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THE INCREASING PRICE OF LOYALTY

March 5, 2014

Having created America’s first frequent flyer program (Western Airlines, June, 1980), I’ve found the news that Delta (Western merged with Delta in 1985) is changing to a dollar base program fascinating. I remember pitching the frequent flyer idea to Western senior executives who thought it was crazy to reward your best customers (“We already have their money, why spend more money on them?”).

I also remember telling a room full of skeptical minds that because we were going broke (losing a million dollars a day) we needed a short-term marketing program to try to raise the average fare; travelers would focus on miles, not dollars, so we might be able to raise our average fare. I also cautioned that this was a reverse mortgage and that eventually we would have so many people flying free, we wouldn’t be able to handle them. I told the group that we couldn’t continue this incentive indefinitely, plus no major airline would match us. Ah, so much for my crystal ball. After three decades, rewarding your best customers is now called a loyalty program and is Marketing 101 for every kind of business.

With more than 90 million Skymiles members I guess Delta has decided that your “best customer” is not someone who uses your product the most, but pays you the most. Starting next January (2015), it will reconfigure its program trying to bring in more high paying business travelers. As reported by CBS, “Customers will be able to earn between five and 11 miles per dollar, based on their Skymiles status” a Delta statement said. Those who use a Delta Skymiles credit card will earn an additional two miles per dollar.”The introduction of a new model for earning miles will increase rewards for those who spend more as well as differentiate the Skymiles frequent flyer program for our premium travelers,” said Jeff Robertson, Delta’s vice president in charge of the Skymiles program.

After 34 years it is certainly time to change a program that was supposed to be a short-term incentive. But I predict that they will get a lot of push back. They will also have to look for ways to simplify this program. But the real challenge for consumers isn’t how you earn an award, but can you use it? That is the real marketing issue.

How do you accommodate millions of people who have earned millions of miles? I suspect that Delta has decided that if you are not a “high paying” customer, they don’t want you. That is also why most airlines are adding “fuel surcharges” and making you earn far more miles for a trip. Staff discussion: How easy are you making it for ALL your loyalty club members to use their benefits? That’s the marketing discussion you should be having.

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