Harvard Case - United Airlines: Frequent Flyer Program
"United Airlines: Frequent Flyer Program" Harvard business case study is written by Won-Yong Oh. It deals with the challenges in the field of General Management. The case study is 11 page(s) long and it was first published on : Mar 14, 2016
At Fern Fort University, we recommend that United Airlines implement a comprehensive revitalization strategy for its MileagePlus program, focusing on enhancing customer experience, leveraging technology, and fostering strategic partnerships. This strategy should prioritize personalization, seamless integration, and value-driven offerings to regain customer loyalty and drive long-term growth.
2. Background
United Airlines, a major US airline, faced declining customer satisfaction and loyalty due to its struggling MileagePlus program. The program, once a leader in the industry, had become outdated and lacked the innovation and personalization needed to compete with rivals. The case study highlights the challenges faced by United Airlines in a competitive landscape where customer experience and loyalty are paramount.
The main protagonists of the case study are the executives at United Airlines responsible for the MileagePlus program. They are grappling with the declining performance of the program and the need to find a solution to regain customer loyalty and drive future growth.
3. Analysis of the Case Study
To analyze the situation, we can employ a framework that considers both internal and external factors impacting the MileagePlus program:
Internal Analysis:
- SWOT Analysis:
- Strengths: Strong brand recognition, extensive route network, existing large customer base.
- Weaknesses: Outdated program design, lack of personalization, limited value-driven offerings, poor customer service.
- Opportunities: Leverage technology for personalized experiences, expand partnerships, offer unique benefits, improve customer service.
- Threats: Competition from other airlines with innovative programs, changing customer expectations, economic downturn.
- Porter's Five Forces:
- Threat of New Entrants: High, due to the ease of entry into the loyalty program market.
- Bargaining Power of Buyers: High, as customers have many choices for loyalty programs.
- Threat of Substitutes: High, as alternative reward programs are readily available.
- Bargaining Power of Suppliers: Low, as United Airlines has significant leverage over suppliers of loyalty program services.
- Competitive Rivalry: High, as airlines constantly compete for customer loyalty.
External Analysis:
- Market Trends: Growing demand for personalized experiences, increasing use of technology, focus on sustainability.
- Competitive Landscape: Airlines like Delta and Southwest are investing heavily in their loyalty programs, offering innovative features and benefits.
Key Issues:
- Outdated Program Design: The MileagePlus program lacks the flexibility and personalization offered by competitors.
- Limited Value-Driven Offerings: The program lacks unique and compelling benefits that resonate with customers.
- Poor Customer Service: Customers experience difficulties redeeming miles and accessing program benefits.
- Lack of Technology Integration: The program fails to leverage technology to enhance customer experience and personalization.
4. Recommendations
To revitalize the MileagePlus program, United Airlines should implement the following recommendations:
1. Enhance Customer Experience:
- Personalization: Leverage data analytics to understand customer preferences and offer tailored benefits and rewards.
- Seamless Integration: Simplify the program structure and streamline the redemption process.
- Improved Customer Service: Invest in training and technology to improve customer service channels and address customer concerns promptly.
2. Leverage Technology:
- Mobile App Enhancement: Develop a user-friendly mobile app with advanced features like personalized recommendations, instant redemption, and seamless travel booking.
- Data Analytics: Utilize data analytics to understand customer behavior and preferences, enabling targeted marketing and personalized offers.
- AI Integration: Explore AI-powered chatbots and virtual assistants to provide 24/7 customer support and personalized assistance.
3. Foster Strategic Partnerships:
- Co-Branding: Collaborate with brands in travel, hospitality, and other industries to offer exclusive rewards and benefits.
- Joint Loyalty Programs: Explore partnerships with other airlines or travel companies to expand the reach and value of the program.
- Strategic Alliances: Partner with travel agencies, hotels, and car rental companies to offer integrated travel packages and exclusive benefits.
4. Implement a Value-Driven Approach:
- Tiered Membership Levels: Offer tiered membership levels with increasing benefits and privileges based on customer engagement and spending.
- Unique Rewards: Introduce unique and exclusive rewards like access to premium lounges, complimentary upgrades, and travel experiences.
- Sustainability Focus: Offer rewards for eco-friendly travel choices, aligning with growing customer interest in sustainability.
5. Basis of Recommendations
These recommendations align with United Airlines' core competencies and mission to provide a superior customer experience. They also address the needs of both external customers and internal clients, including employees who are responsible for delivering exceptional service. The recommendations consider the competitive landscape and aim to differentiate United Airlines from its rivals by offering a more personalized and value-driven loyalty program.
The recommendations are attractive from a quantitative perspective, as they are likely to increase customer loyalty, boost revenue, and enhance brand value. The assumptions underlying these recommendations include the availability of data analytics tools, the willingness of customers to engage with personalized offers, and the potential for successful partnerships.
6. Conclusion
By implementing these recommendations, United Airlines can revitalize its MileagePlus program, regain customer loyalty, and drive long-term growth. The program will become a key differentiator for United Airlines, attracting new customers and retaining existing ones. The focus on personalization, technology, and strategic partnerships will ensure that the program remains relevant and competitive in the evolving travel landscape.
7. Discussion
Alternative options include a complete overhaul of the MileagePlus program, which could be disruptive and costly. Another option is to simply focus on improving customer service and offering more competitive rewards, without significant changes to the program structure. However, these options are less likely to achieve the desired results.
The recommendations are based on the assumption that customers value personalization and convenience. There is a risk that customers may not be receptive to these changes, or that the technology implementation may be challenging. However, the potential rewards of a successful revitalization strategy outweigh these risks.
8. Next Steps
To implement these recommendations, United Airlines should follow a phased approach:
Phase 1 (Short-Term):
- Improve Customer Service: Implement training programs and technology upgrades to enhance customer service channels.
- Data Analytics: Begin collecting and analyzing customer data to identify preferences and personalize offers.
- Mobile App Enhancement: Upgrade the mobile app with basic personalization features and improved user interface.
- Strategic Partnerships: Initiate discussions with potential partners to explore co-branding and joint loyalty program opportunities.
Phase 2 (Mid-Term):
- Tiered Membership Levels: Introduce tiered membership levels with increasing benefits and privileges.
- Unique Rewards: Offer unique and exclusive rewards like access to premium lounges and complimentary upgrades.
- AI Integration: Implement AI-powered chatbots and virtual assistants to provide 24/7 customer support.
- Sustainability Focus: Introduce rewards for eco-friendly travel choices.
Phase 3 (Long-Term):
- Complete Program Overhaul: Consider a complete overhaul of the MileagePlus program, incorporating all the recommendations and innovations.
- Continuous Improvement: Continuously monitor program performance, gather customer feedback, and adapt to changing market trends.
By following this phased approach, United Airlines can successfully revitalize its MileagePlus program and achieve its strategic goals.
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Case Description
From 1980 to 2010, frequent flyer programs (FFPs) had evolved from simple customer reward programs to independent profit-generation business models. The airline industry had seen enormous success with FFPs, which had become businesses of their own. In June 2014, however, United Airlines announced that as of March 1, 2015, it would move from awarding miles based on distance flown to awarding miles for dollars spent per ticket, following in the footsteps of Delta Air Lines. According to the new mileage accrual plan, most United Airlines passengers would earn fewer reward miles. Many customers saw this change as a significant devaluation of award miles and complained about United Airlines' new policy. Who benefited from the revenue-based FFPs and how would the new program affect the behaviour of United Airlines' customers? Should American Airlines also adopt the revenue-based FFP?
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