The shift towards revenue as the defining characteristic for loyalty value is picking up speed. Several smaller carriers have made the shift over the past couple years and now a major US airline is joining the efforts. Delta has announced that stating with their 2015 Medallion program year the carrier will require a minimum spend in addition to flight thresholds for passengers to acquire elite status.
The good news is that the details of the requirement – essentially 10 cents per mile – are being published well in advance of the requirements kicking in. The spend will be a factor for earning status in 2014 towards the 2015 program year. Members of the SkyMiles program have plenty of time to figure out if it still works for them and, if not, to figure out their next move. And I’m guessing not so many will be making a move.
For most passengers, the spend requirements probably aren’t all that bad. The price point is actually below the overall average fare price for tickets across Delta’s system. In other worlds, passengers who have Medallion status for less spend than that are below average in revenue to the company. It isn’t hard to understand why Delta would not want to reward those customers as much as the above average spenders. And the whole point of the loyalty programs is to reward your best customers, right?
The 10 cents per mile requirement will have many up in arms, particularly in the points & miles community. The discussions online have been rather exciting since the rumors of this change started swirling and they haven’t calmed down since the official announcement today. For customers focused on getting as much value as possible for the minimum amount invested this move is pretty much the end of the road.
It is also worth noting that customers spending at least $25k on a co-branded American Express credit card will have the spend requirement waived. Not necessarily because Delta realizes the same revenue from the CC spend but the cost of servicing that is rather lower, meaning the margins are in favor of the CC customers.
There are plenty of problems with the accounting scheme. Most of them come from not counting spend on partner travel (I don’t see only counting base fare as a problem) and setting themselves up for some very strange rollover miles situations. But the big picture of the new plan is reasonably well structured. That doesn’t mean it is great for all customers, but it is great for the ones the company wants to reward.
In reading around the webs on the change I was quite surprised to see Gary over at View From the Wing say, “I like marrying a minimum spend level with miles flown.” That’s a big change in stance and one I hadn’t expected. Personally I’ve always wondered why the airlines didn’t go this route. I know it isn’t good for me personally as a customer given my spend patterns, but I also know that I’m not the right customer for the airlines. Yet somehow they keep rewarding me.
It is simply a matter of time now before the other major carriers make their moves in response to Delta’s. It will certainly be interesting to watch this play out.
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