Loyalty Programs and Airlines
Airline loyalty programs need boost, not cutbacks [USA Today]
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Airline loyalty programs need boost, not cutbacks
By Christopher Elliott
Is a magnanimous mileage program the key to saving the airline industry?
Why do business travelers feel betrayed by recent changes in airline loyalty programs?
Ask frequent fliers, and they will tell you that the airlines' revisions make it difficult � and more often, impossible � to reach those coveted elite levels.
The only way to qualify for the most sought-after flier perks, such as seating upgrades and complimentary lounge access, is to buy pricier tickets.
Some thanks that is for their allegiance, they say.
"That's funny. I thought it was called a frequent flier program, not a 'big spender' program," said Dave Liesse, a software-quality manager from Oswego, Ill. But airlines seem genuinely perplexed by the hostile reaction. Delta, for example, saw a passenger lawsuit and a grassroots campaign called "Save SkyMiles" emerge after the airline overhauled its loyalty program earlier this year. Of all people, the airlines figured, business travelers would understand that airlines have businesses to run and can't just keep indiscriminately granting preferential treatment to road warriors who buy bargain fares.
Or can they? Sure, restructuring mileage programs saves money. It might even encourage a few travelers to buy higher-priced tickets in the long term. (But probably not in the short term. Delta, the first major airline to revamp its program, has suffered adjusted losses of more than $400 million since its changes.) Perhaps business travelers refuse to spend more because it's bad for their businesses.
Preserving the current mileage benefits � perhaps even boosting them � might make more sense.
What better way is there to thank those road warriors who stood by your airline after 9/11, amid unprecedented travel-budget cutbacks, and who resisted the temptation to take their business to your no-frills rivals? The carriers engaging in these program cutbacks might be well served to take a step back and try to see things from the passengers' perspective.
On balance, the current cuts appear to be more trouble than they're worth. Delta's revisions, which last month were mimicked by Continental, have proved to be a public-relations disaster. More travelers complained to the federal government about Delta's mileage program during the first half of this year than about any other airline. The Atlanta-based carrier finally buckled to the pressure and revised its program again in an effort to placate its platinum-level passengers. Any carrier contemplating similar moves must be wary of repeating the experience.
"There is a small but very vocal group of frequent fliers that doesn't like change," said Hal Brierley, a loyalty program consultant with Brierley & Partners in Dallas.
Indeed, travelers such as Liesse have jumped programs as a result of the recent changes. But those switches represent only "a small percentage" of frequent fliers, according to Brierley.
A far more difficult case to make is that the changes have helped make business travelers more loyal � or driven them to spend more money on their tickets.
Interestingly, most air travelers polled by Brierley agree that passengers who shell out more for their tickets should be rewarded more generously than bargain-hunters. "But that doesn't mean they want the airlines to reward people who travel frequently any less," he added.
Holding the line on loyalty programs, as many airlines have done despite the recent industry downturn, is thought to be a more sensible course.
Randy Petersen, who publishes InsideFlyer magazine, believes the "wait-and-see" approach represents the future for most loyalty programs after two turbulent years in which business travelers were afraid their airlines would cut benefits, limit award redemption or go out of business. Keeping things as they are also draws an important distinction between the airlines that made cuts and the ones that refused to do so.
"Not following the negative changes gives an airline a kind of competitive advantage," said Tim Winship, editor of Frequentflier.com. There's one other option: Go the other direction. Why not raise the stakes? Granted, making it easier to reach elite status � the holy grail of any loyalty program � could be troublesome. There are only a finite number of first-class seats, and there's a limited amount of space in an airline lounge. If Delta and Continental are deflating the value of their miles, then an airline that tried to be more generous might run the possibility of point inflation.
Consider the benefits, though. Any airline that decided to lavish its top travelers with additional rewards would differentiate itself from the carriers that have left their programs intact � never mind the ones that have been whittling away at their benefits. It also would further distinguish the carrier from the low-fare, no-frills airlines, whose own programs are more tightfisted.
Being big-hearted makes business sense, says Joel Widzer, author of the book The Penny Pincher's Passport to Luxury Travel. "During the mid-1990s, which is the last time the frequent flier programs were really generous, frequent travelers were treated like royalty. They could tell a ticket agent, 'I don't want to pay this change fee,' and the change fee would be waived," he said. That kind of special treatment made business travelers fiercely loyal, which, in turn, helped lift profits.
Could it be that simple? Is a magnanimous mileage program the key to saving the airline industry? Well, maybe not entirely. But then again, neither is trimming your loyalty program until your best customers feel cut off.
Christopher Elliott is National Geographic Traveler magazine's ombudsman and a member of USA TODAY's board of contributors.
Posted by Craig at October 16, 2003 04:16 PM