March 12, 2015

Flier Rewards Overhaul Might Backfire

SMITH BRAIN TRUST -- United’s and Delta’s shift to reward customers based on spending instead of miles could set up the airlines to milk big corporate accounts. But University of Maryland Robert H. Smith School of Business professor Roland Rust says the strategy could turn off a broader base of customers in the long-run, including smaller business clients.

Rust, the David Bruce Smith Chair in Marketing and Distinguished University Professor, told Buzzfeed Business that the changes signal that both airlines are honing in on the fliers who make them the most money. “What they really care about is who the valuable customers are," Rust says. "So what they care about is money.”

Other airlines could fall in line, Rust said. But prior to that shift, United and Delta could lose a significant cross-section of lower-class frequent fliers. Also, the incentive for business travelers to opt for expensive bookings could eventually conflict corporate travel-expense departments. 

Future big-spenders also could be lost. Rust, founder and executive director of Smith's Center for Excellence in Service and Center for Complexity in Business, added: “Everybody has their own self-interest in this. Some might spend more to get the more expensive ticket, especially if it’s on someone else’s dollar. But this could alienate the leisure traveler who has the potential to become a high-value customer, someone lower in the business world, and what matters is a customer’s potential lifetime value.”


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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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