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Discussion in 'General Discussion | Miles/Points' started by uggboy, Oct 3, 2014.
Airlines Mull How to Measure Loyalty: Points or Dollars?
Are we all getting revenue programs because consultants make more money by selling this idea to the airlines?
It's not at all clear to me that skewing RDMs toward people buying expensive tickets is a profit maximizing strategy, especially if those people would have bought anyway. It should be about incremental revenue.
I agree Seacarl. Business travelers and those with big wallets will fly who they want to fly and an revenue based program isn't going to stir their loyalty much. I would think that appealing to the wider customer base even on less expensive tickets would generate more income because there are a greater number of people who could be swayed. I suppose it all comes down to the data and since I don't have data to review it's hard to say for sure which is better for the airlines.
What I find really unfair about the new system is that you still need to fly the same distances to keep your elite status. If they truly want to reward those who buy expensive tickets, they should allow the mileage they accrue from those flights to count toward the miles needed for elite status. If you earn 8000 miles from a $700.00 short haul ticket, all 8000 miles should count toward the 100,000 needed for 1K. Not that I like the new system, but I think there would be more incentive for people to buy expensive tickets to keep their status alive if the miles helped fulfill that goal.
This model seems to do little to address a huge core of business flyers, the average consultant. If you're a low or mid level consultant who are by and large a larger number of flyers than the top executives who do flying, you're relegated to using a revenue minimizing system. Controls are in place to keep the cost down and high cost tickets are simply not an option. Some have flexibility to choose their airline if it is slightly more expensive, but there are limits. Others are limited to simply the lowest cost in the booking tool at that time regardless of airline.
My personal observation has been at least a 10-1 ratio of consultants flying at mandated low cost versus the top level guys with more leeway.
I would imagine that this vast mass of flyers added against a minority of big spenders probably outspends. But who knows. Maybe they've already crunched the numbers and Microsoft networking consultants flying the globe on 10k+ tickets outspend their counterparts at IBM, Accenture, Deloitte, etc. sitting in the back of the bus at .5k-1k.
Anyhow, it's my rationale for sticking by American and preparing myself for free agency in the event they follow the herd. I can lowball the route on a case by case basis in that event and buy up for the small perks I'd get as a loyal elite if the mileage driven programs are all gone.
Then someone could maintain Plat or PM status with a single sufficiently expensive business class trip per year. Two such tickets would be enough for 1K or DM. Most of us wouldn't consider this pattern to constitute frequent flying.
No. it is because the airlines finally (years later, just like in almost every other facet of business they operate in) have the technology to be able to do it.
Incremental revenue is easy to drive in other ways which cost the company a lot less. If they need to fill seats at low fares they can do so with anyone; doing it with folks focused on the points comes with a higher cost.
As someone that used to work as a regional sales manager (covering midwest and southeast US) I love the idea of revenue based rewards. Now that I have been promoted and fly international a lot, not so much. I will say, from the airlines perspective, who is more important, the person that flies from NY to SF and paid $300 for their ticket or someone going from ORD to MSN and paid $500 for a one way? Why should the person going from NY to SF get 3K miles and I get only 500 when I spent nearly twice as much? From a business perspective, I want to take care of the person who spends the most. I am USAirways platinum, with about 100 connections a year, I am lucky if I get above 50K miles a year. I bet I spend a hell of a lot more and would be "more valuable" to USAirways than others whom have more miles but spend less per year.
So what -- if they fly so little, they have a shiny card but no true benefits, i.e., they are not taking away your spot in the boarding group 1 queue.
And you are right, it doesn't constitute frequent flying, but it also isn't a frequent flyer program anymore, it's a revenue-based kick-back scheme
I don't have an opinion as I fly regularly but mostly on leisure travel. I have gotten a taste of the phenomenon. There are times when a J ticket for anything over 2,500 miles has been worth the extra money in terms of schedule or comfort, so I end up spending 70% of my flying revenue outside of Y. 3 times over the past 6 years I've ended up within spitting distance of the next level of elite based on points rather than BIS miles. This got me to buy another 1-2 J tickets just to get that status, instead of Y. I'm doing JFK-SFO one way in J and return in Y for one night to get enough points for a promotion, a trip I wouldn't have taken otherwise. So they've gotten a few $,000 more out of me over the year then they would have. I guess this segment of people adds up to enough revenue to make it worth it? Or is the watering down of the elite group enough to save significant $$ without losing revenue a'la Parker-$misek?
If you're mostly buying premium fares for your mileage runs then I'm pretty sure they are quite happy to have you continue doing so.
Adding a perspective for others to consider. Not saying you are wrong, but do think there are many different ways to view this. Your position can be filed under the presumptive frequent flyer model rewarding customers for spend. I'll use your JFK to SFO vs. a short hop example later on.
Personally, I want to be rewarded as a flyer for my time spent in the air. In the model I'm familiar with, we all fly at the lowest cost possible by mandate with little wiggle room. We're bound by the booking tool and the rules in place. I will direct many thousands of dollars worth of business each year based on my company travel needs. I want to do this in a manner that minimizes my travel time and maximizes my travel comfort. If you told me I could spend $150 and fly transcon in an RJ or pay $400 on a mainline, the choice is clear every time. I'm flying mainline. Not going to contort myself for 5-6 hours. However, if this were a real option my booking tool would force me to take the $150 (at which time, I'd have to request an exception because I'd rather quit and get a new job than deal with that.)
In keeping with the comfort model, I'd trade all the airline miles to get to do a nice MSN to ORD every week instead of a JFK to SFO. I don't get that extra time back for myself and I'd rather spend it just about anywhere than trapped in a high altitude tube for many hours. As someone not putting money out of pocket, I'm looking for least amount of time in the tube and best comfort. For me the points per mile is compensation for this captive time, so I would say why should someone only spending 45 minutes in the tube get more points than me for spending 300-360 minutes. Time is money to me.
Finally, from the business value proposition, its such a tangled web, one can't really say it is simply dollars. Short haul flights aren't necessarily bigger revenue generators than long haul. Economies of scale can make long haul more profitable and short haul less so. Not that I expect anyone would ever consider rewards based on route profitability, talk about complexity!
So the business value from my perspective is to grab someone's attention in order to grab their spend. I'm going to spend my many thousands of company dollars where I get the most comfort and return.
Again, completely understand your point of view, but wanted to contrast against the very different experience I've had and how someone like me views the air travel and associated rewards.