying 25,000 miles, 30 segments, or generating $5,000 in revenue. This way if someone bought a full-fare J say from BOS-LHR at $5,000, then they would make elite.

On AA, a BOS-LHR F ticket at $9,000 would only get you about 10,000 q-points meaning you would need three roundtrips just to make AA Gold. These three trips in F on TW would have made you TW Platinum.

IMHO, this is an interesting alternative that rewards customers that give the airline revenue. And I am a leisure travelling student who only buys AA L and N fares. So, I admit I would probably not be an elite if this were implemented as the sole means to elite status, but it is a nice alternative to have in addition to miles.

I think one of the problems is that rewarding F with a paltry 50% COS bonus is crazy. LH has it right by giving a 200% bonus.

It's a good idea -- it's a matter of implementation. I'd say if you went with the "point" concept -- where different fare classes (if one assumes that roughly, different classes represent differing revenue paid per mile) accrused significantly different "point multipliers" you'd have the ideal system.

But I suspect that having, say 9 different multipliers (5 for coach, 2 each for business and first) would confuse the heck out of people.

Steve

Just makes me even happier that I have my lifetime platinum with AA. Seems like the route that BA is taking that only full fare fliers can join BA.

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Ms.DtG

I think the SQ model makes sense. The lower tiers are achieved by miles in any class. The higher tiers are achieved by miles/segments in First or Business classes.

The LH model in which higher fares accrue large class of service bonuses which count toward status also makes sense.

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"They that can give up essential liberty to obtain a little temporary safety
deserve neither liberty nor safety." -- Benjamin Franklin

True, but Hilton HHonors recently added base points as another way of earning elite status. (Base points are a multiple of stay revenue.)


Kathy