United Airlines, American Airlines, Delta Air Lines and JetBlue Airways have all relaxed their customer rewards programs, as air carriers face weak demand amidst the recession. Providing a few additional breaks to elite frequent fliers aims to lure in more business travelers.

United eliminated a fee of $75 to $100 for booking reward travel less than three weeks in advance, while American started allowing one-way mileage redemptions.

JetBlue will start rewarding points based on the fare paid rather than the number of miles flown, and Delta is allowing elite travelers to roll over miles from one year to the next.

Taking a page from the cell phone industry, Delta will free elite frequent fliers to roll over miles earned above a qualification status in a given year to the following year, making it easier for them to maintain that status or achieve a better one.

The mileage rollover program is similar to plans offered by some cell phone service providers, which allow customers to roll over unused minutes to the following month. A Delta traveler who accumulates 35,000 miles in a year, but needs only 25,000 to qualify for the lowest level of elite status, would start the following year with 10,000 qualifying miles. The rollover program starts this year and is not retroactive to miles earned in 2008 and before.

The strategy, which emerged from a customer focus group, aims to discourage travelers from splitting their loyalty among multiple air carriers. The airline found that customers were switching air carriers after hitting the elite traveler threshold at Delta.

The aforementioned marketing moves help address the biggest consumer gripe about frequent-flier miles: that they're tough to actually redeem. And getting customers to cash in frequent flier miles helps the bottom line since such miles sit heavily on an airline’s balance sheet as liabilities until they are redeemed. So, it is little wonder that airlines hope to woo regular customers while eliminating frequent flyer seats.

Road warriors try to stick with the same airline whenever possible. Elite Status means automatic upgrades to business class and first class, more legroom, pre-boarding, double miles, baggage fee waivers, even complimentary cocktails for those stuck back in crowded coach.

But is airline loyalty still worth it, as cash-strapped customers take stay-at-home vacations and corporations cut back on business travel? At least one marketing research firm thinks so.

A market research report entitled Building Stronger Relationships with Frequent Flyers: The Secret to Loyalty Program Success from Carlson Marketing and Peppers & Rogers Group says with more than 70 frequent flyer programs worldwide, travelers have no lack of opportunity to be rewarded for their patronage. In the United States alone there are 235 million members in the top six programs and over 10 million awards are issued per year.

“Enrollments and redemption, however, are not the measure of success for a frequent flyer program — it is the building of profitable, long-term customer relationships. Unfortunately, while this goal is judged as being very important by 85 percent of airlines around the globe, only 15 percent agree that it has been fully achieved,” the research revealed.

Carlson Marketing performed primary research to understand the strength of customer relationships with airlines and to address the three most critical questions on the minds of marketers in the industry:

• Which airlines are most adept at building strong customer relationships?

• What impact do strong customer relationships have upon business outcomes, such as the likelihood to recommend the airline and to fly it more?

• How can strong customer relationships be developed—especially through the use of a frequent flyer program?

Twelve U.S. air carriers were examined in this research, representing a broad cross-section of the industry and including legacy and smaller, younger carriers, low-cost carriers and regional airlines. Specifically, the airlines scrutinized included: AirTran Airways, Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Frontier Airlines, JetBlue Airways, Midwest Airlines, Northwest Airlines (now part of Delta), Southwest Airlines, United Airlines and US Airways.

The authors said their research was able to answer affirmatively three essential questions for airline marketers.

• Do customers have relationships with airlines? Yes — among brands the strength of customer relationships varies considerably; and within brands, there is a set of “champion” customers with strong relationships and another set of “critics” with weak relationships.

• Do stronger customer relationships with airlines impact business outcomes? Yes — the likelihood to recommend the airline, the intention to fly more, and an improved share-of-wallet are just three of the benefits documented through this research.

• Can frequent flyer programs be used to develop stronger relationships? Yes — a frequent flyer program can directly influence the decision to purchase a ticket from one airline versus another. Indirectly, the quality of the program influences the strength of the relationship that in turn impacts business outcomes.

The researchers asked: Equipped with these insights, what might a senior marketing professional do next?

• Evaluate. Do I know the strength of the relationship to my airline for each member in the frequent flyer program? How does the relationship strength vary by membership tier, by tenure in the program, by business versus leisure travelers?

• Prioritize. Which customer touch points have the greatest positive (or negative) influence upon changes in the strength of the relationship? Which touch points can be most easily and quickly improved?

• Execute and Measure. Which customer touc hpoints can be most readily tested in
order to demonstrate a solid business case for focusing upon the strength of customer relationships as a source of strategic marketing differentiation?

“Airline frequent flyer programs have been in existence for over a quarter of a century,” the study noted, concluding, “Now is the time to consider how these programs may be transitioned to a new level of effectiveness. Now is the time to understand and to act upon the strength of the relationships among members in these programs.”

As one business author said so succinctly: “Of the firm’s various assets, none is more important than its present relationships, because the strength of relationships with customers as well as other stakeholders is a fundamental indicator of the business’s future success. Relationships are predictive. All else is history.”

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