If you don t place any restrictions at all, then you really have discounted your product. Well, first by making sure that the benefits earned are low cost for the provider. Advances in yield management identified which benefits could be used to encourage patronage while at the same time preserving profit centers for the airline. They managed to translate a fixed cost into a benefit. After all, once the plane is airborne, the night is over, or the ship leaves the dock, those costs are fixed at that point in time.
Additional revenue goes directly to the bottom line.
Price cutting on the other hand is usually much less effective. In raising the levels very high, there was much less dilution. It s hard to get enough miles in several programs, better to concentrate on one or two. What Barry Smith missed is that the use of these affinity programs changed the game forever. Ray is correct, you can t sit on the sidelines if your competition is using some version of this strategy.