RMF: Recency, Monetary value and Frequency
CLV: Client Lifetime Value
These are two of the technical terms that Wharton Marketing professor Peter Fader uses in this excellent interview to explain Delta’s changes to their mileage program. As you may have heard by now, Delta is switching to a new earning program from 2015 where passengers earn miles based on the dollar value of their ticket and their Elite status, rather than actual miles flown.
You can read the article here (Credit: Knowledge@Wharton).
Here are a few key points I got from the professor:
- Delta is not reducing what it gave travelers, it is giving the more deserving customers more (those who spend more)
- Business travelers who pay high dollars for last minute short trips, and are hence worth more to the airline, will earn more rewards
- Casual travelers and those trying to ‘game’ the system (think mileage runs) will earn less
I personally am still not sold to this model. United has taken a ‘hybrid’ approach where there is a revenue component to their new mileage program (already in play this year). They are trying to just ensure that their Elites have a minimum spend on tickets and that too on United, not on their partners. So, for United, the spend is a qualifier to get in the mileage game. For Delta, it is all about spend. I will have to do an analysis of my spend for last year (almost all business related, and expensive, albeit economy tickets) to see if I would have fared better on a spend based program than on a miles based. I did make 1K, which is United’s highest non-invitation level, so not much could have changed. United actually does have an invitation-only level called ‘Global Services’ which is entirely spend based. I am afraid that if Delta does well with the new model, other airlines will not be far behind. The airlines have always followed each other.
What do you think of the new Delta program? Does the good professor’s logical explanation change your thinking in any way? Do share by leaving a comment below.
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