FlyGuy27
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Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:13 pm

Should loyalty programs be based on spend only? I got thinking about this topic as I was reviewing my various YTD spending on (US) airlines.

I usually purchase “premium” seats (First, Economy+) and it seems that the MQM, PQM, etc. boost doesn’t match the significant price difference.

This got me thinking ... shouldn’t the people who spend the most get the most in “perks” (e.g. benefits of status), regardless of miles flown? Someone who spends $5,000 flying Boston to Chicago all year is more “profitable” then someone flying $5,000 to China on cheap economy fares.

I’m assuming an alternative school of thought is those who spend the most time with butts-in-seats should be rewarded - the emphasis on mileage flown.

Thoughts?
 
chonetsao
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:20 pm

A programme based on money will ultimately be looked by tax authorities in near future. As it will be a cash back scheme.
 
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NameOmitted
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:23 pm

Loyalty programs should be based on whatever the airline thinks will create and sustain loyalty in their clientele.
 
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LAXintl
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:23 pm

To me spending is by far the most logical means and am glad airlines increasingly following other consumer sectors (hospitality, retail etc) by using spending at the primary criteria in their loyalty programs.
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ClassicLover
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:25 pm

It's one of those interesting questions really. What constitutes loyalty?

Is the person who travels on 24 flights per year on discount short haul economy fares that might total €4,000 more or less valuable than the person who buys a single long haul business class return ticket each year and pays €4,000?

By the same token, is the person who travels 11,500 kilometres on their 24 flights more loyal than the one who travels 34,000 kilometres on their two flights?

You can slice it and dice it any way you like - it really comes down to personal preference and what the airlines offer. I like the points based on distance model best. It divorces it completely from "money" so when you are redeeming your points, you're not thinking, "It cost me €25,000 for the 25,000 points I am using for this one way upgrade from Premium Economy to Business Class".

While there is a value to reward points earned by distance, it feels more rewarding when it's not linked to spend. I think that is something that the airlines who have switched to a model based on spend have missed.
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UPlog
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:27 pm

Yes spending seems the most fair. If it works for Starbucks, grocery stores, other retail, hotels, car rental, restaurants and so on it should certainly work for airlines.

I also like concept of airlines dynamically pricing awards based on some relationship with fare pricing. Higher the going fare, the higher award redemption points.
 
Antarius
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:28 pm

American has Concierge Key, an invite only level for this exact reason. SQ has a spend based tier as well, not familiar with it though.
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YIMBY
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:31 pm

Should? From whos's point of view?

From one point of view the loyalty programs limit competition so they should be forbidden.

Also, giving benefits to passenger instead of payer may be considered bribery.
 
mrwhistler
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:42 pm

What is the point of loyalty programs? I argue it is to increase the wallet share of discretionary travelers. What is the point of rewarding full fare C travelers that are forced to fly an airline due to corporate travel agreements?
 
alasizon
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 6:43 pm

Antarius wrote:
American has Concierge Key, an invite only level for this exact reason. SQ has a spend based tier as well, not familiar with it though.


CK isn't based on spend though. There are plenty of EPs that spend way more than their CK counterparts.
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flipdewaf
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:17 pm

The BA loyalty club has an element of of almost spend relatedness as you use 2 separate points systems in one program, one determines how far up the frequent flyer ladder
You go and that is based on both flight distance and class and the number of miles you can collect are also based on fare bucket and distance traveled as well as how far up the ladder you are. There are elements of how much you pay in there.

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janders
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:22 pm

Harvard Business Review published a study on this a few years back that looked at consumer behavior and effects on companies.

Ultimately it found the proliferation spending based programs throughout different industries as the most logical and fair method of rewarding consumers.

Their study even found that such spend based models enticed consumers to spend a little more than they would have under programs that rewarded bargain hunters the same as bigger spenders.
"We make war that we may live in peace." -- Aristotle
 
DAL763ER
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:34 pm

chonetsao wrote:
A programme based on money will ultimately be looked by tax authorities in near future. As it will be a cash back scheme.


Where do you live? Cash back should not be taxable in most places - after all it's my own cash that I'm getting back. Cash which has already been taxed once.
 
Aptivaboy
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:45 pm

In all honesty, I don't care how the airlines structure their loyalty programs as long as they're transparent and consistent. In other words, don't change the terms and conditions midstream. I'm so tired of seeing my banked up loyalty/reward miles devalued everytime the airlines realize that their paying customers are actually taking advantage of their miles, just like they're able to. Hawaiian just devalued my miles last week without warning, and the same has happened to my United and other carriers' miles, as well. Do whatever works, that's fine, but don't screw the customer over who is merely playing by the rules.
 
klm617
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:53 pm

ClassicLover wrote:
It's one of those interesting questions really. What constitutes loyalty?

Is the person who travels on 24 flights per year on discount short haul economy fares that might total €4,000 more or less valuable than the person who buys a single long haul business class return ticket each year and pays €4,000?

By the same token, is the person who travels 11,500 kilometres on their 24 flights more loyal than the one who travels 34,000 kilometres on their two flights?

You can slice it and dice it any way you like - it really comes down to personal preference and what the airlines offer. I like the points based on distance model best. It divorces it completely from "money" so when you are redeeming your points, you're not thinking, "It cost me €25,000 for the 25,000 points I am using for this one way upgrade from Premium Economy to Business Class".

While there is a value to reward points earned by distance, it feels more rewarding when it's not linked to spend. I think that is something that the airlines who have switched to a model based on spend have missed.


Every customer should be treated with equal value. The one who maybe does 2 trips a year now could get a job in the future that could have the requirement to travel more just as a corporation that spends a lot today could go bankrupt. We need to get rid of this class distinction that deems one human more important than another. That being said the old way was the best there was basic mileage for every flight and you got bonus miles for purchasing a higher class of service seems reasonable to me.
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
klm617
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:56 pm

Aptivaboy wrote:
In all honesty, I don't care how the airlines structure their loyalty programs as long as they're transparent and consistent. In other words, don't change the terms and conditions midstream. I'm so tired of seeing my banked up loyalty/reward miles devalued everytime the airlines realize that their paying customers are actually taking advantage of their miles, just like they're able to. Hawaiian just devalued my miles last week without warning, and the same has happened to my United and other carriers' miles, as well. Do whatever works, that's fine, but don't screw the customer over who is merely playing by the rules.


I have been told on this forum many times that airlines are not charities and should be allowed to do what every they think is necessary to please their investors. That's how capitalism works in the minds of most a.netters. If they can get away with it they are in their perfect rights to do so.
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
klm617
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 7:57 pm

DAL763ER wrote:
chonetsao wrote:
A programme based on money will ultimately be looked by tax authorities in near future. As it will be a cash back scheme.


Where do you live? Cash back should not be taxable in most places - after all it's my own cash that I'm getting back. Cash which has already been taxed once.


Like when you sell a car LOL.
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
Antarius
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 8:03 pm

klm617 wrote:
ClassicLover wrote:
It's one of those interesting questions really. What constitutes loyalty?

Is the person who travels on 24 flights per year on discount short haul economy fares that might total €4,000 more or less valuable than the person who buys a single long haul business class return ticket each year and pays €4,000?

By the same token, is the person who travels 11,500 kilometres on their 24 flights more loyal than the one who travels 34,000 kilometres on their two flights?

You can slice it and dice it any way you like - it really comes down to personal preference and what the airlines offer. I like the points based on distance model best. It divorces it completely from "money" so when you are redeeming your points, you're not thinking, "It cost me €25,000 for the 25,000 points I am using for this one way upgrade from Premium Economy to Business Class".

While there is a value to reward points earned by distance, it feels more rewarding when it's not linked to spend. I think that is something that the airlines who have switched to a model based on spend have missed.


Every customer should be treated with equal value. The one who maybe does 2 trips a year now could get a job in the future that could have the requirement to travel more just as a corporation that spends a lot today could go bankrupt. We need to get rid of this class distinction that deems one human more important than another. That being said the old way was the best there was basic mileage for every flight and you got bonus miles for purchasing a higher class of service seems reasonable to me.


Then we should go to all Y? Isnt F a class distinction?
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planecane
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 8:15 pm

klm617 wrote:
ClassicLover wrote:
It's one of those interesting questions really. What constitutes loyalty?

Is the person who travels on 24 flights per year on discount short haul economy fares that might total €4,000 more or less valuable than the person who buys a single long haul business class return ticket each year and pays €4,000?

By the same token, is the person who travels 11,500 kilometres on their 24 flights more loyal than the one who travels 34,000 kilometres on their two flights?

You can slice it and dice it any way you like - it really comes down to personal preference and what the airlines offer. I like the points based on distance model best. It divorces it completely from "money" so when you are redeeming your points, you're not thinking, "It cost me €25,000 for the 25,000 points I am using for this one way upgrade from Premium Economy to Business Class".

While there is a value to reward points earned by distance, it feels more rewarding when it's not linked to spend. I think that is something that the airlines who have switched to a model based on spend have missed.


Every customer should be treated with equal value. The one who maybe does 2 trips a year now could get a job in the future that could have the requirement to travel more just as a corporation that spends a lot today could go bankrupt. We need to get rid of this class distinction that deems one human more important than another. That being said the old way was the best there was basic mileage for every flight and you got bonus miles for purchasing a higher class of service seems reasonable to me.


Every customer does not have the same value to a company. The main purpose of a reward program is to make more profit off of a customer than they would if they had to acquire the same customer through other marketing means. Having a loyal traveler that flies once or twice a year on the cheapest fare is much less valuable than a loyal traveler that flies once a month and selects flights based on more than price.

It would be like if a restaurant gave the same rewards to somebody that orders the cheapest dish, no drinks and no dessert as they do to somebody that gets cocktails, appetizers, an expensive meal and dessert. Those two customers do not remotely have equal value to the restaurant.
 
MIflyer12
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 8:34 pm

LAXintl wrote:
To me spending is by far the most logical means and am glad airlines increasingly following other consumer sectors (hospitality, retail etc) by using spending at the primary criteria in their loyalty programs.


Hmm, the major U.S. hotel programs I'm thinking of (Marriott, Hilton, Hyatt) all have nights qualification criteria as an alternative to spend.
 
Birdwatching
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 8:39 pm

In the early 2010s, due to personal reasons I flew transatlantic a lot, about 4-5 round trips a year, originating in Europe. For some strange reason I never fully comprehended, a travel agency specializing on military fares but also catering to the general public (searchable on the usual fare comparison sites) always had tickets for around $400 round trip, always on DL/AF/KL. I used to maximize this with a connection in AMS or CDG and another one in ATL, DTW or JFK, so a round trip was usually 6 segments. Within two years I went from Silver to Gold to Platinum on DL, getting upgrades on almost all domestic sectors and many times even on the transatlantic flights, collected several hundred thousand Skymiles, and got all kinds of apologies and certificates whenever a flight was delayed, had lounge access, and got super easy rebookings on the phone to any alternative itinerary I pleased if a time change had occurred. This went on for a couple of years until my transatlantic flying stopped. All in all, my tickets might have cost a couple thousand dollars, the same amount a passenger might have paid for ONE round trip in business.

If DL had had a spend based loyalty system in place, I might have been rewarded with the equivalent of a domestic one way or round trip in the end.
But the way DL's Skymiles program worked (and still basically does for non-US residents), they rewarded me big time for basically costing them money, and they upgraded me before some customers that were actually valuable.

I never understood why the amount of miles flown is of any relevance, instead of the money spent. This is like a supermarket not rewarding a customer for the amount he spent, but for the number of items they bought.

But wait, the frequent flyer programs are not meant to reward customers, they are made to encourage loyalty. In my case, they were highly successful.
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intotheair
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 8:51 pm

I feel like all airlines have either moved to some version of the revenue-based model or will at some point. LH just announced it’s going to, and I’d be willing to bet my net worth of airline miles that all the others (including AA and AS) will drop the hammer sooner rather than later.

I guess it was inevitable. You still can get a return on your miles (I suppose) in most programs, though you can’t get outsized value for your miles in the way all the FTers used to.

There will always be some value for passengers to participate in the programs because the airlines make so much money selling miles to banks via credit cards.
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ltbewr
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 9:03 pm

Some lower seat class and cheap coach fare levels have lower points per mile value, those of higher class and fare levels have enhanced of 1:1 or better values. If a ticket is purchased from an on-line agency vs. the airline directly, it may have limited miles. If not a frequent enough flyer, time limits on points so expire before you get any use from them. Thus you already have some value/price factors in miles programs. Gone are the days of the 80's and 90's where the points on the cheapest coach seat were 1:1, were promotional bonuses, no time limits on getting miles could get you a FF free flight across the USA like I was able to do 4 times.
You also have the non-flying points from certain credit cards, that meant airlines had to dilute points values from them or overall to protect themselves.
 
sircygnus
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 9:04 pm

I often struggle with the question of what is loyalty in this context. I view loyalty as a choice and therefore think travelers with an actual choice of who they fly with should be rewarded. I can get to pretty much anywhere I need to go in the US non-stop with three different carriers (UA, AA, WN). As opposed to smaller cities or Mega-hubs which pretty much dictate which airline you need to fly. In theory I suppose my “reward” is competition that keeps airfares low in my local market.
 
jomur
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 9:19 pm

If you go completely to revenue based then there will be a considerable drop in the number of elite members as all those that get their flights paid for by their company will now get nothing as they won't have personally spent anything.
 
IPFreely
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Re: Should Loyalty Programs Be Based on Spend Only?

Sun May 26, 2019 11:52 pm

DAL763ER wrote:
Where do you live? Cash back should not be taxable in most places - after all it's my own cash that I'm getting back. Cash which has already been taxed once.


I agree it shouldn't be taxed again. But to be technically correct, it's actually already been taxed twice. Once when you earned the money and paid federal income tax, social security tax, medicare tax, and state income tax. And a second time when you used some of what is left to buy an airline ticket and paid airfare tax, security fee, and passenger facility charges. Actually that's seven different taxes.
 
aviationaware
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Re: Should Loyalty Programs Be Based on Spend Only?

Mon May 27, 2019 12:59 am

Delta has found the perfect equation in my view. Spend based but with multipliers for status and exchangeable sector/mileage qualifying criteria. I believe several other airlines have gone this route as well. Considering many business travellers (especially at professional services firms) have relatively free reign over which airline they use, this (combined with the fact that Delta Miles don't expire) is a real element of distinction that sets Delta apart from its peers in the US domestic market.
 
dredgy
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Re: Should Loyalty Programs Be Based on Spend Only?

Mon May 27, 2019 2:13 am

There's lots of different factors, but I do not believe the amount of money spent is a good way to run a loyalty program. All depends on balance though.

For starters, it's a loyalty program, so it should be designed to attract long term loyalty and be profitable in the long term. I think people are less likely to be loyal to a company that's basically "give us more money for us to recognise your repeat business" rather than "use our product alot".

I also suspect that the most profitable members of a loyalty programs are the masses who sign up and subsequently fly with one airline but never really use any points.

Then there's also buying patterns. I switched from Lufthansa M&M when they switched to a $-spent rather than miles flown model. The only reason I flew Lufthansa repeatedly (about $5k a year, so not much) was because the flights were cheap & long distance & they had a lot of partners to redeem on. As soon as they switched, I switched to Turkish, and it's even cheaper to keep Star Alliance gold.

That said in Australia I fly Virgin more often because I prefer their product, but I barely keep note of my points - my main loyalty program is Qantas Frequent Flyer because I can use those points on airlines I actually want to fly, plus its easy to get credit card bonuses which means I rarely fly Qantas.
 
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Coal
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Re: Should Loyalty Programs Be Based on Spend Only?

Mon May 27, 2019 2:45 am

Antarius wrote:
American has Concierge Key, an invite only level for this exact reason. SQ has a spend based tier as well, not familiar with it though.

Mileage-based only gets you KF Elite Gold, which on the plus side is equivalent to Star Gold, but for SQ is like a poor man's Gold, e.g. you do not get access to the proper business class lounges but rather to a watered-down "Star Gold Lounge" (in Singapore). Technically you are also not allowed to board with F or J class, but rather after J but before general Y. The one that is spend-based is PPS Club, which requires you to spend S$25K per year (excluding taxes and fees) in J and F only (Y spend is not counted towards PPS Club status). PPS Club gets you access to the proper business class lounges, proper priority check in and boarding, etc.
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blueflyer
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Re: Should Loyalty Programs Be Based on Spend Only?

Mon May 27, 2019 6:14 am

This is a loaded question where the answer is as likely to depend on the travel habits of the one answering the question. Passengers who buy a few last-minute high-price tickets per year want their loyalty rewarded as much as road warriors traveling twice a week on deeply discounted tickets bought a month out. Lately it seems the road warriors on cheap tickets are getting the shaft, I guess that tells us what loyalty the airlines care more about.

At a certain point, it stops mattering too. Fly 4 TATL roundtrips in Business and you'll qualify for one of the premium tiers, whether based on spend or distance traveled.

I actually think the current combination of spend, distance, and segments is rather fair. The biggest losers are the passengers who were hunting for the bargain fares for no reason other than to rack up miles and status, and in the process not generating much of a profit for the airlines.

jomur wrote:
If you go completely to revenue based then there will be a considerable drop in the number of elite members as all those that get their flights paid for by their company will now get nothing as they won't have personally spent anything.

Huh? The airlines don't care where the money come from, they credit the frequent flier's account for the value of the ticket purchased, irrespective of who pays for it. Besides, there are plenty of corporate travelers who buy tickets on their personal credit cards to earn miles or cash back, and then expense them.

Any airline who suddenly decides only passengers who paid for their own tickets should be rewarded is an airline headed into bankruptcy...
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n729pa
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Re: Should Loyalty Programs Be Based on Spend Only?

Thu May 30, 2019 7:18 pm

FlyGuy27 wrote:
Should loyalty programs be based on spend only? I got thinking about this topic as I was reviewing my various YTD spending on (US) airlines.

I usually purchase “premium” seats (First, Economy+) and it seems that the MQM, PQM, etc. boost doesn’t match the significant price difference.

This got me thinking ... shouldn’t the people who spend the most get the most in “perks” (e.g. benefits of status), regardless of miles flown? Someone who spends $5,000 flying Boston to Chicago all year is more “profitable” then someone flying $5,000 to China on cheap economy fares.

I’m assuming an alternative school of thought is those who spend the most time with butts-in-seats should be rewarded - the emphasis on mileage flown.

Thoughts?

I'm don't know which airline you're with but I'm an account holder with a One World airline and your idea of rewarding those that spend the most is already a long standing condition.

For example. .. London to Sydney at bronze entry level
Discount economy. .6 200 points 70 credits
Flexible economy 12 400 points 140 credits
Business 20 195 points 295 credits

The points and credits are calculated on the distance, the fare paid and class/type of ticket

So he who pays the highest fare is already rewarded 14000 more points that the cheapest fare.

The definition is in the name "Frequent" Flyer.... is it not ?

The discount guy still has to reach the same level as the business Flyer to become silver. But take longer, buy more tickets and fly more often to do it. But they are just as entitled to the SAME perks and rules.

Maybe some of the regional US carriers have a different idea, but personally I don't see where the issue is.
 
directorguy
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Re: Should Loyalty Programs Be Based on Spend Only?

Thu May 30, 2019 7:46 pm

Already many airlines reward passengers who pay more. As some have pointed out, different booking classes will earn a different number of miles.
Emirates for example will upgrade passengers from Y to J or J to F based on the type of ticket, then Skywards status. A non-status passenger on an Economy Flex Plus ticket might have a better chance of getting upgraded than a Silver on an Econ Saver ticket.
 
YIMBY
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Re: Should Loyalty Programs Be Based on Spend Only?

Mon Jun 03, 2019 12:14 pm

DAL763ER wrote:
chonetsao wrote:
A programme based on money will ultimately be looked by tax authorities in near future. As it will be a cash back scheme.


Where do you live? Cash back should not be taxable in most places - after all it's my own cash that I'm getting back. Cash which has already been taxed once.


But if it is not your own cash that you are getting back. Many people - sometimes most, at least in business class - are traveling with someone else's money.

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