Scott McCartney, The Wall Street Journal’s Travel Editor, penned an interesting article this week regarding airline frequent flier programs. The piece, titled What Airlines are Hawking describes some of the ‘unique’ rewards that frequent flier mileage holders are redeeming their miles for nowadays: Plastic surgery, big-screen TVs, and even high-dollar dinners with sports stars. While the point of Scott’s article was to highlight that airlines are charging their customers radically different prices to redeem miles depending on individual status and the credit card used, the article begs to ask the more important question: Have frequent flier programs lost their purpose? Do they really help build customer loyalty? And if they don’t, why do the airlines continue to administer these expensive programs?
Here is, perhaps, a better way to think abut the subject:
Imagine today that you are working at a major airline (without an existing frequent flier program) and are pitching to your Executive Committee the establishment of a frequent flier program. I suspect the conversation would go something like this:
You: I’d like the airline to introduce a frequent flier mileage program in order to match our competitors’ offerings. The purpose of the program would be to reward our loyal customers by allowing them to earn ‘miles’ each time they flew on our airline and then after earning the appropriate number of miles, be able to redeem those miles for a free flight or upgrade. Obviously, the details would need to be worked out (miles earned per flight, number of miles required to redeem, types of flights eligible for redemption, etc.), but the program would be pretty much identical to other frequent flier programs run by our competitors.
Committee: Would the program reward others besides our loyal paying customers?
You: Yes, almost anyone could earn points for credit card purchases and then redeem those points for free flights on our airline.
Committee: How would that reward our most loyal customers?
You: It wouldn’t.
Committee: Would we reward fliers from other airlines to redeem their miles on our airline?
You: Yes.
Committee: How would that reward our loyal customers?
You: It wouldn’t.
Committee: Would the program be set up so that it generated measurable customer loyalty, be easy for our customers to use, and easy for the airline to administer?
You: Certainly not. Most of our competitor’s programs show no measurable increase in customer loyalty, most customers find them overly complicated (some to a point where they don’t even participate) and it would be quite difficult for us to administer.
I think you get the point here. What do you think the chances are that the Executive Committee would approve your ‘customer loyalty’ request?
Probably no chance at all. Zero!
So why do most airlines today continue to believe that their frequent flier programs are worthwhile? The easy answer is that they probably don’t, but they also don’t have the fortitude to admit it and make the necessary changes. Remember, as originally structured, most frequent flier programs did contribute to increased customer loyalty and the programs were relatively easy to use and easy to administer.
What’s happened over the past thirty years, however, is that airlines lost sight of the program’s original purpose. As various competitors began to add more and more ‘features’ to differentiate their frequent flier programs, those same programs began to lose touch with their original purpose–again, that being to build customer loyalty. And so today, we have programs that don’t add any measurable customer loyalty and have become complex to both customers and the airline.
Every airline needs to ask this simple question: “If you didn’t have a frequent flier program in place today, would you invest the resources and time necessary to recreate what you actually have?” I suspect that for most airlines, the answer to that question would be a resounding “NO!” If that’s the case, then either get rid of the program or change it so radically that it aligns to its original purpose–to build customer loyalty.
Here’s the takeaway: If you didn’t have a frequent flier program, would you begin one today? Just as Peter Drucker asked a similar question about entering new businesses, the airlines need to ask that question about their frequent flier programs today.
