United: let's have a little business intervention

Discussion in 'United Airlines | MileagePlus' started by Black Cloud, Nov 1, 2013.  |  Print Topic

  1. Black Cloud
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    Black Cloud Gold Member

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    Hi United. How's it going? Been a rough few years, eh? As someone who works for a publically held company I know the feeling of underperforming in your sector. Kinda sucks, doesn't it. Creates lots of pressure.

    It's rather obvious that the recent devaluation to MileageMinus is an attempt to control costs. As a business guy, I get that. Costs are bad. We don't like liabilities. But I think you're barking up the wrong tree. Can we discuss, in a very logical manner, your actions and the business impact? A little unsolicited business advice if you will.

    You've dug yourself in a hole.
    Let's think about that statement for a second. You've willfully commoditized the product in an effort to reduce costs. Here's the fatal flaw that you're now realizing - when you commoditize your product you better be able to compete in an undifferentiated space on price and COGS alone.

    Based on your cost structure, operational performance, and current fare structure your costs are too high, you performance is below that of your competitors, and you try and extract a premium for a product that is undifferentiated. Remove yourself from your current environment for a second and reread that sentence. Does anything here make sense from a macro business perspective? Nope. It sure doesn't. Hence, the hole.

    I get it though, you can't charge a premium for a premium product. That's a losing business proposition that a handful of tried and all have failed at. Hello, VX, I see your gradual decent into BK. So what's a business to do you ask?

    Figure out your customers and sell to them
    It's time you reanalyzed your customer base. Who provides you with profitability and who do you want to defend, tooth and nail, from realizing that you're selling a commodity product at a premium and having them defect over to one of your other competitors (who routinely outperform you in just about every key metric)? And how to you increase that segments profitability without alienating them?

    Oh, you've already done that segmenting you say? And that's why you've implemented the spend requirements in your FFP and you have that GS program. Well, good job. Apparently a dog that keeps crapping on the carpet can learn a new trick (that all the other dogs have figured out).

    So what do you do with this fantastic data set?

    Stop knocking your best customers over the head
    Your best customers are your best customers. I get it. You might think that we're unfailingly loyal to United based on our continued tolerance of devaluation and subpar performance. And to an extent, I think you're right (we're a stupid and stubborn lot). But with ever straw you pile on the camel's back you take one step closer to breaking that back. You really don't want your customers flirting with your competitors because, let's face it, they're much sexier. The worst thing you can do is make a stupid customer realize they're being played for a fool.

    If you want to extract more revenue do it through smarter pricing. Continue to unbundle and selectively sell those products (to the right target). Provide a differentiated premium product that provides value for a premium that can be rationalized.

    Negative changes are inevitable
    Practical businessman me gets that negative changes are inevitable in your sector. I don't lose sleep over that inevitability. But the timing and who is bearing the brunt of those negative changes has me scratching my head.

    Why, when you're underperforming your sector, would you force your customers (and let's not kid ourselves, every time you make a change like this you force everyone to look around) to look around? Hint: not too many people like flying United lately. You're telling your sacred cows (to use the BCG customer matrix) that hamburger is on the menu tomorrow.

    Mooo.

    It seems that your best customers have ben bearing the brunt of your latest rounds of fees and changes. Want to know why, previously, you've avoided harassing this group? Because they're profitable. Don't mess with that. It's insulting to all of our intelligence that you charge a premium to be served a drinkable drink in a Club that we pay an annual membership for; when that exact same drink (which has a higher service cost) is cheaper on an airplane and cheaper outside the premium club. No, your tattered furniture and towers of salty snacks don't justify a premium.

    And now you're telling us that one of the last pieces of differentiation left - the decent MileagePlus award redemptions - is going away? Who does that penalize? Your best customers. The ones that have hundreds of thousands of miles. Why do we have those miles? Because we fly a lot. Because we give you a lot of business.

    Want to do something smarter? Penalize the folks that do things like churn credit cards or acquire miles in some way that doesn't add value to you. You can do that by offering different redemption rates for different tier levels within the MileagePlus program.

    You see what I did there? I gave you an opportunity to accomplish nearly the same thing, while creating another reason for people to be more loyal. The net effect on your best customers would be zero. And you'd anger people who maybe you don't really care about (or, care less about). And you reduced the liability of the miles on your balance sheet.

    And that's just one of many ideas of things you've executed very poorly over the last few years.

    Please, stop trying to fire your best customers. It's not in your best interest. Really, it isn't.

    And please, stop spending time making bad decisions and focus 100% of your efforts on giving us a reliable product. Until you do that all of our loyalty is up for grabs.
     
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  2. Steve GadFly
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    Steve GadFly Gold Member

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    Fantastically thought out and written....I hope you e-mailed a copy to Jeff, Martin Hand, Scott O'Leary, etc. While you're at it, a printed and hand-signed snail-mail seems to get noticed too.
     
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  3. Newscience

    Newscience Gold Member

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    Absolutely! Black Cloud's letter rocks! Although a case could be made that one or two other airlines could use a similar "wake-up call" letter! As Steve Gadfly says, send in a snail mail signed copy! And please let us know what the US corporate response is!
     
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  4. Anglo Large Clawed Otter
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    Anglo Large Clawed Otter Gold Member

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    Agreed on all fronts, except for MileageMinus. It's too unwieldy. I prefer MiglioLira
     
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  5. LarryInNYC

    LarryInNYC Gold Member

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    If, perhaps, not perfectly spelled.

    Seriously, how much consideration do you believe would be given by management of a multi-billion dollar company to an anonymous internet posting by someone using the name "Black Cloud"? I'm sure that United gave thorough consideration to all of the factors discussed here. True, they might have reached the wrong conclusions (although that's not obviously so to me), but the suggestion that they're unaware of basic business practices would, in my opinion, only serve to insult them.
     
  6. Black Cloud
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    Black Cloud Gold Member

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    Sorry about the spelling mistakes. I wrote it while on a conference call. Didn't get my full attention.
    They know who I am. They know my spend.

    And while I'll freely admit that surely United employs people far more intelligent than I am, their business performance probably has everyone questioning if they're making the right decisions. This is simply intended to be a counter-point to whatever they whiteboarded.
     
  7. radonc1951

    radonc1951 Gold Member

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    Having lived (and flown) through the Lorenzo years at CO, this doesn't even come close to a dysfunctional airline. A truely dysfunctional airline goes bankrupt and leaves you stranded in a distant city with no recourse other than to buy a fare on an alternate airline in order to get home (with no refund either). In truth, most operations are improving (although still not as they should be) and while I may see few mainline planes, the RJs I get usually transport me to my destination on time with little fanfare. As an elite, UA bends over backwards to accommodate me in irreg ops. Finally, the ability to do SDC for free on UA is invaluable. (Unable to do it on US last week without paying for it).

    That being said, I think that loyalty programs have spiraled far out of control, and now manipulators have taken over which has led to much abuse of the system. This has been compounded by corporate greed since what use to be a simple program to reward the best of the best customers has turned into a monster of making money selling points and status.
    (My late investment banker FIL was a member of the AC in the early 70s due to his level of F flying. It was by invitation only, no initiation fee, etc. He also had "status" with Pan Am as well, again invitation only).

    We may think that DL or AA are better airlines. But just remember that a decade ago, DL was the pits but 2 decades ago, Dl was fantastic. And AA was great and now has problems. I suspect that UA will pull out of this funk mainly because it provides a necessary service to millions of passengers who basically want a NS flight from A to B which leaves and arrives on time and doesn't cost an arm and a leg.

    However, for those of us who have figured out the system and used it to our advantage, the future may not be nearly as bright as before. It will cost us more money for less frills and benefits we once considered standard fare. :(
     
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  8. LarryInNYC

    LarryInNYC Gold Member

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    No worries. Sorry if I came of as belittling. I found your analysis interesting; the idea that it should be sent to United less so.

    I strongly suspect (with no real knowledge) that United has decided that the number very high value customers who are motivated primarily by mileage redemptions (like you) is much smaller and less significant to them than the number of very low value customer who are primarily motivated by freeloading (like me). They must know that they are going to alienate people like you, presumably they've decided that it's worth that cost to not have to deal with people like me.
     
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  9. gregm

    gregm Gold Member

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    Would you please send a copy to Richard Anderson? Just replace "United" with "Delta" and "MileagePlus" with "SkyPesos". (And I just realized that term may not be the most PC, so , please, no offense to anyone who uses pesos of any kind for any reason in any economy.
     
  10. colpuck
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    colpuck Gold Member

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    Didn't they post a 2 billion (with a B) dollar profit. Anderson can't hear you over all the money he is counting.
     
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  11. radonc1951

    radonc1951 Gold Member

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    Correct, and he did it with a loyalty program that is without a doubt the worst in regards to use of Skypesos.
    Perhaps the upper management at UA realized that if DL could make billions and still get away with its crummy loyalty program, then .......
     
  12. Hartmann
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    Hartmann Gold Member

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    They also have a domestic (and quickly building an international) product that is arguably better than UA. So DL's success isn't because the SkyPeso is worthless. I'm sure it helps, but it's not the only reason.
     
    Last edited: Nov 3, 2013
  13. Black Cloud
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    Black Cloud Gold Member

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    I wouldn't say that my buying behavior is motivated by mileage redemptions. It's one factor in many.

    The customer facing performance of United the last few years has been less than stellar in just about every conceivable way. I've stuck with them (except for a 3 month flirt with DL over the summer) during that time. Their thanks for this? Essentially a retroactive devaluation of that loyalty (since miles were earned under a different award chart).

    Yes, I'm well aware that UA redemption rates are now much more similar to DLs and DL seems to be functioning rather well, but the larger point is that DL offers (arguably) a better product and a more reliable product. If all other points are equal, why would I, and others, not move my business to DL?
     
  14. Phudnik
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    Phudnik Gold Member

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    Except that DL's product is improving (probably the best of the legacies in Y, and in my limited experience their domestic F and international C is at least as good, if not better, as anyone else), while UA's is getting worse. DL can get away with a lousy loyalty program because their product has gotten better and more reliable. UA's primary advantages were MileagePlus (and, I suppose, flat beds internationally) and they have just pissed away advantage #1.

    It's an interesting contrast in business strategies. They seem to be following Doug Parker's approach of trying to cut your way to profitability with a commoditized product, rather than investing in improving the product. As a former US CP, I experienced that a while back (charge for water, anyone?) and don't really care to do so again.

    Ah, but you're a hub captive, aren't you? There must be a reason why you didn't stick with DL, and operational performance wasn't it.
     
    Last edited: Nov 1, 2013
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  15. radonc1951

    radonc1951 Gold Member

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    You hit the nail on the head. DL has built an excellent product without a fancy loyalty product giving away the store. In fact, other than domestic upgrades for the super elite, Skypesos gives little else. The upgraded service is available to all customers, including the once a year kettles. If you were a CEO of a competitor whose loyalty program was far more generous and was being abused to the tune of multi-millions by low value customers, and saw how you could plug the hole with little impact on your customer base but big impact on the bottom line (by decreasing debt based on point value), how long would you keep your existing program?

    For the vast majority of UA customers, this change has minimal impact on them. For them, a free domestic Y ticket is a gift from heaven. And the number of points needed for that hasn't changed a bit.
     
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  16. Black Cloud
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    Black Cloud Gold Member

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    Quantity over quality.
    What's a better customer for UA? The infrequent flier who is more price sensitive and who buys via orbitz or kayak, or the VFF who is a corporate customer and pays $1000 for a domestic ticket? This move slaps the VFF in the face and says "we care more about the infrequent traveler than we do you."
     
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  17. radonc1951

    radonc1951 Gold Member

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    I think that VFFs are valued as long as they are also imputing money into the system. The problem is twofold. First, we have VFFs who do not put money in and who abuse the system. Secondly, we have evidence that making the FFP less valuable has little impact on the high value customer (DL is showing everyone that the Skypesos program does in fact not dissuade the high value VFF from using DL). Those are two very impelling reasons to change the system as it stands today.

    In regards to kettles, they just want a cheap product that gets them from A to B. Anything else, like a free domestic Y ticket for their loyalty or using UA'a CC is just gravy to them.
     
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  18. Black Cloud
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    Black Cloud Gold Member

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    With the new spend thresholds that dynamic is being mitigated.

    Right. When you offer a decent and reliable product the FFP takes a back seat.
    United, as of late, doesn't offer either. They can hang their hat on the FFP.
     
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  19. bmg42000
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    bmg42000 Gold Member

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    I am more forgiving of delays when I am flying for free.
     
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  20. Gtitan
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    Gtitan Gold Member

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    This ..... UA's reliability is awful. You take away the FFP and it is terrible. Does it work for our the hub captives? Sure, it does in many instances. However, for those of us not in a UA Hub, especially if you have to rely on UAX to get you places, the experience is not good.
     
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  21. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    What you call free I consider a flight that I paid for with my previous flying (or credit card spend, which could instead of gone to cash-back or hotel points or ...).
     
  22. FetePerfection
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    FetePerfection Silver Member

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    And we are the DL dolts who let him (Anderson) get away with it...
     
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  23. Newscience

    Newscience Gold Member

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    Geez, I guess that we Milepointers are just a bunch of complainers! :rolleyes: Who wouldn't want to "Fly the Friendly Skies of United"?:

     
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  24. CGK
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    CGK Gold Member

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    Very well said.
     
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  25. delff128

    delff128 Silver Member

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    I agree with OP for the most part but a tiered award chart based on status would be just as bad. A mile earned is a mile earned be it through in seat flight or credit card spend. United makes money in either circumstance. As an alternative, I would however support United making it less easy to acquire miles since currently the market is saturated with opportunities to amass miles.

    Sent from my iPhone using milepoint
     
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