United MileagePlus frequent traveler program has been making news lately. Effective August 28, the carrier announced that earned miles will live indefinitely in MileagePlus accounts, with all expiration restrictions based on time or activity removed.
With this change, United joins Delta and JetBlue as major US airlines without mileage expiration rules. American Airlines, Alaska, and Southwest airlines continue to expire miles. American has an 18-month inactivity rule, while Alaska and Southwest expire miles after 2 years of no activity.
The change will be greeted happily by travelers, especially those who fly less frequently and require an extended time period to earn a free flight. Who among us wouldn’t want more time and flexibility to earn a free flight?
But what does it mean for United as it manages programs costs into the future? We asked loyalty liability expert Len Llaguno, Founder and Managing Partner KYROS Insights for his opinion. He shared “I applaud this change ... when members have miles in their account, you have an incentive mechanism to influence behaviors and drive engagement. Eliminating expiration rules allows you to keep more points in more members’ accounts. I suspect that this change will have a net positive economic impact for United.”
Probably overlooked by most travelers in this announcement, United is effectively returning to a state of play that was in effect years ago before the industry began to tighten up program rules as memberships ballooned and concerns about the financial liability of unredeemed miles climbed into the stratosphere. Rather than nitpick over that historical fact, United should be applauded for making bold moves that are required to compete well into the future.
Luc Bondar, Vice President of Loyalty and President of MileagePlus described the move in the company’s press release saying, "We want to demonstrate to our members that we are committing to them for the long-haul and giving customers a lifetime to use miles is an exceptionally meaningful benefit". Mr. Bondar is a veteran thought leader in the customer loyalty industry and he clearly understands what it takes to put the customer first.
In a related announcement, United will no longer publish an award chart with fixed mileage totals required for travel between specific regions. This “dynamic pricing” approach to mileage redemption is becoming trendy in the industry and while some travelers prefer the certainty of knowing exactly what it takes to earn a free flight, we believe the added element of gamification, essentially what this concept equates to, will create higher engagement and satisfaction levels among members when redeeming miles.
The focus of these frequent flyer program rule changes is clearly customer centric. In this case, United is showing some love to the broad section of its audience that falls outside of road warrior status. There’s lots of choice being exercised by that group of travelers when they DO travel, and United is making it more attractive to become the preferred airline of choice for this very large segment of travelers.
Managing its financial liability going forward may become more complicated for United by virtue of eliminating mileage expiration. We dug a little deeper with Len Llaguno who shared this perspective “The elimination of expiration rules will definitely result in a decrease in breakage, and thus a larger liability – but this isn’t necessarily a bad thing. Too many loyalty programs view a growing program liability as bad. This is probably because the word “liability” refers to something that is generally not good in most context.”
“But for loyalty programs, the liability is actually a really good thing”, Ken continued. “It’s better to think about it as an investment in members that will drive a better ROI for most programs. When you look at it from that perspective, it’s easy to see how it’s a positive thing.”