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| ON BOARD WITH RANDY PETERSEN |
THE CHANGING FACE OF ELITE STATUS
December 2003
by Randy Petersen
We live in uncertain times.
Frequent flyer programs today are striving to keep pace with a changing member base, habit-forming demands of long-time members, the competitive landscape of low-cost carriers and the scarce commodity of preferred services.
It was nearly one year ago that Delta SkyMiles went public with a plan to restructure its elite re-qualification criteria—essentially limiting the ability of low-fare passengers to earn elite status. Continental was the next to throw its hat into the ring and change the look of its elite qualification structure.
Like many others, Delta extended elite benefits following the disaster of 9/11. In other words, there was no natural culling of members. Combine that with at least two initiatives Delta implemented in 2002: 1) allowing members to upgrade to first class for a fee at the gate, and 2) launching of several rather open campaigns to attract elite members of other programs who were linked with potentially insolvent airlines, and you end up with an inflated demand on the scarce commodity known as upgrades.
Today, the only difference between the full-service carriers that are competing in some markets with low-cost carriers is the first-class comfort of an upgrade.
Over the past several years, the inflated elite levels have hindered the ability of many full-service carriers to highlight this difference. Traditionally, elite-level membership has represented approximately 2 to 3 percent of total active membership. Today those numbers have risen to 5 to 6 percent. With a doubling in the percentage of elite members, it's no wonder some airlines feel a need to pare back.
From a practical standpoint, guarding the inventory of upgrades to compete with low-cost carriers is not a bad idea at all. What I do challenge is the manner in which some of these programs have introduced the changes.
When Delta announced its changes, it never looked back. To its credit, Delta felt it had made the tough decision it needed to make and stuck with it despite criticism. But in its actions, and non-actions, Delta exhibited an air of aloofness. Delta never delivered a clear message to its members explaining why the airline had embarked on this strategy, other than to say it was more readily aligning the services to those who contribute the most revenue to Delta.
Executives at Continental rated an F in the manner in which they announced their changes—or failed to announce them, as the case may be. An announcement of new benefits the day before cloaked the implementation of the changes. Continental failed to even list a press release about the changes on its corporate Web site.
Members of both these programs would have been far more accepting of these changes if executives had stood up, raised their hand and simply told them the changes were a result of a business decision based on the current competitive environment and the necessity of protecting the valuable upgrade.
The lesson the airlines are learning, the hard way, is that you can change the face of your frequent flyer program, but you better recognize the importance of the mouth.
You can contact Randy Petersen at randy@insideflyer.com.
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