I’m something of a snob when it comes to frequent flyer points: My points redemption is focused on travel and I try to make sure that I’m getting the absolute best value for those redemptions I possibly can (within certain parameters, of course). I don’t always redeem for long-haul premium cabins but my focus is on maximizing the value I can get based on the trip I need/want to take in any given year. So when a loyalty program starts talking about the power of their low-value redemptions I generally am a bit suspicious. And then I remember that there are a lot of other types of people out there and I’m at least willing to listen to what they have to say. For United Airlines it seems that the low-value redemption options are actually increasing loyalty for the MileagePlus program. That’s not at all what I was expecting to hear.
At the 2014 Airline Information Mega Event held last month United was represented by Shunt Madanyan, Senior Manager Air Redemption Programs, who presented a session regarding the breadth of the redemption options MileagePlus offers and how those options appeal to the various demographic groups within the program’s membership rolls. Sure, there are members who focus on travel redemption for their points but many members want other options. Madanyan spoke about passengers such as the road warrior who has tons of miles but who doesn’t want to get back on a plane again once work gives a respite or the slow accumulator who never really has enough points for a travel award. It is these sorts of members the MileagePlus program is focusing on more than ever, and with good reason: it is smart business for the company.
The cost to the carrier for non-travel awards is arguably higher than for travel redemptions; the award seats are generally considered spoiled inventory anyways while there is a real world cost to delivering the retail redemption options. Some of that is easily accounted for by accounting valuations of the points in various circumstances but there’s a surprising part to the analysis: United says that the retail redemption customers are some of their best. Offering the small redemptions makes those customers happy and it brings them back into the program rather than losing them once the transaction is complete. As Madanyan explained during the presentation:
What we’ve found is that members who redeem miles will earn miles at twice the velocity of those who do not redeem their miles. And this is across all levels, from people who burn a very small amount of miles to people with massive values. We want to keep this cycle going but it is from the perspective of getting people to burn their miles because they’re going to come back and keep spending money.
In other words, the MileagePlus members who redeem points are the more valuable ones. Even for small redemptions. These are the customers who feel the “rush” of getting that free sprocket or whatever and who want more of that. So they work to earn more points so they can have the feeling of “winning” again with their next redemption.
And, despite concerns from some in the industry that low-level redemptions will lead to a “cash-out” from the program United doesn’t see that behavior. Even if it is just a few miles redeemed for a song in the digital media store or tickets to an event those customers see a value in the points such that they go out of their way to come back and earn again.
What we found is people are coming back. They redeem and a couple months later they come back and redeem again.
And that’s the type of customer any program wants. Madanyan was quite clear at the beginning of the presentation that he recognizes the role of the program to drive additional business to the airline and to its partners. By offering up more choices for redemptions at a wider variety of price points the MileagePlus program is delivering on that goal for United Airlines. Even if they are a bunch of awards I’d never get anywhere near.
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