AA's Too Frequent Flyer Plan

source: www.aa.com

Many corporations are interested in creating a long-term commitment with their highest margin clients. In the quest to do that, the marketing professionals within firms sometimes generate ideas intended to ensure that business relationship with selected clients are maintained. One real example of that is the American Airlines' AAirpass which was intended to be a one-time upfront payment for selected customers in exchange for unlimited travel in the future. It is understandable that in the thinking of the corporation, this was meant to ensure upfront payment for a service that would be consumed in the future.

Washington Post reports here that the lifetime travel pass was initially sold for US$ 250, 000 and was adjusted a number of times thereafter. For a student of applied economics, it is clear that here is an instance in which the designers of the AAirpass failed t properly reckon with the fact that ownership of the pass would change travel behaviour for some customers. With the benefit of hindsight, it is clear that the AAirpass was purchased by individuals who would in turn trade on it and travelled far more frequently and longer distances. That the corporation resorted to use of detectives to detect the alleged abuses and ended up suing some customers is less a demonstration of deviousness of the customers than the fact that the marketing team that came up with this idea understood very little and crated a poorly designed product.