January 23, 2013 A cogent review of Delta’s new EQD
So it is starting to become old news that Delta is adding a minimum spend requirement to the SkyMiles elite tiers for 2015. I am a bargain basement mileage runner looking to get status at the lowest possible cost. In short I am the person Delta is looking to eliminate from its elite rolls. CNN Money to did a cogent review of the change, http://finance.fortune.cnn.com/2013/01/23/delta-frequent-flyer/.
CNN’s argument is this, let’s say I am going from Phoenix to Orlando, before the change since I have status of Delta, I would take them at equal or pay a slight premium to fly Delta. Now that I will not have status, I will only take Delta if they are at best equal with other carriers. So here is the question that needs to be asked, does this change make me wan to spend money on Delta? Easy answer is no. Does it make any flyer want to spend money on Delta? I don’t think so, the people who will be elite under this scheme will be the business flyers and they don’t care since it is not their money.
What CNN fails to consider though is this. People generally see frequent flyer programs as equal. If you look on surface, Delta, American, US, and United all have very similar programs. All offer trips for 25K miles, all offer credit cards, all allow rewards with partners. What people do not see is the fact that all the programs are different. Critically here is the value of a SkyMile. A SkyMile is worth less compared to an AA, US, or United mile. It is worth less because their miles are generally difficult redeem at the 25k level, and there are few partners to redeem on. Without elite status the SkyMiles program is of little benefit reward wise. However, the average elite traveler will not notice this, well until they find themselves earning at a lower level.
Delta is trying to polarize their program. Delta wants to attract the high revenue flyers even if they are high cost. Delta doesn’t care if they are spending 10 cents a mile on a flyer if they are getting 30 cents mile from that flyer. Also Delta wants as many people as possible in the SkyMiles program. The person who doesn’t travel and just has the credit card to redeem for the occasional trip to Orlando. This flyer represents very little cost to Delta and the revenue from the credit card and the occasional ticket that is redeemed or sold outweighs that low cost. Delta thinks by implementing this program they will eliminate the high cost low revenue flyer that I represent. The question remains what revenue will replace the albeit limited revenue I generate.
CNN’s review is a cogent review of the new program and why it will fail. That being said, I think it will succeed the push to a revenue based model is to strong.