All major airlines offer frequent flier programs. Originally seen as a way to differentiate their providers in response to excess capacity in the industry, these programs have long since become ubiquitous. Many industry analysts believe that these programs have met with only mixed success in accomplishing their goal. Use the competitive advantage concepts to explain why

Answer 1

Initially, frequent flier programs had only limited success in creating differentiation among airlines. Airlines tried to bundle frequent flier mileage programs with regular airline transportation to increase customer loyalty and to create a differentiated product. Furthermore, theairlines anticipated that the programs would fill seats that would otherwise have been empty and would, so they believed, have had a low marginal cost. However, because the costs of implementing a program were low, there were very few barriers to other airlines starting their own frequent flier programs. Before long, every airline had a frequent flier program with roughly the same requirements for earning free air travel. Simply having a frequent flier program no longer differentiated airlines.
More recently, airlines have had some success in differentiating frequent flier programs by creating additional ways to earn frequent flier mileage and increasing the number of destinations covered. Airlines have developed "tie-ins" with credit card companies, car rental companies, hotels, etc. to allow members of a particular frequent flier program more ways to earn frequent flier mileage. They have also reached agreements with foreign airlines so that frequent flier mileage can be redeemed for travel to locations not served by the carrier. Finally, the programs have provided additional services for their best customers, including special lines for check-in and better flight upgrade opportunities. As a result of these efforts, airline programs have been somewhat successful in increasing customer loyalty.