Love the miles...but today's frequent flier programs serve no purpose
In his book “Differentiate of Die”, Jack Trout writes an interesting piece on the origin of frequent flier miles and why this universally popular program is today considered a bust by many experts.
In 1981, American Airlines introduced its AAdvantage program. Back then, the airline actually believed mileage rewards would:
- Encourage brand loyalty
- Bring in the competition’s customers who wanted better deals
- Differentiate American from United and everyone else
AAdvantage is now boasts over 50 million members worldwide. What management did not anticipate was the stampede by competitors to respond in kind and the virtual impossibility of stopping such a program once under way.
Today everyone gives away miles. You can get them by shopping in your local grocery store; you can trade your American Express points for them; and I wouldn’t be surprised if there was a thriving gray market for them all over the world.
The problem, as Trout points out, is that airlines are supposed to sell tickets, not give them away. Frequent flier programs, supposedly a customer service bonanza, have had the unwanted effects of:
- Reducing demand for paid tickets
- Limiting available seats for the high demand vacation spots like Hawaii
- Irritating good customers who can’t cash in their miles
And according to Leonard Barry, professor of marketing and director of retailing studies at Texas A&M University, what frequent flier programs “...have not done is differentiate the sponsoring airlines for the frequent travelers to the degree that justifies the costs and drawbacks. The frequent traveler concept, essentially pricing benefits for the better customers, is simply too easily imitated.”
Here’s the takeaway: While the objective of the program perhaps made perfect sense in 1981, it makes no sense today. Collecting frequent flier miles requires very little brand loyalty - you can just as easy ‘earn’ them at the grocery store or at The Home Depot, as one can by being a loyal customer. And without the loyalty connection, the program really serves no purpose.