Some customers are better than others and need to be very well taken care off. But not Steve Rothstein. For American Airlines this customer was the one to get rid of and American Airlines did spend a lot of efforts to kick that customer out after he had flown 10,000 flights in first class with the airline. Discover this amazing story below.
Probably the single most loyal customer
Rothstein bought a lifetime AAirpass in 1987 for $250,000 and one additional pass (companion seat) for $150,000 at a time when American Airlines was in desperate need of cash. Sixty-six of those passes are reported to have been sold (for more info on the AAirpass scheme, see wikipedia). The AAirpass gave him the possibility to fly an unlimited number of times anywhere in the world in any class (including first class). Rothstein is said to have flown 500 times to England alone. Moreover each flight gave him right to additional miles on his loyalty card and he accumulated some 40 millions frequent flyer miles(!) of them that he generously gave away.
This quote by the Time.com really sums up the essence of the deal and the difficulties American Airlines puts itself in :
What American discovered over the years is a lesson that every restaurant owner who offers an all-you-can-eat buffet must know: For some customers, “unlimited” really does mean unlimited.
A black hole for the company’s cash
In 2012 the airlines looked into the profitability of its customers and discovered that Rothstein was actually a black hole for the company’s cash. Rothstein generated losses of $1m per year because of its really unlimited use of the pass, resulting in some $23m losses for American Airlines over the lifetime of the relationship with this customer.
Subsequently AA investigated all possible legal breaches to the original 1987 contract and terminated the relationship in 2008. A termination letter was handed over to Rothstein who was trying to check in at Chicago airport.
An article on Americanow.com reveals Rothstein’s feelings after the letter was handed over to him :
Rothstein said he was so shocked, he couldn’t get out of bed for days. He felt betrayed, too, as he had helped the airline sell passes and spoke at its events.
Interestingly these feelings of betrayal are common among frequent flyers who lose their status. This was the topic of a discussion at EMAC 2017 conference this year and it seems that the resulting feelings can be compared with those arising when a love relationship gets broken. Pretty serious and intense feelings thus.
Conclusion
This example shows that not all loyal customers must be kept. Some of them are terrible for your profitability and should be removed from your customers’ portfolio. This once again proves that CRM strategies need to take much more than actual purchases into account to work effectively. Yet, as we stressed in an earlier article, most CRM strategies today are still focused on purchases and don’t take all other interactions that happen outside the firm (for instance word-of-mouth).
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Posted in Marketing.
