Flaws of frequent flyer programs and sensitivity to customer needs

There is no company today in the tourist business (passenger transportation, hotels, rental cars, credit cards,  and so on) not offering either its own mileage program or being a member of a big affiliate network. I think the reason is simple - typical middle-class road-worriers won't use their service without award miles or points. Those companies made a very smart observation many years ago and built new channels of attracting new customers and sustaining customer loyalty. They found that though frequent fliers have some travel policy from the management regulating their choice the choice limits them to yet a few competitors in a niche. Those smart companies found a way to influence on that choice and it was the award points programs.

Hertz vs. Avis, Marriott vs. Hilton, Delta vs. Continental - just a few examples. A traveler's company may restrict him in budget or make a subset of business partners he can choose from but typically there is still a choice. The smart companies from the travel industry understood that the company will pay for tickets, car, and hotel, but it's up to the traveler to choose what particular provider to go every time.

What I found though is that not all of them are executing this idea to really differentiate and attract picky customers rather quite formally just to check a V in their program list.

An example is Hilton and Marriott require you to spend 70 and 75 nights per year to achieve the highest status in their network (diamond and platinum correspondingly). But Hilton allows you to do it in any continuous 12 month span though Marrriott only in a calendar year. A new customer choosing a network in the middle of a year will likely go to Hilton since in Marriot he has missed already half of the qualifying period.

 

There are flaws in almost every program. Hertz doesn't let you use your its miles anywhere but in North America (making collecting internal miles meaningless for international vacations). Delta doesn't let you borrow miles (as Lufthansa for instance does). United doesn't let you transfer miles from account to account that precludes from aggregating miles.

Another very obvious step each program can do (and almost none does) is to offer miles/points as a compensation means. They easily can distinguish frequent fliers/travelers from private ones and offer the former miles as a first option to compensate for any inconvenience. It doesn't make sense for problems with the Internet in a room to offer exclude it from the bill - the less bill the less point the traveler gets.

I'm saying a simple thing. If all the companies are hunting for new customers and increasing existing customer loyalty and have made a huge step for that with the miles/points programs why not to do it right and really attract new customers? Most of travelers still have options. Why not to please them with a program that does what the travelers expect from it and makes them very consistent clients?

Technorati tags: miles, travel, frequent flier

Comments

[Richard Veryard]

Hi Roman, I agree with what you are saying - service providers certainly need to be more sensitive to customer needs. But I believe there is an opportunity for much more radical and genuinely value-adding transformation.

See my discussion at

http://www.veryard.com/so/2006/02/value-deficit.htm

[viinnie mirchandani]

I have consiously been weaning myself off frequent flyer programs as my prime decision criteria. After having flown 2.5 m on Delta, I sitll have to fight and call multiple times to use the awards? Or they want you to use double miles.

You appreciate a somewhat simpler program like Southwest's. No capacity controls (program is changing though), use it up within 12 months. Their attitdue if YOU, MR CUSTOMER EARNED IT, USE IT WITH PLEASURE. WELCOME ABOARD.

Since I run my own business, I also get annoyed that most hotel chains give big companies big discounts, but will not give me as part of AAA, much bigger than any single company, the same discount. Fine. I shop around each time. Not much loyalty between Hyatt, Marriott or Hilton...

Frequent flyer programs cannot make up for poor pricing, customer service or product...

[Roman Rytov]

Guys, your comments inspiered me to dream in more drastic terms about it. Here is the second part: http://roman-rytov.typepad.com/miles/2006/02/flaws_of_freque.html

[Randy Petersen]

Good perspective. The reasoning for Hertz is that outside North America stations are often franchises and individually owned. For instance in the U.K. they have an entirely different loyalty program in play. With no central marketing department (unlike, say, most hotel programs) it makes it very difficult to determine who internally earned and is owed for redemption and perks.

Just like Starwood Hotels, a huge majority of their points are earned by members in the U.S., bit the number one redemption property: Westin, Cayman Islands.

The challenges of globalization.

[Roman Rytov]

though the reasons maybe clearly understood they don't excuse. I'm using Hertz only because my company obliges me to pick up a vendor from a limited set and others in the set have no analogy to "Hertz Gold". Once Hertz feels they loose international customers to a deepper integrated aliance they'll find a way to adjust the policy to the franchizing.