I am sitting at the Starbucks in Mumbai airport muttering unmentionable obscenities at Jet Airways for making yet another change to its loyalty program which devalues my membership and its JPmiles. They have now decided to keep their top-tier members out of the airlines lounges unless they purchase a certain class of ticket! So much for being loyal to your customers.. just shove it up their behind in the name of profiteering!
I am so incensed at the continued decimation of my loyalty rewards account at Jet Airways that instead of working on my fund presentation, I am motivated to write a post panning Jet Airways and using them as my subject for a learning lesson for startups.
Honestly, I am at a loss on what Jet is doing with its loyalty program and whether they understand that loyal customers (like yours truly) are getting increasingly disillusioned with the airline and are choosing to fly other carriers. In a situation of an apples to apples comparison on ticket price Jet Airways is losing out to the low-cost carriers (LCAs) as their premium services, that should allow them some leeway in pricing power, are just mediocre services with which the airline is hoodwinking itself and not its customers. The situation in which a full service carrier like Jet Airways is unable to command a price higher than that of the LCA is a death knell for them. Effectively what it states is that the value of the frills (mediocre class premium services) and the brand behind has zero value in the eyes of the customer. In fact on net revenue per mile of flight after the deduction of the cost of the frills, Jet Airways has a lower revenue per mile flown.
Jet Airways started the slow journey to decimating its brand loyalty by making it difficult to redeem the JPmiles, putting an imaginary limit on how many tickets can be redeemed per flight (especially on long haul international flights). Internally they have branded these redemption tickets as non-revenue tickets, so that their computer system ensures that there are just 1-2 seats available for redemption in their business class section and a handful tickets available in the economy class section. To protect their behinds, the Jet Privilege customer service team will flat-out lie to you about the business class section being full when in fact they are selling tickets for customer willing to pay – a brand that teaches its employees to lie is a brand rubbing its own nose in the dirt.
It should be an eye-opener for Jet’s staff and customers that a listed company calls award tickets as non-revenue tickets but that is against the IAS principles as it clearly states that
An entity shall apply paragraph 13 of Ind AS 18 and account for award credits as a separately identifiable component of the sales transaction(s) in which they are granted (the ‘initial sale’). The fair value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and the other components of the sale.
So it is very likely (and I hope likely) that Jet Airways is in fact recording the each mile that it is awarding their customers as revenue, however, the airline is just befuddling its customers by calling them non-revenue tickets. Then to use this false premise to impose artificial and ad-hoc methods to prevent its loyal customers from utilizing their miles that they have earned by patronizing, the airline should be punishable with a public flogging of the genius that came up with this idiotic idea.
If Jet Airways (and Etihad’s) think tank had an economist advising them, he/she would tell them that the perceived benefits of a strong Jet Privilege program made a customer choose Jet when they were on the fringe of choosing between Jet and another carrier. In fact there should be enough data that a strong Jet Privilege program would have enticed customers to choose Jet even if Jet was 5-10% dearer than its competition – that was the super-normal profit that a leader like Jet would have commanded.
Alas Jet continues to operate with a dinosaur dated mentality in which, brands feel that they can screw over customers because with a population of a billion plus and few airline operators a customer wouldn’t have many other options but to choose Jet. However, that scenario is changing rapidly and dynamically with Vistara, Air Asia and a number of regional players carving out a piece of the skies for themselves and Jet Airways will see rapid erosion in its market share by alienating its customers.
Jet can learn a lesson from Amazon, specifically from what Amazon learnt after the 1999 meltdown. New customers are very expensive to attract and true profit comes from attracting a previously acquired customer to visit and transact with your brand multiple times. In venture capital speak, the cost of customer acquisition (CAC) has to be exceeded by the lifetime value (LTV) of that customer – so always, and I repeat always, find way to keep your customer coming back to you for more!
Jet Airway’s share of Indian skies stands at a lowly 17% beating the universally panned Air India by a whisker and is in danger of falling below the recently bankrupt SpiceJet. Even in terms of filling up its air-planes Jet Airways has an abysmally low PLF of 77% in comparison to Indigo’s 91%. All these point to death spiral that is consuming Jet Airways.
I can offer a starting point – look at the appalling treatment of its loyal customers and you will find correlation that has seen previously a top airline in India own a paltry 17% market share of the skies and will soon see the previously bankrupt SpiceJet overtake them – the signs are ominous that Jet Airways is in an identity crisis and is going to have to do something drastic to make up for what it is losing each day – loyal customers.
When Jet rebranded themselves as a full service airline they took on a responsibility of providing frills like meals, reward points, business class seats, etc that would make the decision to choose Jet over an Indigo and maybe even pay a slight premium to compensate for the frills – the strategy was to take the fight away from price and into services. That would have created value for the Jet Airways brand.
However Jet Airways completely messed up the execution. They continue to behave with a low-cost carrier (LCA) mindset, slowing eroding the value of the frills that they promised to give to the point that today, Jet Airways is chosen only when they compete with the low-cost carriers (LCAs) on the pricing front, even though, it is a premium service. All those frills are perceived by the customer as having zero value – how does this create value for its shareholders is beyond my level of reasoning!
To further add insult to injury Jet’s frequent tinkering of the loyalty program is alienating those customers that chose Jet over anyone else. By devaluing the JPmiles and putting ring fences around its redemption they are making it easier to choose other carriers faster, timely and infinitely more comfortable airlines.
I used to shun offers from all other airlines because the Jet Privilege program made me feel like a VIP and I loved the lounge access, instant upgrades to business class and the last-minute no charge cancellation policies which allowed my family and me to book our flights almost exclusively with Jet Airways.The JPmiles were influencing our buying decision and allowed Jet Airways to make up for the old planes and later than on-time arrivals at my destination. However, as the value of its JPmiles and the utilization of the miles eroded, that liberal allowance we gave them started to erode as well.
First, my father stopped booking with Jet unless they were cheaper than Indigo or Spice, because he knew that the miles were not going to be utilized without haggling with the Jet Privilege staff. That precious time lost in getting the brand to give what it promised and to make its loyal customer feel like a beggar completely demolished all signs of brand loyalty with my frequently travelling father and Jet also converted a promoter of its brand into a detractor – well done indeed!
Next, he stopped all the credit card point conversions to Jet leading to further loss in revenue that Jet got from his point conversions. What is detrimental for Jet is that due to their treatment of its loyal customer he gave another airline a shot at taking his business and once that happens it is like allowing your spouse to flirt with others, you can never be sure if they will come back. If they end up falling in love with someone else, you could have also lost a precious relationship for life.
So now he loves the LCAs loving their on-time performance and the cleaner, quieter and faster aircraft deployed by them. I can safely say that this is a loyal customer that Jet has lost for life – unless they offer cheaper nominal fare than a LCA. So, a full service carrier is now perceived as an equal (or inferior) to a discount carrier – this has to be outrageous for the bigwigs at Jet/Etihad (or is it?)!
Of late I too have flown Indigo & SpiceJet in the last couple of months. I am starting to wean myself off the Jet Privilege kool aid and the shock today will wean me off even faster!
Jet’s loss is, however, a learning opportunity for startups and companies that are running or are going to run loyalty programs. If you have influenced the purchasing decision of a customer by parading the benefits of your loyalty program then make sure you deliver on the promises that were made at the time of giving the points. The loyalty points so awarded are an unwritten contract between your brand and its customer and by delivering on your unwritten promise you create an aura of trust with the customer which is infectious and magnetic – it keeps the customer coming back for more and increases your brand value.
Even other brands that co-brand with successful loyal programmes should pay very close attention to the ease of redemption and the value of the points that were awarded at a 3rd party brand for a buy decision made at your brand. Any erosion in value of the points that were awarded has reduced the value of the discount you have provided your customer and they will take note and they wont forget – so be vigilant Citibank, American Express, etc – Jet is playing with your brand’s image as well.
So be very careful about making changes to your loyalty program and if the change does not increase value for the points or miles that were gained by your customer then err on the side of caution and do not make that change. I cannot stress this point strongly enough that when you break the unwritten contract you have demolished the aura of trust and trust once lost is almost impossible to gain.
Just take a look at the frustration that a tax payer has had when the previous government made retroactive adjustments to tax laws which nullified all the planning that was done for making business transactions. There was an unwritten contract and trust that a financial year is complete, there wont be any changes made that would hurt a person retroactively since there was no way for a person today to make right (something from the past) what is being considered wrong today (unless we discover time travel). Now just take a look at the effort the new government has had to make to ensure investors that those days are long gone – but the feelings of mistrust continues and will most likely continue since that aura of trust once broken makes all promises empty and all assurances seem to be cover-ups, all in a single swipe.
However, if you as a brand have to make any changes to your program that even makes a 5% devaluation of the reward points that were previously awarded to a customer, make it up to your customer by giving them 10% additional points to make up for the loss… give them 20% extra reward points! Then sincerely apologise for the erosion and ensure that your compensation is not enough, but it is a token of your appreciation for the patronage.
Don’t go the Jet Airways route of touting how awesome lesser rewards are for the loyal and how amazing it will be to be out there with a begging bowl to get some value of the useless JPmiles – rubbing salt in the wounds of the trust placed in your brand will make your loyal customer shun you for treating them as idiots.
I doubt the people at Jet will care for an email from a decade long loyal customer but I am certain that Jet no longer figures on the top of my list of airlines.. RIP Jet Airways.