Airlines and hotels have many frequent flyer and frequent visitor programs in which individuals who fly the airline or stay at the hotel receive bonuses that are the equivalent to discounts. a. Give two reasons why these companies have such programs rather than simply offering lower prices. b. Can you give other examples of such programs? c. What is a likely reason why firms whose employees receive these benefits do not require their employees to give the benefits to the firm?

A. First Reason: Companies offer loyalty programs in order to encourgae repeated use of their services. The primary objective is to ensure that they can keep the customers they currently have and avoid having them go to competitors.

Second Reason: Loyalty programs help build a relationship between the customer and the company. Being thanked for your loyalty by a specific company will typically leave customers with a more positive outlook on their trip. This relationship also allows companies to know what their customers preferences are. This ensures that they have a trip that is tailored to their specific needs.

B. Delta Skymiles, IHG Rewards, United MileagePlus, AA Advantage, Chase Rewards, etc

C. This gives their employees an additional perk for working at their firm. It is a huge benefit being able to have a free vacation when you desire to. This also helps the firm be more attractive to potential hires and help retain employees, thus giving them better access to human capital.

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