PPS Club Changes: The inside story on SIA's thinking

[Peasant]

Hi everyone,

I thought some of you might be interested to learn a bit more about the decision-making process that led to SIA's recent changes to the PPS Club. A very reliable source has shared with me an internal memo that outlines the company's new approach to "loyalty marketing".

Some notable highlights are:

• The new qualification rules are expected to decrease the QPP and TPP population (currently at more than 45 000) by nearly 50%.

• Krisshop vouchers and birthday gifts for annual requalification were eliminated to help save the airline more than $5 million annually.

• Overall, with lower servicing costs due to cuts in benefits as well as the smaller number of PPS members, savings are projected to be between $15 and 20 million per year.

Following the April announcement, SIA anticipated a sustained negative response from existing PPS Club members. It has hired additional staff and has formed a team (as the airline puts it) to communicate "transparent and positive" messages.

[singaporu_kooku]

15-20million a year is not that much really... Compared to what SIA gets from the loyal SQ travellers. SIA is nowhere near financial trouble with profit at record high of more than a billion dollars. The management should have a look at what the competitors are doing, SQ is no longer the leader in everything, other airlines are catching up.

[fimo]

Which is all fine and dandy but then it's no big whoop being PPS since the benefits come with flying in premium class anyway. So... what's the perk to being in PPS other than being a member of the club?

[jjpb3]

Which is all fine and dandy but then it's no big whoop being PPS since the benefits come with flying in premium class anyway. So... what's the perk to being in PPS other than being a member of the club?

The management apparently think the card with the enlarged goose has plenty of cachet on its own.

The $5 million saved from discontinuing the birthday gifts certainly didn't come from the UK division.

[Singapore_Air]

So who's the source?

[LionCity]

The savings of SGD 15-20 Millions worked out to 1.5% to 2% out of a profit of 1 Billion dollars.

If 50% of the Members equates to about 22,500 members (assuming 45,000 PPS Members as quote by Peasant).

Considering that 20% of the fare of these 22,500 members are lost, it will equate to 4,500 members not flying with SQ because of these changes.

Assuming a revenue of $12,500 per passenger, it will a revenue loss of SGD 56,250,000 or SGD 56.25 Million.

Based on marginal cost analysis (as most fixed cost and semi-fixed cost taken into account), assuming a profit ratio of 30%...it will equate to 30% X 56.25 Million = SGD 16.875 Million.

Total Net Cashflow to SQ is SGD -1.875 Million (based on SGD 15 Million savings) to SGD +3.125 Million (based on SGD 20 Million savings). So the net effect is that a drop 10% of PPS members completely out could possibly mean a negative cash flow depending on the amount of cash saving.

The above model is very simplistic and of course I will not stand by it. It does not take into account members flying harder to achieve LPPS, TPPS and QPPS status. It also not consider additional food and drinks cost savings to SQ as less members used the lounge...and other factors too!

[MAN Flyer]

So who's the source?

That's hardly going to be announced is it ?. It's real, don't you worry about that.

[token01]

Singapore_Air, as Manflyer suggested, why is there a need or even a reason why the source would be mentioned?? unless someone from SQ themsleves *cough cough* wanted to reprimand and close the leak down....

[StarG]

Thanks for the info, Peasant.

For such a world class company to treat its most loyal premium customers as a big liability... wow.
I hate to say it, but I really don't know what is so special of being a PPS or Solitaire nowadays.
Most of the benefits are already only equivalent to how other airlines treat their Gold members.

[Lobster]

Thanks for the info, Peasant.

Most of the benefits are already only equivalent to how other airlines treat their Gold members.

The are now below how most airlines treat their gold customers

[tfung]

maybe one day they will get rid of Krisflyer and PPS program altogether, and introduce super god like treatment to everyone..

[UMD]

Since SQ thinks loyalty is a liability, it is only fair for me to release SQ off some of its liabilities by not being too loyal.

With me requalified now for Solitaire until 2009 after spending a bit more than S$27K with them this year, I have now booked my next trip on CX and will now give all my flights to CX and QF to qualify for my QF Platinum so I could make use of QF worldclass (vs SQ cattle class) First Class lounge in Sydney and CX great F lounge in HKG.

Also, with QF I could still get my lifetime membership in Gold.

If only SQ did not remove its Lifetime membership, I would continue to spend my remaining traveling budget which is about another S$60K with them. So, instead of getting S$ 90K from me this year, SQ would only get around S$ 27K.

[fimo]

maybe one day they will get rid of Krisflyer and PPS program altogether, and introduce super god like treatment to everyone..

Don't give them any ideas!!!

[SQflyergirl]

Since SQ thinks loyalty is a liability

This gets my vote for quote of the day (if we had such a thing)

[bloob]

I think that SQ probably has some of its KPIs looking the wrong way. The executives running the KF and PPS loyalty schemes are in a cost centre, and reducing costs is a prime KPI for them. Loss of business and clientele is probably not a KPI for these executives; that belongs elsewhere in marketing and sales, and those other executives now have to work doubly hard to make up for the potential losses in loyal customers.

I wonder if SQ has a measure for customer loyalty..... if they did, the pruning of PPS ranks would definitely send a huge red flag somewhere in their management dashboard. Or are their bean counters so focused on cost cutting that they have forgotten about erosion of loyalty.....

Whatever happened to that old wisdom that it costs 5-10 times more to win a new customer than to retain a happy one that keeps giving you business.