Every company knows the drill: Customers are more demanding, better informed, and more capable of communicating with one another than ever before. Which means that customers are more powerful than ever before. At least that's the theory. But what's a company to do when its customers actually move beyond business theory and take direct action to exercise their newfound power?
Consider what happened last fall at FlyerTalk.com, a community Web site where anal-retentive mileage hoarders like me swap notes on strategy. "Collecting points is like Pokémon for adults," says Randy Petersen, president of Frequent Flyer Services, in Colorado Springs, which owns FlyerTalk as well as several other related publications and services. He's right, and I take it as a compliment. I flew about 100,000 miles last year, but thanks to the tips I picked up on FlyerTalk, I actually banked many more miles than that. The biggest dividend came in the last three months of the year.
It all started when United Airlines decided to offer bonus miles to members of its frequent-flier program to apologize for leaving them stranded so often last summer. Now the highest-level fliers (50,000-plus miles a year) could earn at least three times as many points as the number of miles they actually flew.
American Airlines, United's biggest competitor, responded with a similar offer in order to discourage its elite road warriors from defecting. But the snag came when American tried to limit eligibility to people in certain cities, informing them of their bonus via snail mail. Were it not for the FlyerTalk community, American might have gotten away with it. But within hours, roughly 200,000 chatty FlyerTalkers knew which cities American had deemed eligible and which ones the airline had excluded.
The hue and cry from people in such ineligible cities as New York, where United and American compete fiercely on high-traffic routes to Chicago, Los Angeles, and San Francisco, was immediate and fierce. American was bombarded with phone calls, email, and letters, causing endless confusion among well-meaning customer-service employees who had never even heard of this special offer. Within days, we FlyerTalkers who were initially deemed ineligible managed to get American phone reps to sign us up anyway, and we posted information to the site telling others whom to call. Victory was ours!
So did American handle this well? I'm not the only one who thinks American was blindsided by the Web-based assault. "It was old-world thinking," says Jeff Pelletier, a Big Five technology consultant who goes by the name "DrHowser" on FlyerTalk and logs about 200,000 miles with American each year. "A few years ago, people were not as intertwined as we all are now. Before FlyerTalk existed, American could have gotten away with something like this."
American spokesman Mark Kienzle insists that the airline wasn't trying to "get away" with anything. "We make decisions for competitive reasons based on the information we have when we make them," Kienzle says. "Then we adjust accordingly if we need to, which we did. That made people happy, which is exactly what we want to do." Well, it made some people happy — namely people like me, who happen to read FlyerTalk and thus found out about the bonus. But the airline certainly didn't write to all of the originally excluded elite-level fliers and alert them to the fact that it had expanded eligibility for the promotion.
To people who think about this stuff for a living, however, my FlyerTalk compadres and I have it all wrong. If routes out of, say, New York, are not particularly profitable, then why should the people who live there be eligible for extra miles, regardless of how many other airlines we have to choose from? "It is fair to give more to customers who produce more profits and less to those who produce less," says Richard G. Barlow, chairman and CEO of Cincinnati-based Frequency Marketing Inc., which develops loyalty programs for companies like American Express, GE Capital, and Microsoft.
Moreover, Barlow thinks it was a mistake for American to have backed down. "There is nothing in your frequent-flyer agreement that says you will get every offer every time," he says. "This is not the Bill of Rights we're talking about here. If American starts letting members run their program, they'll eventually have to do away with it altogether, because members are insatiably greedy." He adds, however, that any company that stands its ground in similar situations had better be prepared for the onslaught that will inevitably come when word gets out on the Web. Every frontline employee should be ready with specific information, he says, and perhaps some smaller peace offering for good customers who didn't get in on the real action.
That may not be good enough, though. The Web has boosted consumers' sense of entitlement, whether companies like it or not. At any rate, I'm sure glad Barlow wasn't advising American this time around. Last year, I earned an extra 25,000 miles thanks to the bonus, which the airline stopped offering on December 31. Some globe-trotters did even better. "I sent the FlyerTalk postings to all 35 people in my group at work, all of whom fly American all the time," says Jeff Pelletier. "Just among us, we'll earn extra miles that total well into the seven figures. We're cleaning up!"
A version of this article appeared in the March 2001 issue of Fast Company magazine.