If a FlyerTalk Member Ran a Frequent Traveler Program...
Jul 9, 2009 | 4:31 pm
#16
FlyerTalk Evangelist
Join Date: Sep 2005
Location: MN
Programs: Lots of programs, dirt on all of them!
Posts: 11,943
Typical reaction of someone who spends a lot of money (usually someone else's) with an airline, and doesn't get the recognition s/he thinks that s/he deserves, but has never been involved in a loyalty program from the inside.
The fact is that loyalty (FF, etc.) programs do not exist to reward past behavior. They exist to influence future behavior. People who spend large amounts of money are less subject to influence by these programs than people who pinch pennies. (Do not use yourself, any other FTer(s), or even all FTers, as a counter-example. FTers are not typical.) For one thing, they already get many of the benefits of FF programs. In addition, they tend to have (or have access to) financial resources that make FF awards less relevant to them.
A loyalty program has to balance the greater value of "big spenders" with the greater effort needed to influence their behavior. A given reward structure can create a great deal of loyalty among lower-spending people for the same as it would cost to create a much smaller amount among those who spend more. Lower-spending passengers are less profitable than those who spend more, but they're more profitable than empty seats. Without them, no airline can survive. This balancing act usually calls for some sort of progressive benefit scale as spending goes up, but not proportional to the spend rate.
So, big spenders: sorry, but it simply does not make business sense to base rewards solely on what you (or someone else) spends on your tickets. You deserve more than the "little guy," but not as much more as your higher spending might lead you to think. Keep your expectations under control.
(The above applies primarily to North American FF programs. The concept of balance applies everywhere, but airline route structures in Europe and most of Asia are different, which leads to different program motivations. This can lead to a different spending/reward relationship.)
The fact is that loyalty (FF, etc.) programs do not exist to reward past behavior. They exist to influence future behavior. People who spend large amounts of money are less subject to influence by these programs than people who pinch pennies. (Do not use yourself, any other FTer(s), or even all FTers, as a counter-example. FTers are not typical.) For one thing, they already get many of the benefits of FF programs. In addition, they tend to have (or have access to) financial resources that make FF awards less relevant to them.
A loyalty program has to balance the greater value of "big spenders" with the greater effort needed to influence their behavior. A given reward structure can create a great deal of loyalty among lower-spending people for the same as it would cost to create a much smaller amount among those who spend more. Lower-spending passengers are less profitable than those who spend more, but they're more profitable than empty seats. Without them, no airline can survive. This balancing act usually calls for some sort of progressive benefit scale as spending goes up, but not proportional to the spend rate.
So, big spenders: sorry, but it simply does not make business sense to base rewards solely on what you (or someone else) spends on your tickets. You deserve more than the "little guy," but not as much more as your higher spending might lead you to think. Keep your expectations under control.
(The above applies primarily to North American FF programs. The concept of balance applies everywhere, but airline route structures in Europe and most of Asia are different, which leads to different program motivations. This can lead to a different spending/reward relationship.)
And yes, big spenders are the ones who would normally keep the airline profitable. Or better said, help them lose less money
.I gladly take all the benefits the airlines give me. And anyone who flies even just a little should never pay checked baggage fees - it is so easy to attain low-tier status with most airlines with just minimal effort. But most people don't think like FT'ers do.
Jul 9, 2009 | 9:16 pm
#17
FlyerTalk Evangelist
Join Date: May 1998
Location: Massachusetts, USA; AA 2.996MM & Plat Pro, DL 1MM, GM & Flying Colonel
Posts: 25,037
- That FF programs are intended to influence future behavior, not to reward past behavior? That is simple logic.
- That low-fare buyers are more influenced by these programs than those who pay for F/J? That is well documented via reams of research. (Again, FTers are not typical.)
- That a given set of FF rewards will therefore influence low spenders than high ones? That follows directly from the preceding point.
- That low-fare travelers are more profitable than empty seats? I don't think anyone can, or cares to, argue that.
- That the benefits of an FF program should, from the airline's point of view, designed to be as cost-effective as possible? Any business manager can explain why this is true.
- That the value of a benefit is basically its degree of influence on each type of customer times the profitability of a customer of that type? That's elementary microeconomics. If Joe Bargainhunter is influenced five times as much by FF benefits than Fauntleroy Moneybags, he should get five times the benefits that a pure spending ratio would suggest. Since their spending ratio is much higher than 5:1, J.B. still gets a lot less than F.M., but benefits proportional to spending would be way out of whack.
- Something else? Please be specific as to exactly what you disagree with and why. Every part of my post is simple logic, Business 101, or documented fact based on thorough research.
Airlines know this, too. I don't believe this. I know this. Consider: many North American FF programs have started or undergone big changes since AAdvantage was introduced in 1981. If any airlines thought that rewards should be proportional to spending, at least one of them would have tried it. If it worked better than the existing model, the others would have followed long ago. None has tried it. They all follow the model I described: to provide more benefits to big spenders, but less than proportionately to their spending. That should tell us something.
Jul 10, 2009 | 9:29 am
#18
Join Date: Jul 2005
Location: Houston
Programs: Hilton Diamond, Southwest A List, United Silver, Jumeirah One Silver, Marriott Silver
Posts: 391
I would make it possible to search and book parnter availability online, segment by segment.
I would also eliminate mileage expiration, if you earned them, you get to keep them for as long as you want, even if you havent flown them for years.
I would also eliminate mileage expiration, if you earned them, you get to keep them for as long as you want, even if you havent flown them for years.
Jul 11, 2009 | 2:59 am
#19
Join Date: Jul 2003
Location: St. Petersburg FL USA
Posts: 99
I think I'd try to get extreme customer loyalty by making it much easier to use miles. I'd make more seats available, in coach at least. When current events drastically reduce load factors, I'd offer big mileage sales (15,000 RT to Mexico right now, for instance. Weekend specials would also have weekend special FF rates. Hopefully, making miles easy to use would attract a lot of customers and keep them. I'd allow one-way trips, open jaws, layovers, and multiple destinations.
I would offer fewer bonus mile programs, unless they were with a partner that was paying me a lot for the miles and the advertising.
Hopefully, miles that are actually useful would attract and keep customers, especially business customers.
I would offer fewer bonus mile programs, unless they were with a partner that was paying me a lot for the miles and the advertising.
Hopefully, miles that are actually useful would attract and keep customers, especially business customers.