The Homa Files

Excerpted from WSJ, “Plunging Value of Fliers’ Miles Saps Loyalty” By Scott McCartney, Dec 9, 2008

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The plunge isn’t as severe as your 401(k) or home appraisal, but the value of frequent-flier miles has dropped so far that airline programs no longer drive customer loyalty as strongly as they used to … But now, a handful of airlines … are launching tweaked programs they hope will rebuild ties with fliers.

The percentage of online buyers who say they are loyal to particular travel companies fell to 25% this year from 31% in 2006 … Customer loyalty for airlines … are worse than for hotels and cruise lines. And travelers buy tickets based on price and schedule more than ever instead of choosing to fly a particular airline.

“Airlines are shooting themselves in the foot…Their loyalty programs are just not worth what they once were to consumers.”

The biggest force driving the erosion of loyalty is the loss in value of frequent-flier miles … Airlines have raised the price of awards and tightened availability of the cheapest award levels, forcing travelers to jump to more-expensive mileage levels to claim seats…

To be sure, frequent-flier programs still drive loyalty for some road warriors… And they still make lots of money for airlines … The programs have grown more profitable as airlines have made it more difficult to cash in miles and added fees and surcharges to awards…

Not surprisingly, research …s hows growing dissatisfaction with mileage programs…Some airlines are addressing these flier gripes and revamping their programs …

Industry watchers say it may be risky to continue to degrade frequent-flier programs … airlines need to re-examine if they have squeezed frequent-flier programs too tightly. He says airlines have ignored trends in other industries where loyalty programs are stronger, and made their rewards more expensive and more difficult to redeem than other loyalty programs.

“Airline passengers get whacked by a lot of sticks, but there are not a lot of carrots out there for them” … airlines need to reinvigorate their customer-service efforts across the board, improving service at the airport and on board aircraft … frequent-flier programs could be more valuable to airlines as stronger drivers of loyalty if carriers revamped their confusing and frustrating redemption schedules, and gave consumers better benefits for purchasing loyalty.

“The idea of trying to reward people for loyalty is good … but it has become too complex and frustrating in the airline industry.”

Edit by SAC

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Declining customer loyalty adds pressure to the airlines already heavy financial woes.  Passengers no longer see the value in the customer loyalty programs that were originally created to increase customer loyalty.  As such, frequent-flyer programs may be profitable for the airlines in the short-term, but in the long-term customer lifetime value is likely to decline having a great impact on the airlines’ bottom line.

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Full Article:
http://online.wsj.com/article/SB122877921525689525.html

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This entry was posted on January 28, 2009 at 7:06 am and is filed under Airlines, Customer Satisfaction - Loyalty, Mktg - CLTV. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.