4. Effects upon the airline industry
Sky miles were initially granted to customers in order to attract them. From their emergence up to present times, the sky miles have developed in form and usage possibilities and are now features that influence the global airline industry. Their effects are best represented in two directions. First of all, air miles increase customers' satisfaction in regard to the issuer's products and services. Secondly, they influence the airline industry in the meaning that they increase the competition among airline companies.
Increased customer satisfaction
Air miles are a most efficient means of attracting customers, familiarizing them with the company's products, services and policies and increasing their fidelity to the issuer. The concept is based on the reward strategy and the sky miles are presented as the company's reward for their customers.
Being granted additional traveling opportunities, customers become more content with the airline company and tent to return. Furthermore, not only that they increases existent customers' fidelity to the issuer, sky miles are also a guarantee of new customers. For instance, when considering a flight, be it for social or business purposes, most travelers look into the company's benefits. If they find that one company offers more miles for a spent dollar or has lower annual fees for credit cards, they are likely to pick that company.
The increased number of customers generates the company increased demand of their products and services. This offers the issuer the opportunity to expand and develop his business, leading to his registration of higher sales revenues.
Consider that the large majority of the airline companies operating on the market are striving to present their customers with high quality products and services. This means that the customers are offered a wide palette of services from which they chose those that best meet their needs. As such, the sky miles represent a selection criterion for those searching for the perfect flight.
All in all, increased customer satisfaction generates increased customer needs and expectations. On a market where customers become more exigent and demanding with every day, airline companies have to constantly develop their strategies, products and services. But not only do they have to improve and develop in order to satisfy customer needs, they must also develop in order to remain competitive on the market, this being the second effect sky miles have upon the airline industry.
Increased competition among airline companies
The competition between airline companies is generated by their desire to number as many customers as possible, register high incomes, develop, expand and become leaders on the market....
This competition directly affects the entire airline industry in the meaning that:
It forces companies to constantly develop, deliver better products and services and consequently improve the overall image of the airline industry
It forces companies to expand, hire more workers and as such create more jobs and reduce the unemployment rate
Strong airline companies register increased revenues, ergo pay more taxes. The collected taxes aid the community and sustain other developing industries
It forces companies to function based on the concept survival of the fittest. The strongest companies will survive, while the weakest ones will have to cease their operation.
Sky miles are travel services offered by airline companies as a reward of previous purchase of the company's products or services. They are generally earned through payments with credit cards and they can be used for flights, car rentals, hotel rooms' rentals or for shopping from airport stores or other partners' stores. Air miles are easy to use, have numerous applications and can even be sold, donated or transferred. The costs of purchasing sky miles are generally reduced, but these vary with each issuer. The costs include the amount of dollars clients have to pay in order to earn a mile and the annual fees demanded by some issuers.
Air miles were basically used by airline companies as a promotion strategy aimed to attract more customers. However, currently, the sky miles hold a growing role with the airline industry as they lead to increased customer demands and increased competition between the airline companies operating on the market.
Sky miles represent a selection criterion when choosing an airline company; they increase the issuer's number of customers and subsequently his sales revenues; they force companies to continually develop; they create more jobs and they improve the overall image of the airline industry.
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