Caving to the protests of its stingiest customers, Delta Air Lines is revamping its SkyMiles program to what it calls a more "customer-focused transformation meant to simplify the Medallion qualification process."
I've checked out the changes and I have a different opinion: I think it's accelerating Delta's path toward bankruptcy.
Delta is essentially downgrading its loyalty program to reward infrequent, disloyal, customers who make purchasing decisions based only on price.
Basically, they're dissing their best customers.
How's that? The new SkyMiles program disenfranchises Delta's most loyal passengers, penalizing them for their continued patronage. It runs completely contrary to the purpose of loyalty programs, which are to promote repeat purchases.
I have argued for some time that the only way the major airlines can differentiate themselves from the crowded skies of economy carriers is by offering added value to the right customers.
Instead, Delta is reversing course and devaluing its product by awarding unprofitable, deeply-discounted fare-paying customers with mile-for-mile Medallion Qualifying Miles (MQM's). This dilutes the program and fails to appreciate the value of their top-level elite members.
By reducing qualifications for its top-tier elite status, Platinum Medallion, to 75,000 MQM's instead of the more appropriate 100,000 MQM's, top tier membership will lose its cachet.
This will be especially noticeable in Delta's Crown Rooms, to which Platinum Medallions enjoy free access. The already overcrowded so-called "private lounges" will convey a Wal-Mart experience versus a luxurious Neiman Marcus atmosphere.
Doling out prized upgrades to any Medallion customers willing to purchase a Y, B, or M fare also nullifies the benefits of tier elite status.
It's all wrong.
Why reward those who bring you the least value? Sure the new SkyMiles will benefit the occasional bargain-hunting customer with a few extra elite qualifying miles. Big deal. They fly once or twice a year and accumulate only a few thousands miles - hardly enough to achieve even the minimum level of elite status.
What Delta doesn't seem to understand is that price-sensitive fliers have no concept of loyalty. These cheapskates don't intend to buy another ticket unless the price is right. That zero re-purchase intent translates into zero long-term profitability.
Where are the incentives for loyalty? The earned benefits of Delta's most elite frequent fliers are now pretty much worthless.
Reducing the minimum number of MQM's per flight from 750 to 500 makes it harder for frequent short haul-fliers to earn elite status. Doing away with the special qualification threshold bonuses removes the incentive to take that extra year-end trip to reach an exclusive level of service.
The greatest insult to Delta's best customers is that they will no longer be rewarded with double MQM's. Delta has also decided to penalize its prized customers willing to pay a slight fare premium (adding significant revenue to Delta) with a 50 percent reduction in MQM's.
Adding further insult, Delta is no longer offering its most profitable customers a discount on service fees. Medallion members will no longer get a waiver on the $50 service fees for reissues, redeposit, and tickets issued within 14 days of travel.
By taking away preferred benefits from their loyal elite, Delta is abolishing incentive for continued loyalty. And those incentives are the key to its long-term prospects for continued operations.