http://www.youtube.com/watch?v=DZnEjmpnCTI

Peter Fader, Professor of Marketing at the Wharton School of the University of Pennsylvania, talks above about Delta’s new Skymiles2015 program. I encourage you to sit thorough all 15 minutes of it. It is telling but to me it raises as many questions as it answers.

The first thing that hits me is this: is it a good idea to only reward the top 4% of your customers even if they bring in 25% of your revenue? What about the other 75%? Can a company thrive on 25% of what they make now? Now, I get that everyone will not leave Delta. Most will stick even with the horrid Skymiles2015 changes to the program (from the normal flyer’s perspective that is).

Also so telling to me is Mr. Fader’s closing remarks in the video. He says:

“I could switch. But, because I am at the highest [frequent flyer level] for US Airways and I’m one of those customers who gets treated pretty well, I don’t really have a reason to switch away from them. I’m one of the few people who will stand up and say, “I like the way that US Airways treats me.”

Now, it could get even better if they restructure their loyalty program in the way that Delta has. And while there’s no specific evidence of it, I predict that they will do that as well. So, I have no reason to jump ship and try other airlines out.”

So he is happy where he is, under the current US Air program, but he wants AA/US Air to have a Delta program that could be better, but he is NOT willing to RIGHT NOW switch to the clearly better Delta program? Really? If the Delta one is so great, why not vote with your feet and move over and stand behind your assertions?

Here is what I see happening in 2015. Delta flyers are going to be beyond upset when they see how little they are getting back from flying Delta. You see, IMO, discount personal and business flyers have put up with all the lucrative little fees and extra costs Delta charges because we at least get some points back at the end of the day. In 2015, the continued FULL COURT PRESS will be more than ever but “you” will only get 10-30% of the rewards you got before. How happy are you going to be then to pay all those fees at that point? I thought so.

What about the other airlines? United is a mess. AA/US Air needs to find it’s footing and that will take some time. Plus, why switch and follow Delta until you have a chance to see how it goes. If it works, switch then, If not, you can say: “Come on over to us, we are better and NOT changing how we reward flyers“.

I think 2015 is going to be an interesting year for aviation and rewards programs – don’t you? – René

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Posted by rene | 18 Comments

18 Responses to “Is the change to revenue based inevitable for all airlines? An interesting Univ. of Penn. video”

  1. patricia says:

    if DL changes the MQD waiver only down to Plat level (so Diamonds must qualify via MQD + miles/seg), would you be downgraded?

    and if so, would you still stay loyal to DL ?

  2. James W says:

    I travel weekly on the lowest fares, and calculating in the Diamond multiplier of 11 for miles I will be coming out way ahead in the new program. I will go from 4000 miles from GEG to DTW weekly to usually around 6600 for the same trip (on average). That said, it does nothing to make my experience better on a weekly basis. I get the upgrade from SLC to DTW on a 757 less than 25% of the time since I am on such low fares. If I was Gold or Platinum I think I would have some major issues. Lets say that I fear losing status more than ever. Not many airline options in my home town of Spokane, and as you say, United is a mess. If Alaska flew more places I would be tempted to change to them, their program is superior for inflight long haul flights if you have top status (IMHO).

  3. Delta Points says:

    @patricia – As long as PLATs got free award changes, yes. If they change that, no.

  4. Andy says:

    Many airlines around the world give 25% or 50% Elite and/or redeemable miles for lower fare classes (which is pretty good approximation of revenue). That basically achieves the same thing.

  5. Jason says:

    Nice post and video. I’ve been reading your blog for awhile but this is my first comment. I have to disagree with you — I think the SkyMiles 2015 changes will be very good for Delta and as far as the folks who will come out as “losers” under the new scheme, isn’t it obvious that these flyers were too well-rewarded in the past? The industry analysts seem to all agree that rewards based on miles is fundamentally unsound and I agree. Just as this move follows others in the industry, more will follow Delta as well.

    In any case, I’m switching to Delta in 2014 and can’t wait for the 2015 changes!

  6. John says:

    Where am I going to go? In MYR it is either AA/US (Spirit Airlines quality service) or DL. I was once Silver on US and Gold on DL at the same time. So, I personally know that DL wins hands down every time.

    But, once again, WHAT CHOICE DO I HAVE???

    This week to SYR, I’ll get 5818 RDM but next year I’d only get 3551 RDM. So, I guess I’ll sit back and say “Thank you sir, may I have another. And, if I promise to give you all my money, please don’t take away my SC membership.”

    #NoWinSituation

  7. Peter says:

    So Delta is not going to reward milage/fun runs. Not really surprising, just that it took so long. Their program will now become more “rational” in that they will reward those that contribute to their bottom line (revenue only), and not those who are gaming the system.

    It will hurt me as I only fly international at low rates. But as a CPA, I understand their decision. As long as they don’t change their route, i will be on board.

  8. Delta Points says:

    @Jason – txs for both reading the blog and commenting and for flying Delta!

  9. Delta Points says:

    @Peter – we will still take mileage/fun runs they will just have to be even better deals. we still need MQMs.

  10. Peter says:

    I guess I don’t understand the 2015 structure. I thought that it solely revenue based. have to check it out again.

  11. Peter says:

    So it looks like the Medallion program doesn’t change from 2014? Sorry, missed that reading it the first time through.

    Peter

  12. Delta Points says:

    @Peter – the key is MQM earning does not change. It is ONLY Skymiles earnings that changes.

  13. KevinIN says:

    I would like to see this guy shove his “customer inertia” down his throat. When we talk about customer worth, what is it saying about me and my future dollars? Is this guy a paid spokesman for Delta attempting to smooth over the changes?

    Customer lifetime value…………this is simple they will lose customer share. The biggest question is will the top 4% continue to spend in a fashion to keep the revenue in place they expect. Are they missing analytic horsepower or simply short sighted for the 96% of customers?
    Go in a different direction? How can he say that those other airlines should change, but he doesn’t embrace?

    How can you say you are locked in but yet you could change? This guy speaks out of both side of his mouth. Does he really believe that he can like the US Airways program and embrace Delta at the same time all while saying he doesn’t see a need to change? So frustrated with this……….

  14. john says:

    I must be missing something because I do not understand how anyone who flies on low fares like the second commenter thinks they can come out ahead under the 2015 program. To earn 6600 miles for GEG-DTW in 2015 he must pay more than $600 for this ticket since taxes and fees don’t count. That is not my idea of a low fare. Plus today if he connects through SLC he earns over 11000 RDMs not 4000. Next year he would have to pay $1000 for his ticket (actually more since fees and taxes are excluded) to equal what he is getting now! I don’t understand the logic.

  15. Delta Points says:

    @John – it is not about the Skymiles. It never has been. They are almost NEVER a win. What matters are the MQMs and they will NOT change in 2015. See?

  16. john says:

    This video was very educational but it must have come from Fox News because it was so fair and balanced. There should have been a knowledgeable opposing view represented too. It is another case of the rich getting richer. In this case, their gain comes at the expense of the moochers in the back of the plane and deservedly so according to the prof. Truly class warfare. Instead of the lowly 47%, we now have the worthless 96%. The prof. glosses over these changes as being a small reduction for the masses not the huge devaluation it is. I agree there will be a sudden awakening next year as the reality of these changes hits home. For all but the highest cost fliers the new program is a poke in the eye with a sharp stick.

  17. john says:

    Rene, How is delta 2015 not about skymiles accrual? To clarify, my comment concerned the James W comment that as someone who flies on the lowest fares he would get more skymiles under the 2015 program. Based on the information he provided, I believe that is incorrect. His MQMs won’t change but he should get a lot less RDMs. Right? Thanks.

  18. Delta Points says:

    @John – 2015 same mqm less rdm yes.

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