If a FlyerTalk Member Ran a Frequent Traveler Program...
 

Often, when perusing the various airline and hotel forums, it is not uncommon to see threads with content regarding complaints on how bad are the frequent flier loyalty programs of airlines and frequent guest loyalty programs of lodging companies, as well as suggestions on how to improve them.

If a FlyerTalk member was in charge of one of these programs, would the program indeed improve, or would it be in worse shape than it is now?

What do you think?

If I were running it as a for-profit entity, then I'd base it on the number of dollars spent with the airline, period. This is for both award points and status points.

Agreed. A fixed rate based on dollars spent, with a portion of the profit in an accrual column on the company's balance sheet. As consumers used their points, the company would draw down the accrual, allowing customers to use the points whenever they wanted.

The reward program wouldn't be, on the surface, as "generous" as current plans are, but such a program would mean that there would be no need for blackout dates or capacity controls, since the airline/hotel would essentially be reimbursing itself.

Mike

I said as much at a recent LAS DO and was told UA already had GS, I said Id do it across the board with all programs at least for their reg top level . GS is above the top level

Hotels should do likewise

Yes Im shooting myself in the head but it just happens to be teh truth. It should be based on the amount of $$ spent rather then anything else. So if a person flys 200,000 miles yet ends up spending say $8000 (4 cpm) then they wouldnt make it to Top Dog cause TD would be say $20k at a min.

Most people would yell bloody murder and end up curtailing the amount they fly, but will still fly to hold some lesser Level but wont get the Goodies they were used to for so long. Meaning IMO the Carriers saving $$ numerous ways if not earning more

@:-):rolleyes:

Do you, safigan (and mikeef, and craz) work for Flying Blue? Check out the AFKL/FB forum for what the (ex-)FFs of that airline/program think ... :mad:

You're underestimating the value of loyalty as measured by the ratio of trips you choose to take with a particular airline compared to your total number of trips, however many that may be.

In addition, it costs more to reel in a new customer as opposed to retaining one.

ie. I always fly on AA when I can, and specifically I fly transatlantic several times a year. My annual spend isn't huge compared to someone whose business pays for full fare F or J tickets, but since AA's MRTC, and even once it was dropped, I have convinced almost all my family members to travel solely on AA when they have a choice. That loyalty is surely worth a great deal to any airline: they got at least 10 loyal customers because I myself was happy with their FF benefits.

For that reason, I believe measuring loyalty by each person's own expenditure alone is misleading and short-sighted.

I will speak for myself, no I havent read the posts over there and it really doesnt matter much, what some FTers think

Very few if any FTer will pay the $15 for checking a bag on a Carrier , not cause they have Status, or dont check bags, but cause if they have to pay they wont fly with that Carrier if they can avoid doing so. Yet the Carriers are racking it in, in the multi Millions of $$$$ on the bag fees alone.

Most people flying for business reasons will probably spend the say $20k a yr on tkts, who will lose are us leisure travelers (people not traveling for biz), or their company will spend enough and have it in their contract with the Carrier that they can get x employess comped top level status

thusly the AF Group wont be in trouble due to FTers decding not to fly on them for whatever reason

Im a LifeTime Plat not from Flying alone, and thats IMO AAs big mistake LifeTime status should be based on Actual flight miles alone

anyway I cant stand the MD-80s and if I do 1 r/t a yr on AA thats alot and usually its down to FL

Nope even 100 people buying the ElCheapos isnt in my book going to keep AA afloat , its those buying Full fare tkts that will.

No different then a hotel, I cant remember the last time I spent more then $100 a night (outside of 1 location) I have top status with 3 programs and dont consider myself a Valued customer as I dont spend enough. So its very possible I will get the Upgrade that someone wont get who checks in after I do and spends 3-4x as much per night on avg then I do.

BTW 100 people buying tkts that dont cover the cost of a flight isnt worth much to a Carrier. while 10 people paying full fare is worth a heck of alot more to that Carrier


Let me sum it up as follows, my main concern would be what to do to make or keep the Carrier or Hotel the most profitable. So Id want to hold down the cost side of things as I increase the rev flow. I can sell today 10,000,000 widgets in say an hour for $10,000,000 and rake in alot of $$$ only problem is each widget cost me $1.50 so I end up lossing $5,000,000 but I would have a Great sales figure and people would line up everyday to buy from me. On the other side is what do i have to offer in order to get people to buy from me and to continue doing so. Its a very fine line, and on the side of the owner Id want to give away as little as I could, if I was the purchaser Id want to get as much as I could

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.)

I meant no offence to you, craz, or to anyone; nor was I trying to imply that FTers can't (or don't) think for themselves. It's just that safigan's statement almost exactly matches the explanation given by FB for their recent program 'enhancements'.

The specific item has gone from their website now, but it was something along the following lines: "Flying Blue has changed its rules so that mileage accrual rates more accurately reflect the fare paid." Hence my misunderstood attempt at sarcasm!

--Henry

No offence at all was taken!

besides I dont care what anyone calls, Except being called late to dinner

:D

The two biggest changes I would make would be to stop the blackout dates, and don't charge fees for cashing in miles.

I would also make the same changes.

Two programs that are strongly revenue based are Air New Zealand (NZ) Airpoints and Virgin Blue (DJ) Velocity Rewards. Each has a slightly different approach - neither is pure revenue based.

NZ earning rates are fixed rates by route loosely based on fare and burn rates (at least on NZ metal) are $ based on fare.

DJ earning rates are $ based and burn rates are fixed rates by loosely based on fare.

QF also has $ based awards, but these are additional to traditional distance based ("classic") awards and earning remains distance based.