Delta President Glen Hauenstein explained at the airline’s Investor Day on Thursday why people take the SkyMiles credit card.
Bear in mind that SkyMiles is more opaque, and their miles more likely to get you just around a penny apiece, than other airline frequent flyer programs. For customers not looking to spend towards elite status they’d be much better off with a 2% cash back card, or an American Express Membership Rewards card that,
- Earns points faster than the Delta cards
- Lets you transfer to Delta or other airlines
Hauenstein says that they’ll enroll 6 million new SkyMiles members” in 2020. And their card has had 1 million new signups in each of the last 3 years with significant spend growth.
Why are customers doing this?
He says the model works like this: Fly Delta -> like the experience -> join Delta programs -> like them even more.
And Hauenstein reports that Delta is the second biggest card issuer in Nashville, in Atlanta they’re number one, and number one in Boston and New York.
They believe the “relevance of [their] offering and how much people like you” determines allegiance and spend. The implication is that brand experience and scale matter more than value proposition of the card. In fact, Hauenstein didn’t talk about offering customers better rewards through their credit card than competitors.
Seriously? How does he even know that? I think he’s speculating and/or rationalizing.
I think it makes sense in that a lot of people will like Delta, want to earn free flights on Delta, and get the card. They put spend on it to get to the rewards without doing a lot of analysis as to their earn rate, plus there are other benefits of the card, and for those that don’t want to carry a lot of cards they would accept the lower earn rate. I never put spend on the card of course accept some amount to keep the Amex RA Team away!
Gee Uncle Gary,
I thought it was Delta CC——->Free Sky Miles.
The Delta brand /experience is as crappy as most of the others every time I’ve stepped foot on their planes
It’s only a choice if the other options are spirit or frontier
Their brand means near 0 to me
my experiences on Southwest & Alaska superior in every way
They are drinking far to much company kool aid and it’s tainted
Lastly their laughable award redemptions are a scam rip off with only the most naive and uninformed redeeming on their own metal
Pathetic
There are not an infinite number of fish out there for Delta/AMEX to catch. There will be a plateau.
My Delta AMEX is the difference between Gold and Platinum Medallion yearly. It’s worth it to me.
@Brian – yes I am clear that the analysis of don’t spend on the card applies to folks other than those seeking to use it to earn status
@Sam – worth getting for an initial bonus, worth keeping for flight benefits, just not worth spending on it apart from the up front bonus offer
Hauenstein’s comments could contain some wishful thinking, but it is certainly possible that he is correct. Despite what we might like to think, much of human behavior is not “rational.” People often act on their “feelings,” and often don’t make decisions based on cold hard facts. Couple that with the fact that most people aren’t that intellectually curious — and are busy focusing on other aspects of their lives — it is certainly possible that “general good feelings” and market scale can matter more than delivering actual value to your customers. For instance, does Apple deliver “good value” to their customers? No way. But look how successful they have been.
Agree with chopsticks. Most people don’t do the math. They see a big number of miles, a free bag and priority boarding…OK sign me up, I fly Delta a few times a year anyway, so sure, why not? They didn’t weigh that against other better options of signup bonuses, and don’t weight whether it makes sense to put ongoing spend on it either. Honestly, 1-2% vs a mile or two per dollar isn’t going to make anyone rich, it’s a marginal gain no matter what, so, most people don’t want to bother with it…which of course is great for people like me. It means good opportunities will still present themselves, despite things getting tighter and tighter.
@ Gary — I use the POS Reserve card for MQM earnings, although I may drop it altogether with the latest Delta ripoff of no more miles boosts, in exchange for the honor of paying a higher annual fee.
DL is full of it’s self. I worked for an agency supporting them and one of their competitor’s cards. We see our biggest lift in hub cities where you MUST use the DL AMEX to help earn status. Once people move and no longer fly DL the card is dropped like a hot potato!
Truth, awards and status drive the card, nothing more.
1) A 2% cashback card generally does not allow you to supplement earnings from flights and other activity with credit card spend (though Delta’s pay with miles complicates this a bit). Many travelers would prefer to combine the 10,000 in Delta miles they earned with flying with the 10,000 Delta miles they earned via credit card spend rather than having 10,000 Delta Miles and $200 in cash
2) Many customers, even extremely saavy ones, don’t have Amex charge cards and don’t want to deal with the MR system
I used to put spend on a Delta card before I learned about the miles and points options available. Now mostly use AMEX and Chase cards, but I still have my DL AMEX card for the few trips that I take on their flights.
@sunviking is so right
This is zero to do with the inflated Delta ‘brand’ – they just get people in the status chase via MQMs and for the masses the no expiration + sub 25k redemption prices when fares are cheap give them what they want
typo :
“Hauenstein says that they’ll enroll 6 million new SkyMiles members~~~”~~~ in 2020.”
Ya right Delta. You keep believing your own hype and you will win the race to the bottom. BTW Delta, Jeffery Epstein didn’t kill himself . . . Regardless of what your analyst tell you.
He is right. As someone switching business travel to Delta from a non-Delta hub, they are just a better airline so they can worry a lot less about rewards. Southwest has the same advantage. American and United used to be far better frequent flyer programs, so choosing them meant more personal free stuff for work travel.
When Delta realized both airlines were just copying whatever Delta did blindly, they smartly switched to revenue based rewards and variable award charts. Skypesos were already worthless, so Delta flyers weren’t losing much.
United and American followed, so that now their programs are as worthless as skypesos, but still with a subpar product. This was brilliant of Delta to lure the competition into being crushed. After a couple of decades of flying I never even considered Delta due to their poor rewards offerings. Now I am a convert, because nobody else will give me anything more, so I may as well choose the strongest product.
@fun in the sun – interesting. I never thought of it that way. I fly DL and credit to Virgin Atlantic, FWIW.