Tag Archives: loyalty programs

The Cost Of Loyalty Programs (Part II)

I wanted to finish up our look at loyalty programs from two weeks ago.

All the details on a flight to Victoria are posted here – just scroll back to the last story in full. It’s a flight I’m on today, so it’s all broken down. If you’re hooked on the loyalty program of one of the airlines, you need to pay attention: On this $200 flight example, you have to pay EXTRA to get loyalty points. With Air Canada it’s an extra $23 to get half your miles or $44 more for 100%. With Westjet, pay $160 for the flight or $23 more for their Westjet dollars.

But look at their program: Westjet gives you 0.5% of your qualified spending in reward bucks. That’s one half of one percent! You’re paying $23 extra to get less than $1 in rewards. Yes, spend $23 to earn a buck! Tell me how that gets you ahead?

The other great example is from 7-11 and their new reward program. They’ve been doing a lot of TV ads, especially on CFL games. One of the ads is an offer to get a free small bottle of Coke for 1500 reward points.

OK, stop. I went to the store to check it out: The small Coke is 99 cents at 7-11, and pretty much every other retailer. So one dollar divided by 1500 reward points is 0.0007 cents. 7-11 rewards you shopping at less than ideal prices with seven one hundredth of a dollar. That’s to redeem your points. Flip it around to see what you earn: If it’s 2 AM and they’re close and open – buy what you need at 7-11. They’re convenient, good service, and open. But make sure what you’re buying isn’t costing you more than somewhere else because that seven one hundredth of a dollar isn’t making up for overpaying in the retail price!

Petro Points are $0.001 and Airmiles average $0.121. At most you’ll earn 1.5%. That’s the Westjet MasterCard, Aeroplan card, Costco MasterCard and others. It can also be as low as seven one hundredth of a dollar. Breaking news: I have NEVER had a millionaire tell me that their success was because of loyalty points!

Need I say more?

Your Loyalty Is Costing You BIG Money

Below are the screen shots of a flight from Victoria to Edmonton. I picked it because I was booking it – and that’s what got me thinking how much WE have to pay for loyalty…

The Air Canada basic fare is $202. No seat, no checked bag, no frequent flyer miles. Pay $23 more and you get HALF of the frequent flyer miles. Or pay $44 more for 100% of the miles, a seat selection, and a checked bag.

Westjet’s basic fare is $160. So right there it’s $42 cheaper than Air Canada if you were a free agent and just shopped by price and not loyalty. But after that, Westjet is the same as Air Canada: Basic fare is zero reward dollars in their program for tier levels and perks. Pay $23 more and you get only the reward dollars. Pay $90 more for those rewards and a seat selection and checked bag.

One charges you $23 to get your points, the other charges $44. You’ll need $3,000 total (before taxes and fees) to be a somebody in their loyalty programs, and always need to pay way higher than basic fares to earn any! That’s about 12 flights which would cost you almost $300 to $500 in order to BUY your loyalty points. AND you could never fly the other airline.

As a free agent, I took the $42 cheaper flight, skipped the $23 to get my reward dollars, let the computer pick the seat instead of spending $20 or so, and my credit card waved the $30 checked bag fee. That saved me $115. THAT is a lot of money – but not something I would have done last year when I was tied to Air Canada! Even if you make the “silver” Westjet level – have a look what that gets you: 6 free lounge visits, priority boarding (the flight leaves when everyone is on – not just your zone 2, though, and two free checked bag that your Westjet credit card can get you anyway. Yes, you do get to use the reward dollars towards future travel. (Air Canada is pretty much the same rewards but with two lounge visits.) That ain’t much for about $4,500 of spending ($3,000 plus all the taxes and fees for each flight).

For 99% of us, take the cheapest flight at the cheapest price. Pay the rip-off luggage fee if you don’t have their credit card to get a free bag. And for flights under 2 or 3 hours – forget paying for a seat. I’ve done studies that show row 5 arrives at the same time as row 26. The seat pitch is awful and there’s no leg room. Step up to buying a seat only if it’s a long flight.

The Rules of Purchase Returns Are Changing

How much of a hassle should it be to return something you purchased? There’s a fine line between the few who massively abuse it, and those of us who need to return something that doesn’t fit, won’t work, turned out to be overpriced, or needs to be exchanged. And retailers are tightening up on all of us.

Over $400 billion of merchandise is returned for a refund in North America each year. That’s a ton of product! Retailers claim that costs them $400 billion in sales, but that’s just not true. Lots of the merchandise is put back on the shelves to sell again, and a part of it goes to the secondary market, to places such as Marshalls or Winners.

Habitual returners are about one percent of customers. But, because of them, all of us are going to pay the price through more hassle to return something. Retailers have been really generous with returns, thinking it’d have a big impact on increased sales. Costco and Sears with their incredibly generous return policies led the way that all retailers matched to some degree or another. That’s going to change to a new way of thinking that returns aren’t going to be a right, but a privilege. That’ll take a lot of re-educating and push-back.

The coming new way will be that you’ll earn the right to return something by how much business you give that store and whether you’re part of their loyalty program. So, they’ll have to track your purchase history, which means you’ll have to give up your privacy rights in order for them to do that.

If you’re old enough, you’ll remember a third-party called Telecheque. If you wanted to pay by cheque, they’d phone in your name and bank info and that company would authorize your payment. For returns, the company is called Retail Equation. Smaller stores or chains will track your purchases and it’ll be this third-party that will decide if you can return something or not.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Loyalty is Dead: This Time it’s Aeroplan

We talked last year about loyalty programs. On average we’re in a dozen programs and active in about eight.

But, if you’ve noticed, almost all of them aren’t loyal to you. Their way of getting points, freebies, dollars, or whatever are harder to get, PLUS the redemptions keep getting further and further away from happening. It’s more of a game that you’re going to lose beyond a free toaster or something minor. Yet, we’re hooked and stay loyal, despite all the evidence that we’re not getting much of a reward for it – and often for overpaying when another company is often cheaper to deal with.

The newest is a twist where the company who wants your business isn’t even loyal to their loyalty company! If you remember back, it wasn’t that long ago that Air Canada was on the verge of bankruptcy. At that time, they sold their frequent flyer miles program for some big money.

Aimia is the company that owns and runs the Aeroplan frequent flyer loyalty program. They also manage those of Nordstrom, and other companies from Europe to the Middle East.

They have five million of us Canadians as members who hold over 200 billion miles. The company itself, buys 700 million dollars of tickets from Air Canada a year. But now Air Canada is dumping the company that bailed them out to start their own loyalty program again. Needless to say, the stock was down over 76% after the announcement.

Aeroplan is done as of 2020. So the five million of us will start to get greatly reduced rewards. After all, what’s Aimia’s reason for keeping us excited when Air Canada is yanking us away from the program. By the end of next year, there’s no point chasing points that you’re not likely to get any benefit from. On my to-do list is to cash them all out by next year. I normally get Esso gift cards as they can turn into real cash when I gas up. Most other things are pretty marked up in value, so be careful before you press the “redeem” button. If you’re close to an airline ticket, book it as soon as you can before the points needed goes up again and again. If you’re not close – I’d recommend you don’t start the chase.

Greetings from Aruba!

Yes, this week I’m in the Caribbean enjoying 80 plus degrees, and heading for a partial Panama Canal crossing on the Norwegian Pearl. Typically, a full crossing is a cruise from LA to Florida, or the other way around. However, many cruise lines, including Norwegian, now do these partial crossings that start and end in Miami. They’re rather expensive, as they’re 11 day cruises, but well worth it for anyone who has always wanted to see the Panama Canal.

The Pearl is a mid-size ship with 1,200 cabins and 2,400 passengers. That’s what you want, instead of the massive 4,000 passenger ships that are becoming the norm with most cruise lines. On the other extreme, my best friend will only go on a cruise with lines such as Viking that have only a few hundred passengers – but there’s a big price to pay for that.

I do have to confess that it’s my sixth time on the Pear, as it’s still one of my favorite ships. But if you’ve never cruised before, you really want to get the expertise of a cruise specialist with a local travel agent. Different cruise lines, just like different ships, have a very different personality – and for extended cruises, that matters a lot. Many Norwegian cruises have an average passenger age in the 40s. This one, for example, is likely in the 60s due to the length, and non-spring break time of the trip.

The Pearl has also just undergone a two-week dry dock renovation. About half the upgrades were age related, and something you wouldn’t notice. (Could you tell that the original railings are teak, and the replaced ones are spruce?) The other half are quite nice and noticeable. All cabins had a make-over, the most common traffic areas have new carpets, and some of the (pay) specialty restaurants were given a make-over as well.

A couple of heads-up as you might as well learn the painful lessons of someone else (that would be me), instead of on your own:

Within two hours of being on board, it turns out six of my well planned out dinner reservations made two months ago had been wiped out, and were gone. One other had been moved by three days, and only one of eight was still showing. As some of the popular specialty restaurants fill up early, that would have destroyed my vacation in the first few hours. The only reason I was able to get most of them restored, with the help of an incredible hostess who spent an hour helping me, is that I had printed the confirmations and brought them with me. If not, it would have been my word against the ship’s computer, and there’s no chance I would have had them re-booked. Print and take everything! The ship’s hotel director chose not to respond to multiple requests for an explanation or what passengers should do – as I wasn’t the only one. Trust me, I’ve heard the horror stories from almost all cruise lines. And, as I always tell you: If it’s not in writing – it didn’t happen! That will always be true: Case in point that 8,300 of my casino reward point (which is a lot) also disappeared. But with no written proof, I’m out of luck so to speak.

The second heads up is even more valuable: We talk about it at least twice a year: Loyalty is dead. From credit card programs to Starbucks, airline frequent flyer programs to cruise lines. Norwegian Cruises has a pretty high loyalty level called “platinum” that applies at roughly a dozen cruises. This cruise, my traveling companion had also reached that level. But what you don’t know in advance is that none of the worthwhile “rewards” are passed on to the second person. Yes, I get a free load of laundry – he doesn’t. Yes, I get a complimentary dinner – he doesn’t. The value of reaching that loyalty level for the second traveler is $1.25. It’s their own bottle of water in the cabin for the week.

If you have a regular travel buddy, or travel with your partner, make sure you stay a free agent in not always booking with the same cruise line. They get the revenue, but you don’t get the rewards.

Loyalty Is Dead

Almost exactly two years ago we talked about Delta Airlines in the U.S. changing their frequent flyer program from miles or flights to how much money you spend with them. In other words, if you’re a price sensitive flyer that wants the cheap-charlie flights, you’re no longer getting any perks. The entire program is focused on how much profit they make from people.

At that time, I shared this would spread over the next few years. That’s now already come to pass: Starbucks has changed their reward program away from how many times you visit them, to how much you buy on each purchase. So no more rewards for the simple coffee a dozen times, but only if you buy the five dollar fancy coffee.

Thrifty Car rental gave me one free day for every 10 I rented from them. That’s gone: Now any free reward only comes when you reach some huge total dollars spent with them levels. I rent based only on price – I’m never going to see another reward from them because I’m not booking last minute expensive vehicles or rates.

But the best (actually worst) has to be Air Canada. I fly over 35 flights a  year and that was the level at which you were a small somebody. A few years ago they changed away from how many miles you flew to how many flights. Then they took a number of perks away if you didn’t fly at least 50 flights. Then they reduced the total miles for each flight and this year, it’s how profitable you are to them.

If you’re not spending $4,000 or more before taxes and all the rip-off fees, you’ll never get a single perk. I purchase the no-refund lowest price tickets versus the so-called flexible tickets at $100 or $200 more for each flight. Business travelers buy those, because they’re not price sensitive. It’s a fair guess that half of all people on their frequent flyer program have now been cut off. Oh, and to get the decent rewards, you need to spend over $10,000 a year. Add the taxes and fees, it’s about $15,000 or more in flights before you’re a somebody.

Yes, loyalty is dead. The average Canadian belongs to eight different ones. Make sure you know what you’re getting if you do stay loyal. Chances are that you’re still loyal while you’re getting shafted. If so, become a free agent and shop around for the best deal, not the companies that promise something you’ll likely never get.