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Newly launched mileage program aims to get it right the first time

In business theory, much is made of the so-called first-mover advantage. The basic idea: the company which introduces a new product or service can lock in a majority share of the market before competitors have a chance to respond.

But there’s a complementary notion that you won’t find mentioned in MBA textbooks which is every bit as powerful. Let’s call it the latecomer advantage. Here the idea is that companies arriving late to the party can learn from both the successes and failures of the first and later movers and present a nearly optimal product on the first attempt.

Japan benefited from a latecomer advantage in the post-World War II era, when it transitioned from a lackluster economy to the world’s preeminent manufacturing powerhouse. With its economy decimated by the war, the country started from scratch, adopting the best in then-current techniques and leapfrogging more developed countries operating with legacy infrastructure.

Closer to home, we’ve seen a number of recent initiatives in the credit card arena which attempted to capitalize on proven best practices and sidestep consumer concerns with existing programs. Examples: United’s new Mileage Plus card, the American Express Blue card, and Citibank’s PremierPass Visa.

And Starwood took advantage of its latecomer status when it designed the Preferred Guest program.

The latest latecomer is a Middle East airline, Etihad Airways, the national airline of the United Arab Emirates. On August 30, Etihad launched a mileage program which, according to the carrier’s news release, incorporates “what all airline customers want from any travel experience.”

Citing results of surveys of frequent travelers, Etihad’s Guest program was designed expressly to address the key complaint of travel rewards program members: limited availability of awards.

Specifically, Guest members can combine cash and as little as one mile for flights, services, and merchandise. And in a welcome embrace of transparency, the value of miles—in multiple currencies, no less—is shown for each award.

(Etihad missed the mark in one significant respect. Miles expire three years after they’re earned and cannot be extended.)

Unfortunately for consumers who’d like to see other airlines match the Guest approach to awards, Etihad is too small an industry player to force a competitive counter-response from other carriers. It turns out that simply arriving late doesn’t guarantee success. Size also matters.

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