business news in context, analysis with attitude

Got a lot of email yesterday about the MNB Radio piece noting that United Airlines has begun selling the privileges that formerly used to be enjoyed only by its best customers and most frequent fliers…which I suggested was a dumb idea because it reduces the efficacy of the loyalty marketing program even if it generates revenue.

One MNB user disagreed with me:

Personally I applaud this move. Why? I am probably like many Americans, I do not travel by air very often. Less than once a year. So this gives me the option of improving my experience while flying and not sitting there envious of the frequent fliers that can take advantage of the 'perks'. So, while the move may erode the value of the frequent flyer program for those individuals, in my opinion, the airline can find a way to add new value for these folks. Loyalty is important to airline, as is revenue, I believe the airline is smart enough to find a way to continue to add value and take care of all its customers.

I want to put this as gently as possible…but I categorically reject the notion that someone who flies United Airlines less than once a year ought to be treated the same way as someone who flies 100,000 miles a year. It simply doesn’t make sense. And let’s face it – there are limited ways in which to show appreciation for such loyalty, and United is now giving them away for a buck.

Companies that want to have a level playing field for all their customers, regardless of their spending levels, are making a serious mistake in my estimation. It may open the door for new customers to come in, but it also opens the door for loyal customers to leave…and it costs a lot more to get a new customer than to retain an old one.

MNB user Paul Schlossberg agreed with me:

Thanks for pointing this out to us. Great example of how to make a commodity from a premium marketing position (the elite level earned by spending lots of money to put your seat in their seats for 50,000 miles, 100,000 miles, or even more annually). Airline fares have been a commodity for many years. Now one airline is converting their elite status to a commodity. Let's see how long it takes for the other lemmings to follow down the path to completely turning off their most loyal (and most profitable) customers. They're seeking a short-term burst of marginal revenue. They're willing to trade it for (the loss of) long-term customer relationships. This is a case of not understanding the lifetime value of a customer.

What else could they do to make flying on business an even more difficult experience? Just wait. Someone at an airline headquarters will be in a conference room in the next week or two presenting another short-term strategy to maximize revenue or minimize cost. Will this new strategy benefit their most loyal (and most profitable) customers?

I think that it is Jeff Bezos of Amazon who talks about "obsessing over your customers." The airlines (and lots of others) should pay attention to what he's saying.


BTW…I found it amusing how many people wrote in abut the fact that united now seems to be treating its best customers the same way it treats guitars…which is a testament to the power of the Internet and people’s ability to lambaste companies with which they are not happy. (If you don't know what I’m talking about, go to YouTube and search for “United Breaks Guitars,” a video that has gotten more than five million views!
KC's View: