The concept of providing membership to the users and giving them additional benefits is very old. Many companies have tried it with great success. This concept is also being used in the airlines industry. One example of this trend is Jet Blue. The company gives “TrueBlue” points to its customers who have spent $1000 or more on flights during a year using the services of Jet Blue. The reward program allows the customers to continue accumulating the points and they can later redeem six points for one eligible dollar. They have also offered family pooling of points and the customers can use it for extra space seats (JetBlue, 2013)
There are several positive impacts of such programme. These impacts range from psychological impact to financial impact, and build customer loyalty. It encourages the end-consumer or the customer to keep using the company’s products in order to accumulate points or other incentives. The financial term for such a programme is to entice the consumers into making repeat purchases and to develop brand and company loyalty.
The psychological phenomenon that is being targeted through these programmes is called “Ratchet Effect”. Frequent Flyer incentives are given to make sure that the customers keep using the same airline and product in order to earn more points, which can later be redeemed for flights or free air miles (Charness, 2010). The companies in the airline industry usually calculate them as the part of overall costs, and payment for such incentives come from not only the person using these incentives, but everyone contributes to these incentives in order to make sure that these programmes are up and running. There are several issues why the companies these days prefer giving these to the customers instead of cash rewards of benefits. The human psychology tells us that tangible benefits are easily justifiable, separable, and they can be evaluated. All these features are not present when the incentives are handed over in cash or cash benefits. (Jeffrey and Schaffer, 2007)
There is also a financial impact of these benefits. Since, these benefits help the company to entice future and repeat purchases, and they act on the impulse of the consumer and customers to buy more, offering such benefits is very rewarding for the companies operating in the airline industry (Trublue, 2014). For example, Jet Blue offers incentives on purchases worth $1000. A customer who needs to purchase $900 worth of tickets will be tempted to make extra purchases of $100, in order avail the benefits. This will mean that the company will end up with the extra sale of $100. This is very rewarding for the companies and such incentive programme lead to sales growth and profitability increase for the companies. As a result, instead of giving out discounts, the companies are using these methods in order to entice consumers into making repeat and future purchases, and at the same time they are good for increasing the overall sales target of the companies. Schlangenstein, 2014)
It can be concluded from the above discussion that incentives programme are really beneficial for the companies and brand. They do not only help the company into making extra sales, but they are good for consumers as they are more justifiable, separable, and can be evaluated better than the cash rewards or benefits given to the customers in the airline industry (Inc,2014).
References
Charness, G. (2010). Competition and the Ratchet Effect. Nber, 23(1), pp.22-23.
Jeffrey, S. and Schaffer, V. (2007). The Motivational Properties of Tangible Incentives. Sage Publishing, [online] 1(2), pp.23-43. Available at: http://webs.wichita.edu/depttools/depttoolsmemberfiles/psychology/Laboratories/Shaffer/Jeffrey%20%26%20Shaffer.pdf [Accessed 16 Nov. 2014].
Schlangenstein, E. (2014). JetBlue Said in Talks to Drop AmEx as Credit-Card Partner. [online] Bloomberg. Available at: http://www.bloomberg.com/news/2014-10-31/jetblue-said-in-talks-to-drop-amex-as-credit-card-partner.html [Accessed 16 Nov. 2014].
Trueblue.jetblue.com, (2014). JetBlue, You Above All. [online] Available at: https://trueblue.jetblue.com/web/trueblue/home [Accessed 16 Nov. 2014].
Inc., R. (2014). AIR MILES INCENTIVES® - Rewarding Your Customers. AIR MILES® INCENTIVES® - Managed by RMG Loyalty. Retrieved 17 November 2014, from https://airmilesincentives.ca/en/rewarding/customers/
