That's actually an argument for upgrading those customers who are apparently new to your airline, not those who are already regulars and have "form" of buying cheap tickets from you. If you upgrade the regulars on cheap tickets, it is highly arguable that you are merely reinforcing their low-spending habits by giving them more than they have paid for. Some carriers on the other side of the wet bit appear to be finding that this is very costly in terms of premium fares not sold (although they also have a problem differentiating between a "premium fare" and a "total rip off").