Airline Executives Need Mandatory Frequent Flyer Training

There’s a major difference between “know that” and “know how.” The latter comes from deep practice and a development of tacit knowledge that comes from first-hand experience. And airline executives too often lack know how in loyalty marketing and make big mistakes that undermine profits as a result.

The former head of the Malaysia Airlines Enrich frequent flyer program says devaluations hurt airline profits, and that there are unnecessary pain points in delivering benefits and services to an airline’s best customers.

In fact he even cites the revenue-based move at Malaysia Enrich as a money loser. Reading between the lines that suggests to me that it was imposed by airline management rather than coming from the loyalty marketing team. At American Airlines Scott Kirby and Andrew Nocella demanded copying Delta and United on revenue-based earn, over alternatives presented by the AAdvantage team. It’s no surprise that with those executives now in top leadership roles at United, MileagePlus eliminated award charts.

It’s always struck me as incredible that with frequent flyer programs in some cases accounting for the entirety of an airline’s profits that they’d be so cavalier upending the value proposition of those programs. Creative destruction matters, even in profitable businesses, but there needs to be some pretty clear upside before risking multi-billion dollar businesses.

Mark Ross-Smith says delivery of benefits, and cavalier attitude towards programs themselves, stems from a lack of understanding of the programs on the part of airline executives who do not use and experience their key product offerings personally.

Not only don’t employees buy expensive tickets, use airline lounges, find pre-reserved seats changed, and experience redemption frustrations but the mechanisms they use to supposedly understand their customers are unhelpful: “outdated surveys..annoying focus groups..inaccurate often bias[ed] feedback forms.”

When the airline staff are more invested in the program, when they’re feeling the pain on a regular basis – they’re more likely to take action.

Mark Zuckerburg famously forced Facebook employees to use the Android App – because it was so bad. Outcome? The Android app is now superior to the Apple version. Considering most of the world use Android phones – this was a positive move for the majority of Facebook users.

This isn’t unique to frequent flyer programs. Famously it took nearly a year for Doug Parker to try his airline’s new domestic product that was being rolled out across the entire airline. It’s important to experience the product being sold to customers or else you won’t understand your customers.

Ross-Smith argues that senior executives should be trained in the frequent flyer program, and loyalty executives have actually earned elite status as a frequent flyer. He also argues for a staff frequent flyer program

Instead of earning miles when flying – perhaps it reduced status earning. Allow staff to fully utilize FFP benefits if they hold elite status with the airline or in the alliance. Accelerated miles earning for staff who spend on the airline co-brand credit card. Do a deal with the issuing bank so that all airline employees are automatically approved for the co-brand credit card (and charge the bank for the deal! — see my commercializing loyalty programs for more tips)

The most fundamental lesson of marketing is to understand who your customers are, and find more people like them. That starts with understanding your customers.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. With the 500+ DFW flight cancellations today, a travel insurance primer would be great. I had to spend $6000 to re-book us tomorrow since AA couldn’t get us to our destination until Tuesday. The insurer claims it is covered ($1500 per person for the flight, $150 per person per day for incidentals, need to find out my baggage loss-delay coverage through the insurer). I also booked with AA miles and the Barclay Red (so I should have some coverage that way also). But I would love a refresher and tips- so glad I paid for that insurance!

  2. This is a classic analysis of how airline management within the US3 has tanked in its uncontrolled dive toward mediocrity; coupled to that the failure of Board stewardship.

    This depiction of the failure of leadership in the legacy airlines nicely segues to explain how Amtrak faltered and failed with the demise of real railroaders managing its performance.

    Up until the introduction of Amtrak in 1971, the Santa Fe Railway continued to operate the classic, All Pullman, Extra-Fare, “Super Chief” between Chicago-Los Angeles. The epicurean dining standards on this train were consistently so high that the railway’s Chairman & CEO, John S. Reed, did not even bother having his meals prepared in his private business car, but rather, took his meals in the first class diner with the passengers. Within two years of Amtrak taking over the fleet of “Chiefs,” Mr. Reed was so indignant that Amtrak did not fulfill its commitment to maintain the first class standards of the “Super Chief,” particularly dining and lounge facilities, that he withdrew the Santa Fe’s permission from Amtrak in 1973 to use the name “Super Chief” (and “Texas Chief”)!

    W. Graham Claytor initially kept the Southern Railway’s flagship, “Southern Crescent,” out of Amtrak. As Chairman & CEO, he actively rode this deluxe train he was so proud about, talking with crew and passengers; ensuring dining standards between Washington-Atlanta-New Orleans were first class; even notating mechanical and other issue on his business card to be fixed when the train arrived at its end point. Like Mr. Reed, Mr. Claytor knew how to properly run a passenger train; even removing an Amtrak sleeper from his train and substituting Southern’s own sleeper that functioned as intended.

    These are but two examples of the transportation business world I knew, and what we have lost, where the CEOs were hands-on and would not accept any BS, or, diminishing value for the passenger.

  3. Compared to most other businesses, I think top airline executives are SHOCKINGLY familiar with their product. After all, they use it almost every week! Very few company executives in most businesses can say that. Now, you might not like the conclusions they draw from those experiences — especially combined with the treasure trove of marketing data the airlines have and don’t share with you — but to say airline executives are unfamiliar with their product (including their frequent flyer programs) is incredibly naive and just plain wrong.

  4. I went to one of the top universities in the world. I received offers and toured some of these airline revenue management departments. What you’re preaching Gary is right. But those guys and girls just don’t get it. That’s my anecdotal experience.

  5. @chopsticks They fly as cash paying customers? They accumulate frequent flier miles only to find them devalued?

  6. I guess the the big change needed is to give the loyalty program managers a loyalty KPI instead of revenue KPI. People will do what they are measured on.
    The moment the CC bonus inflationary nonsense is killed and miles need to be earned butt in seat we are where we need to be.
    Until then I will not be loyal as airlines are not loyal to me. Instead I will be prostituting around to get me the best deals.

  7. @ chopsticks
    I doubt any management at united ever had his trip cancelled, seat assignment removed, paid upgrade not honored, return ticket cancelled for no reason, denied entry because of overbooking, have a flight attendant look at them and threaten them with: are we gonna have a problem today?
    No, they don’t know their own product, since the united they fly is not the united everyone else has to put up with.

  8. Used to go out of my way to fly United because I felt the benefits were worthwhile. No longer. I have elite status on two major alliances but also fly Delta, Spirit, etc. Just don’t understand how less of my business for United is supposed to be a good thing. And with their most recent program change (the last change is 9 months ago!) United’s unique value proposition: predictable award planing is gone.

    With every cut trust is lost and the stickiness of their loyalty program gone.If an airline has a really horrible loyalty programs like Delta I only book them if they have the best connection between two points (which thankfully is rarely for me).

    On cross atlantic travel I might detour and fly with Turkish, or SAS, or fly Delta, American. I’ve found with good advanced planing I can find really great business class fares. Too bad United is loosing an ever growing part of my spend.

  9. @ron, the money they get selling points to banks for credit card purposes is the main source of revenue for the loyalty programs, and indeed often for the airline itself. That “nonsense” is not going away.

  10. @ DaveS

    Obviously I am aware of that. But selling miles to CC companies has nothing to do with running a loyalty program. It is not different from selling fish on a market.
    Thus if airlines do not give a shit about rewarding loyal customers and try to make them stick, my point is why should we bother?

  11. @Rail Provocateur. Interesting comment about Amtrak. Yea, if the government takes over, quality goes down.

  12. To Other Just Saying:

    You are quite correct that quality does indeed go down when the government takes over, as their is a total lack of competition to keep all parties involved in line, competing on service, price, the customer experience, etc.

    Do note how this is changing in the EU where laws have been passed to force their state railways to open-up their infrastructure to real competition–be it private operators, Flixbus operating its trains, or, even from other state operators.

    Just think back to the ORD-LAX route, when we had Continental, TWA, American, and United going head-to-head with their non-stops. Today, we’re left with the vestiges of a Soviet airline monopoly–the US3. What a difference, eh?

  13. Is maybe short term profit the basis of these evils?
    If you made money today, what difference does it make if you will make a profit next year?

  14. I used to be senior executive at a large hotel chain. I was granted top-level status in the frequent guest program (the top that could be earned, not the invite-only program) just so I could experience what our guests did. In practice, many times the hotel staff knew I was coming and so were probably on their best behavior, but often enough I seemed to be greeted as a regular customer. I did get some valuable insights from my experiences, and occasionally fed some suggestions to the head of our loyalty program. Some of those changes were subsequently implemented. As Gary and others have commented above, it helps to know what your customers experience.

  15. @Rail Provocateur. Well, I ride the subway every day. Dirtier. Prices higher if you include subsidies. Real serious equipment problems. The big three have oligopoly or monopoly control, but not monopoly control. I think it would be worse, over the long run.

    I believe in free markets and competition. However, I cannot explain why the Japanese train system works so well, when Amtrak works so badly. What do you think?

  16. @otherjustsaying Japan is much smaller, so it’s relatively easy to have trains crisscross the country.

  17. @Rocky. True. But then why is New Jersey Transit, Metro-North and Long Island Railroad such a mess. On Metro-North, I used avoiding cars with toilets in them, because the whole car smelled.

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