United Airlines is beginning to roll out cash and points (‘money + miles’) awards on a limited number of domestic U.S. markets. They want to make it possible for customers to redeem a small number of miles and get some value quickly from the program. This was shared by the ingenious Brian Sumers, based on an internal communication of the airline.
Frequent flyer programs have become a lot less important to me during the pandemic. But if I still played the game, I’m not sure how I’d feel about this. @united is introducing a money + miles option. Are these ever a good deal? From an internal communique: pic.twitter.com/7mDfmRl0K2
— Brian Sumers (@BrianSumers) August 25, 2021
United actually introduced the ability to use miles at 1 cent apiece towards airfare in 2006, but at the time this was limited to co-brand credit card customers and the miles they’d earned via their cards, and you had to use miles for the full purchase rather than just towards part of the cost.
I haven’t seen specific examples of this new option in the wild yet, but I’d be shocked if there’s a world in which United will offer materially more than 1 cent apiece when redeeming miles this way. Although their should be.
Airlines know that when members redeem their miles, they begin to accumulate more at a faster rate. They become engaged in the program. That’s because they’ve demonstrated to themselves that the early investment in the program was a good one. That’s also one of the values of credit card initial bonus offers, beyond just getting a customer’s attention and encouraging action. People don’t trust brands, but if the first award is provided more or less up front the consumer gets that redemption experience quickly.
The challenge is that low value redemptions don’t serve as nearly the same kind of proof point. United gives base members 5 points per dollar spent on base fares. After spending $1000 total with the airline they might have 4500 miles, worth a $45 discount when they buy another ticket. That may not be the kind of wow moment that delivers long-term value to the airline, turning the customer into an engaged member who takes the credit card and shops through the mileage portal in order to earn the currency whenever possible.