Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Heretical UA Cost Saving Idea: End Mileage Plus  
User currently offlineCtbarnes From United States of America, joined Mar 2000, 3491 posts, RR: 50
Posted (10 years 5 months 3 weeks 1 day 23 hours ago) and read 5176 times:

Bearing in mind UA's financial problems, there is one possiblity that has not been discussed, for which the cost savings could be massive meaning some protections for pensions and fewer cuts in wages:

What if Unted scrapped Mileage Plus?

I'm not sure how much this would save, but I think it would be substanital. The program could be phased out over the span of 2 years so to give everyone the opportunity to use or convert their miles.

Granted this may be unpopular at first, but it could mean lower fares and a possible lower cost structure for UA. Yes, it could be a daft suggestion (so please keep the flames down to slow bake).

I also have heard the airlines have wanted to get rid of their FF programs for a long time because they are expensive to run, but it might be a better move in the long run.

Just a suggestion. Does this make sense or am I way off base?

Charles, SJ


The customer isn't a moron, she is your wife -David Ogilvy
27 replies: All unread, showing first 25:
 
User currently offlineDeltAirlines From United States of America, joined May 1999, 8913 posts, RR: 12
Reply 1, posted (10 years 5 months 3 weeks 1 day 23 hours ago) and read 4945 times:

Wouldn't happen. One of the major things that keeps a business traveller with the same airline is the FF program, which allows him to have free first class upgrades, priority check-in/screening, pre-boarding, etc. By "dangling" these carrots out there, United is keeping the customer loyal to them. However, if they dropped MP, then you could be sure that the vast, vast majority of those MP Elites would be enjoying AA, DL, CO, NW, or US immediately.

Jeff


User currently offlineAlphascan From United States of America, joined Nov 2003, 937 posts, RR: 13
Reply 2, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4934 times:

Mileage Plus is one of the few "profitable" profit centers UA has. It does not lose money. It makes money.


"To he who only has a hammer in his toolbelt, every problem looks like a nail."
User currently offlinePicarus From United States of America, joined Dec 2000, 302 posts, RR: 1
Reply 3, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4925 times:

Charles,

Great question!

As a marketing director, I know that loyalty programs ARE expensive to maintain. However, airline FF programs are one of the greatest innovations ever created within the industry because they do stimulate brand loyalty and enhance revenues over the long haul; especially as FF programs have grown to include alliances and other partners.

Financially speaking, while accrued miles are a liabilities for the airlines under accounting rules, they're non-cash and don't affect cash flow, profitability, etc. Also, the airlines have instituted controls by placing expirations on unused miles. FF Programs are here to stay forever because they do work. If they didn't, Southwest, AirTran, Frontier, wouldn't have jumped on the bandwagon.

Now that I've said that, your idea could work if ALL of the airlines agreed to eliminate their loyalty programs at the same time. I don't what the legal implications of that would be, but it would be interesting.

Picarus


User currently offlineCtbarnes From United States of America, joined Mar 2000, 3491 posts, RR: 50
Reply 4, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4909 times:

This is not a sarcastic question, I'm really curious: How does MP make money? Also, what are the indirect costs (keeping non-revenue seats open, alliance obligations, etc.), and are these included in the figure.


The customer isn't a moron, she is your wife -David Ogilvy
User currently offlineStarlionblue From Greenland, joined Feb 2004, 17186 posts, RR: 66
Reply 5, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4895 times:

As has been said, UA does not make a lot of money on Monkey Class. Monkey is a low margin, volume business. Filling Biz and First is where the profits are. Any way to keep those seats filled is good, even an apparently expensive one that may raise prices marginally for Monkey.

BTW, If you get a credit card connected to your FF account, your miles normally stop expiring. But it's still profitable.

My boss is at some ridiculously maxed out platinum level on UA and my colleague about the same on US Air. As DeltAirlines said, if their miles dissapeared, they would look for a new carrier faster than you can say "Chapter 11".

[Edited 2004-07-09 18:29:36]


"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineMidnightMike From United States of America, joined Mar 2003, 2892 posts, RR: 14
Reply 6, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4873 times:

Not in a million years, Mileage frequent flyer actually make money for any airline that has it. Cancell the program and United would lose tons of customers.


NO URLS in signature
User currently offlineElwood64151 From United States of America, joined Feb 2002, 2477 posts, RR: 6
Reply 7, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4862 times:

Picarus:

You made every point I was going to make. Who are you a Marketing Manager for?

Now that I've said that, your idea could work if ALL of the airlines agreed to eliminate their loyalty programs at the same time. I don't what the legal implications of that would be, but it would be interesting.

I think an anti-trust issue would arise here. Especially since those oh-so-loyal FF customers would get screwed out of their benefits...

How does MP make money? Also, what are the indirect costs (keeping non-revenue seats open, alliance obligations, etc.), and are these included in the figure.

1) MP makes money by convincing customers who might otherwise chose a flight on another airline that costs the same or slightly less to choose UA. Remember that you have to earn 20,000-plus miles before you get much of anything from most FF programs.

2) The main indirect cost of maintaining the FF programs are:

Maintaining and updating the database.
Propagandizing/promoting the FF program.
Extra time spent on making Non-Rev reservations by res agents.
Maintaining any lounges or other "perks" programs, like express check-in.

Most of these costs are fairly minimal. Computer memory is now fairly cheap. Propagandizing the program can be done both on-board and at reservation and check-in. Only printing costs and mailings really pump up this section. The extra reservations time is fairly minimal, since only a small number of seats will go out as non-rev. And maintaining the perks of the program reinforces the customer's desire to stay with the airline, and further need only be done at strategic locations, not every airport.

As for keeping non-rev seats open, most airlines place a limit on the number of seats on each flight that can be booked non-rev, and there are black-out dates in most programs around major holidays and other significant travel periods.

Really, FF programs look like they cost a lot of money as Picarus mentioned, but there is actually very little cash tied up in them. And the revenue they generate far outweighs any real or implied cost of operating them.



Those who fail to learn history are doomed to repeat it in summer school.
User currently offlineCtbarnes From United States of America, joined Mar 2000, 3491 posts, RR: 50
Reply 8, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4839 times:

Thanks for the insights Picarus and Elwood. It sounds as if the cost savings generated would not be as high as I originally thought and may not be worth it compared to the customer fallout...

Charles, SJ



The customer isn't a moron, she is your wife -David Ogilvy
User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 9, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4805 times:

How does MP make money?

The majority of Mileage Plus miles are now awarded via partners rather than via United flight activity. Every mile awarded by a partner is revenue earned by Mileage Plus on a cash basis. On the flip side, the liability is not actually noted on the books until certain redemption thresholds are reached and then too only as the incremental cost of service provision. As long as the miles are not redeemed, Mileage Plus continues to earn interest on the cash float as well.

A loyalty program with plenty of partners is an absolute cash cow for an airline. If managed properly vis-a-vis inventory allocations, you can essentially clear profit margins in excess of 50% on your turnover.


User currently offlineOrdinduaflyer From United States of America, joined Mar 2004, 123 posts, RR: 1
Reply 10, posted (10 years 5 months 3 weeks 1 day 22 hours ago) and read 4773 times:

Sean, isn't it somehow booked as a contingent liability?

It would be very interesting to see a breakout (percentage) of UA's MP portfolio (or those of other airlines) -- of the miles that have been "earned" by the members, how much of it is earned by those of us who fly on a regular basis vs. the miles that are earned by those whose primary MP contribution is miles earned via their credit card, grocery miles, etc. I.e....how many current members does MP have who would be in a position to cash in miles for tickets or upgrades


User currently offlineSsides From United States of America, joined Feb 2001, 4059 posts, RR: 21
Reply 11, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4751 times:

I'm not sure how much this would save, but I think it would be substanital. The program could be phased out over the span of 2 years so to give everyone the opportunity to use or convert their miles.

I also have heard the airlines have wanted to get rid of their FF programs for a long time because they are expensive to run, but it might be a better move in the long run.

It is true that FF programs have cost more than the airlines probably planned for, but given their attractiveness to customers, it is probably just too risky to scrap them.

FF programs are successful in attracting elite customers who can generate $1000 of revenue for a short one-way flight. Airlines want to cater to this customer as much as possible. Right now, these high-dollar customers are their lifeline, and they will do whatever they can to attract them. If, for example, UA dropped its FF program, you can bet that AA, DL, US, CO, and everyone else would harp on it, inviting UA's frequent flyers to join their programs and get their business (in fact, UA did something similar a year or so ago; it offered elite travelers on other airlines an automatic upgrade to Mileage Plus elite status).

I think the trend, however, will be to increase rewards for truly frequent flyers, while making it more difficult for the twice-a-year flyer to earn miles and rewards. DL has already toyed with this approach; I think they have proposed offering only 1/2 miles for discounted coach tickets. This, along with restrictions on mileage redemption, will probably be the wave of the future for the mainline carriers.



"Lose" is not spelled with two o's!!!!
User currently offlineAlphascan From United States of America, joined Nov 2003, 937 posts, RR: 13
Reply 12, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4734 times:

How does MP make money?

For every airline FF mile given as an incentive by program partners and marketing partners, the airline earns income...say somewhere in the neighborhood of $0.015/mile (for large partners) to $0.025(for small partners).

Take a look at Mileage Plus or WorldPerks sections of the airlines' respective web sites. There are literally thousands of ways to earn miles without ever flying.

Millions of these miles are never used. $Cha...ching!$ Pure profit.




"To he who only has a hammer in his toolbelt, every problem looks like a nail."
User currently offlineMoneyShot From United States of America, joined Jun 2004, 93 posts, RR: 0
Reply 13, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4713 times:

I'm not sure what would happen but I don't think it would be good for the airline in the long run at all. Sure, it might save them money on free seats, upgrades etc, but what does than mean when all of their top paying customers are at WorldPerks, SkyMiles etc. I know myself, that FF programs are the only think that keeps me at an airline. To be honest, without that the ONLY things that the major carriers have is their international network.

User currently offlineOrdinduaflyer From United States of America, joined Mar 2004, 123 posts, RR: 1
Reply 14, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4687 times:

Ssides...I'm not sure I'd use Delta as a positive role model re how their changes have affected their ff's -- check www.saveskymiles.com to see some interesting opinions from DL ff's. They've (from what I'm told by DL ff's, I don't fly them personally so not firsthand knowledge) made it more difficult for even their "very frequent flyers"...the only ones it would appear to not be so difficult for are their "high revenue generating" pax (regardless of how frequently they are BIS on a DL flight)

Alphascan...your last comment is in the same direction I was heading earlier. I wonder what percentage of UA's outstanding miles fall into this "category" (for lack of a better description)


User currently offlineBostonguy From United States of America, joined Jul 2000, 514 posts, RR: 7
Reply 15, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4667 times:

A FF program can be that "tipping point" that gets a customer to choose one airline over another when all things are equal (for example, the customer has accrued lots of miles with United but not with American. The customer, wanting a free ticket, can be more likely to choose United over American when flight times are comparable, even though United might cost more for that particular flight and/or even though the customer may perceive United's service to be inferior to American's).

FF programs also can temporarily deter customers from defecting in droves to competitors when an Airline's pricing and service go south. Note I said temporarily... eventually continual bad service and out-of-sync pricing result in the loss of the FF customer. They can only take so much abuse!

Airlines could collectively abandon FF programs without anit-trust concerns if it was handled the same way airlines handle price increases. One tests the waters... if the others don't join in the increase then the first airline retreats.

Airlines, by more effectively limiting the number of seats available for FF awards, have helped minimize the cannibalization of revenue generating seats (Airlines don't want to give away seats that someone would have paid for). Of course, when FF members perceive awards as difficult to redeem then the value of the FF program diminishes and the customer becomes less loyal. It's a very fine dance the airlines have to do to balance not giving away seats that would generate revenue while maintaining a high-perceived value (i.e., ease of getting free seats) from the customers for the FF program.

Probably a greater concern to airlines these days is that they are having to make significant cuts in service, amenities, etc. in order to get back to profitability while the airlines that created the environment requiring cost cuts (LCC's) are moving more upscale. An article from another thread provides very good insight into the challenges both Legacy and LCC carriers face. This very detailed analysis tellingly doesn't mention frequent flyer programs, so I would doubt that those programs are such a liability that airlines would consider scrapping them.

http://www.economist.com/business/displaystory.cfm?story_id=2897525


User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 16, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4643 times:

Sean, isn't it somehow booked as a contingent liability?

Yes. It is booked as the INCREMENTAL cost of providing the service and then too ONLY WHEN a certain threshold is reached.

So for example, say an airline deems that the average incremental cost of a domestic RT is $10 in catering, $5 in insurance and $10 in fuel (hypothetical only) - it will book a liability of $25 for every 25000 miles in a single account (which represents a redeemable domestic RT). 24999 miles = no liability booked.

They use historic redemption patterns (eg. 50% Domestic RT, 25% Europe RT, 10% First Class RT, etc...) and book their liabilities proportionately according to those, corresponding to the deemed average incremental cost of providing each of those services.


User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 17, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4641 times:

somewhere in the neighborhood of $0.015/mile (for large partners) to $0.025(for small partners)

Your numbers are a little on the high side but the premise is correct. Most ad-hoc partners can cut deals for miles in the 2c/mile range and the larger contracts can go as low as 0.8c/mile.


User currently offlineStarlionblue From Greenland, joined Feb 2004, 17186 posts, RR: 66
Reply 18, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4626 times:

There are literally thousands of ways to earn miles without ever flying.

Earning miles you can do without flying. But in almost all FF programs you have to fly to get to the higher classes.



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineLTBEWR From United States of America, joined Jan 2004, 13203 posts, RR: 16
Reply 19, posted (10 years 5 months 3 weeks 1 day 21 hours ago) and read 4597 times:

About 2 weeks ago, I posted a topic "Future of Frequent Flyer Programs". I questioned the future of these programs due to the costs to the severly finanically strapped airlines. I got a few responses and I was pretty much shot down for suggesting that they might end or be become more restrictive as to gaining and redeeming points. There are now fewer airlines. All costs have to be considered subject to cuts. Almost all USA based airlines are running a/c with fewer available seats, especaily fewer 1st/biz class seats to upgrade to or claim on FF points. Many flights are near impossible to redeem FF points on (LAX-Hawaii for example). There are many people like me who don't fly as often as I would like for business or pleasure, but like the idea of getting a free ride sometimes, but with today's pricing enviorment for majors are FF plans too expensive? Could the end or making plans more restrictive hurt airlines as many of you here think?.
What I think you could see is already happening - like 50% of actual miles for the highly discounted fare. This could be extended to fares purchased by an employer who purchases at a discount. Some flights may have to be blacked out totally for redemption flights or at double points requirements and make it clear in the redeption information. Let's face a reality too - most people who travel for a larger employer don't have much choice in the airline used. If the co's primary airline from whom they get a volume rebate is AA or if your based in Detroit where your pretty much stuck with NW for all but a few flights, then in either case, you really don't have a choice.
Perhaps the number of miles to claim a flight with FF redemption trip should vary with the length of the proposed trip. Most programs require at least 25,000 to claim selected flights, but you can go EWR-SEA (which I did claim in 1995 with UA). Maybe a flight of 3000 miles should require more miles like 35,000, but if travel 1000 miles (EWR-ORD), maybe you use fewer miles (like 20,000). With today's computer systems and websites, this may not be impossible to consider. It would be fairer to those who don't live on the coasts. This would also encourage redemption.


User currently offlineBostonguy From United States of America, joined Jul 2000, 514 posts, RR: 7
Reply 20, posted (10 years 5 months 3 weeks 1 day 20 hours ago) and read 4532 times:

"Perhaps the number of miles to claim a flight with FF redemption trip should vary with the length of the proposed trip. Most programs require at least 25,000 to claim selected flights, but you can go EWR-SEA (which I did claim in 1995 with UA). Maybe a flight of 3000 miles should require more miles like 35,000, but if travel 1000 miles (EWR-ORD), maybe you use fewer miles (like 20,000). With today's computer systems and websites, this may not be impossible to consider. It would be fairer to those who don't live on the coasts. This would also encourage redemption."

This is already done in some form by many airlines. Intercontinental travel, or travel to Hawaii, frequently require more miles for awards.

Within the continental US, however, most people book an award on a flight to a destination they need to travel to (family reunion, wedding, they want to vacation in Florida so they "need" to fly there), rather than booking the longest segment possible. People who live on the East or West Coasts usually use FF awards for non-trans-con segments. Instituting a "zone system" (based on point to point mileage) would, however, result in perceived unfairness to many of those living on either coast.

From your post it sounds as if you want to fly somewhere for free and use fewer miles to get the award ("Maybe a flight of 3000 miles should require more miles like 35,000, but if travel 1000 miles (EWR-ORD), maybe you use fewer miles (like 20,000)" and "It would be fairer to those who don't live on the coasts."" It sounds as if you want to tweak the FF programs so that you can earn travel faster than you can right now while causing those on the coasts to sometimes have to use more miles for certain flight awards than they currently are using. What you're proposing is actually a disadvantage to both the airline (free ticket for less mile points) and customers (those on the coasts who do use awards sometimes for trans-con segments). I don't see how the airlines will be helped by serving someone like you while taking away something from so many others. For most FF members, both middle-country and East Coast/West Coast, there is no disadvantage in the award scheme for travel within the US. Good try on your part to get free seats for less points, but it ain't gonna work!

Your tiered-approach within the US would, in my opinion, be be harmful to the relationship airlines have with their FF members.


User currently offlineAntares From Australia, joined Jun 2004, 1402 posts, RR: 39
Reply 21, posted (10 years 5 months 3 weeks 1 day 3 hours ago) and read 4277 times:

If some of the reports I have heard are true the UA scheme has just about ended if you try to redeem your points on other Star carriers. The allegation is that it has either stopped or is very slow to pay the fee each member of the alliance pays each other to cover a redemption of reciprocal schemes.

Perhaps someone can clear this up.

It sounds like a re-run of the Ansett Golden Wings scandal, where the other Star carriers didn't want to know about you the moment Ansett died.

Incidentally, I think the value of these schemes is being seriously eroded by the sale of points to non airline customers, like mortgage lenders and the like. People who have no loyalty to the airline concerned are clogging the system with points the carrier sold to non-flyers.

Personally I don't give a bugger how many points I don't earn chasing a better deal on an airline that has a scheme I don't belong to.



User currently offlineLufthansa From Christmas Island, joined May 1999, 3224 posts, RR: 10
Reply 22, posted (10 years 5 months 3 weeks 1 day 1 hour ago) and read 4194 times:

Ctbarnes

As an economist, I'd like to take a moment to explain to you and everybody else exactly how a loyalty program effects business. I'm going to assume you all have a most basic understand of the principles of supply and demand... if not, let me know and i can provide a reading list if your interested.

Firstly, United, AA, Lufthansa, Cathay and Qantas all have one thing in common. PPL who travel a lot, are willing to pay slightly more to travel with them. Why? That is the question I want you to keep in mind thoughout this discussion.

Loyalty programs as designed to effect supply and demand curves for a particular good. You all should be aware, that at a certain price level, the market will demand a certain Qantity of a good.

A loyaly program attempts to effect this by shifting the supply and demand curves to the right. In order words, to get consumers to demand a higher qantity of a good at a higher price than they otherwise would. I'd draw a diagram to explain it normally but it is a bit difficult to do it in this program.

Anyway, this is achieved by raising the switching cost. That is, by giving the consumer a bigger loss for switching to alternative goods.... in this case, alternative airlines or an alternative mode of transport altogether. This is achieved by making loyalty scheme's non-linear. Meaning, that they more of them you earn, the more generous the rewards are, so you incur a much greater loss by using an alternative product. That is why frequent flyer programs have elite levels. It is a way of raising the switching costs for their most important customers, and the idea is to raise it to a level, where people would rather pay a little more and use your service. The idea in theory is to try and earn both more loyal customers and higher profits, except that the level of this varies from market to market, due to the different price sensetivites of customers.

Now ask yourself the question. What keeps flyers loyal to United? Lets say i want to fly LAX-JFK. I've got lots of options. Frequent travellers are aware of jetblue's deal. Leather seats, PTV's and more leg room for most ppl are a pretty good deal, and while you are in a narrowbody, this is no different to the days of DC-8 or 707 flights on this route, plus you can only sit in one seat at a time, so this isn't likely to be that bigger deal. Some may even prefer it because they may feel they're getting more personal service. So, how does a carrier like United seperate themselves? Easy. If you fly a lot, there is a very good chance, that you'll be happy to pay an extra $30 for united on this route. And if the price is the same, you'll most likely definately use United. If you don't fly a lot, it doesn't really matter because you will probably never redeem your miles anyway, so, earning them is purely a pyscological thing. You may still stay loyal because of it so its worthwhile issuing you a card.

The next thing to realise is, that it takes roughly 6 times more money to earn a new customer than to retain an existing customer. So, the lifetime value of a customer is a very important consideration. In 1998, British Airways estimated the lifetime value of a Business class customer was 150 000 United State Dollars. A first class customer is a hell of a lot more than that. So, keeping these customers both happy and loyal is an extremely important thing. A frequent flyer program may seem expensive to maintain, but, the loss of such high customer's revenue would be even more expensive. You have to spend a dollar to make a dollar.
So there you basically have the motivation for a loyalty program and why UAL has such a generous one. IF your worried about the cost, perhaps a better way to save money would be cutting back some of the customers, and perhaps increasing the flight benifits even more at the same time (raising the switching cost even further). It would seem that many American airlines have gone overboard with the amount of non-flight partners they have in their programs. Still, if united were to take up this suggestion, they can kiss goodbye half of their first and business class customers overnight.

The switching cost is the reason why united award miles for TED flights. Both ted and its LCC compeition offer similar products.... but only TED offers mileage plus. UAL have a large customer base already in these cities... who they know are know more price sensative then ever, so they want to still somehow raise the switching cost (via miles for TED flights) yet give them the price that they are demanding. And so far... it appears to be working!

So there you have it! I hope this is interesting for some. Any questions or if i haven't explained anything well (i've just received a large quantity of Stella Artois and am a little under the weather right now) please feel free to ask.

Cheers
Lufthansa


User currently offlineCtbarnes From United States of America, joined Mar 2000, 3491 posts, RR: 50
Reply 23, posted (10 years 5 months 3 weeks 23 hours ago) and read 3961 times:

Lufthansa,

The one thing that jumps out in reading your discussion is the assumption that the customer is going to operate in a predictable, rational fashion. Yet consumer behavior is a far more random element than I think airline exectives want to admit to themselves. Customers will continue to pay slightly higher fares in order to get the goodies (and yes, I'm one of them-I fly often enough to get a free ticket once in a while but not often enought to get gold-encrusted card status), but at the point where customers feel their loyalty is not being rewarded, or they feel they are being taken for granted, they will jump to someone else's program. The second random element is that some of the perks are beginning to lose their luster. I have heard many stories of 1K travelers who have more miles than they know what to do with, and do not have the time to use them (donations welcome  Smile ). Bypassing security lines, lounge access, priority boarding etc. are often seen as far more important, as are novel ways to use their miles. When Canadian Airlines was still in business, for example, you could purchase 30 minutes in a DC-10 simulator for 100,000 miles.

Therefore, while it is true that customers are willing to incur a greater loss for a perceived greater good, this only works if the customer perceives they are getting added or future value to compensate for that loss. Once they stop perceiving that (and it may or may not be because of anything the airlines do or don't do), they then begin to realize they have nothing to lose by switching over.

Have a Stella for me!

Charles, SJ

[Edited 2004-07-10 18:03:39]


The customer isn't a moron, she is your wife -David Ogilvy
User currently offlineStarlionblue From Greenland, joined Feb 2004, 17186 posts, RR: 66
Reply 24, posted (10 years 5 months 3 weeks 23 hours ago) and read 3930 times:

The one thing that jumps out in reading your discussion is the assumption that the customer is going to operate in a predictable, rational fashion. Yet consumer behavior is a far more random element than I think airline exectives want to admit to themselves.

I may only have a BA in Economics, but let me responds to this. In general, if consumers have good information (the big "if") they will behave in a rational manner AS A GROUP. There may be individual discrepancies, but on average this will happen. If this were not true, most economic theory would be useless (and some say it is  Big grin).

Also, the consequence of making FF programs non-linear is that customers will tend to stay with the airline where they first earned miles. That's were marketing comes in.


Also, as you say, perception is everything.



"There are no stupid questions, but there are a lot of inquisitive idiots."
25 Ctbarnes : True enough, starlinonblue. The operative word in your argument is 'if.' Problem is we live in a world of imperfect markets and, especially in the cas
26 Tango-Bravo : What if Unted scrapped Mileage Plus? --------------------------------------- It would be one of the best -- quite possibly the best -- move United cou
27 StargoldLHR : Ive currently got 350K miles in my UA Account. I have burned 300K in my time as well. This is 650K miles in UA alone. Although Ive over a million airm
Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
UA Restricts Mileage Plus Even Further posted Wed Aug 23 2006 15:18:22 by 764
UA Mileage Plus Named Best FF Program by CEO Choice Survey posted Sun Oct 23 2005 06:37:23 by CTHEWORLD
How Do I Use UA Mileage Plus Card? posted Tue Jul 5 2005 19:38:13 by HPRamper
UA Mileage Plus With USairways...is It Possible? posted Mon Feb 14 2005 02:22:19 by ERJ145LR
UA Letter To Mileage Plus Subscribers posted Sat Dec 7 2002 04:06:59 by CMK10
BA Executive, AAdvantage, UA Mileage Plus posted Wed Oct 23 2002 02:14:53 by Alitalia777
QF Frequent Flyer, Or UA Mileage Plus? posted Wed Jul 3 2002 23:54:08 by Alitalia777
UA Mileage Plus Celebrates 20th Birthday On 5/6 posted Tue May 1 2001 00:06:23 by Jiml1126
United Mileage Plus Surcharge posted Tue Oct 24 2006 13:15:43 by B777A340Fan
Cancelling A Mileage Plus Award Ticket posted Sat Aug 19 2006 22:59:03 by Hawaijahaz