ACCC slams loyalty schemes

[woodborer]

Money does not reduce in value over time. The amount of currency increases over time. That's why it's called inflation, and why actual money ($/hr worked, an ounce of gold, real estate) go up in dollar terms over time. If programs want to devalue their currencies then they need to pay interest or they're just robbing people, same as any other savings account. Why would anyone keep money in a bank if what could be bought with it was guaranteed to decrease, unless they made a choice to keep it there for convenience?

But it's exactly what does happen.
$1,000 ten years ago was worth more than $1,000 is today. The value of that $1,000 is slowly inflating away.

Interest, which has nothing to do with maintain value, generally doesn't keep up with inflation anyway.

 

[woodborer]

I'm just waiting for SOMEONE to tackle my biggest bugbear with airlines.........THE ONE WAY TICKET. How are those (paid) fares justifiable on ANY level???

Award fares on Australian airlines are based on one way fares.

 

[lneesham]

But it's exactly what does happen.
$1,000 ten years ago was worth more than $1,000 is today. The value of that $1,000 is slowly inflating away.

Interest, which has nothing to do with maintain value, generally doesn't keep up with inflation anyway.

I disagree. So should every decent economist. Currency loses value. Money doesn't. There is a subtle difference. If you use the "time is money" principle it becomes clearer. Currency treated like money doesn't either, it accrues interest or is spent, either on capital, which increases in currency value, like land, or consumption items which decrease in both money and currency value, like houses, but (deployed efficiently) generate profit, like trucks or railway lines, or rent. The reason why the $1000 doesn't buy as much now is because there is something called a money supply, or M3, the rate of increase of which is determined by a combination of CPI and increase in demand due to there being more people to spend the currency, and to the ones already in the mix getting payrises. M3 should always be higher than CPI (which is not inflation but most people call it inflation), the difference between the two is actual inflation, the amount of currency available per unit of demand. Supply and demand then dictates that the currency buys less units of things on the supply side, which in theory prevents something called deflation or stagflation. It's all a big confidence trick that plays on human nature and psychology in order to prevent recessions, which are genuinely not good. People think they have more money and that it's going to buy less if they dont spend it, so they spend it rather than wait for their money to increase in value, which is what would happen if M3 didn't go up fast enough, ie. Prices go down.

Either way - points are like any other loyalty item. If you simplify it down to something like your local coffee shop's loyalty program, with a card and some tabs that get clipped until you get a free coffee, what has been happening is say when you joined, a card had 5 tabs. But one day you rock up to get the fifth tab clipped and they say "Cheers, but all our new cards have 15 tabs, we're happy to clip one five times for you but you cant get a coffee for five tabs any more". That's exactly how today compares to 1993 when I first joined QFF. About five flights got you one free, now it is about 15 while the actual cost to them of filling an otherwise empty seat hasn't really changed relative to the price you pay. And then when you've bought 15 coffees they go and say "by the way, we don't have any coffee today, unless you want tea, and you'll have to buy the milk because we don't make milk and have to buy it ourselves, therefore it isn't actually free and so you have to pay for it". And then they sell the teabag to someone who extracts your DNA and tries to sell you more tea.
What they really need to do is look up the definition of "Loyalty" in the dictionary. It's a two way street.

 

[woodborer]

I disagree. So should every decent economist. Currency loses value. Money doesn't. There is a subtle difference. If you use the "time is money" principle it becomes clearer. Currency treated like money doesn't either, it accrues interest or is spent, either on capital, which increases in currency value, like land, or consumption items which decrease in both money and currency value, like houses, but (deployed efficiently) generate profit, like trucks or railway lines, or rent. The reason why the $1000 doesn't buy as much now is because there is something called a money supply, or M3, the rate of increase of which is determined by a combination of CPI and increase in demand due to there being more people to spend the currency, and to the ones already in the mix getting payrises. M3 should always be higher than CPI (which is not inflation but most people call it inflation), the difference between the two is actual inflation, the amount of currency available per unit of demand. Supply and demand then dictates that the currency buys less units of things on the supply side, which in theory prevents something called deflation or stagflation. It's all a big confidence trick that plays on human nature and psychology in order to prevent recessions, which are genuinely not good. People think they have more money and that it's going to buy less if they dont spend it, so they spend it rather than wait for their money to increase in value, which is what would happen if M3 didn't go up fast enough, ie. Prices go down.

Putting aside all your mumbo jumbo, people treat points like currency.
A dollar is worth less than it once was.
A Point is less than it once was.

Or maybe you need a P3, the rate of increase in the point supply....

What they really need to do is look up the definition of "Loyalty" in the dictionary. It's a two way street.

There's your mistake.
Loyalty programs are just structured marketing programs. Nothing more. Nothing less.

 

[lneesham]

Putting aside all your mumbo jumbo, people treat points like currency.
A dollar is worth less than it once was.
A Point is less than it once was.

Or maybe you need a P3, the rate of increase in the point supply....



There's your mistake.
Loyalty programs are just structured marketing programs. Nothing more. Nothing less.

100% agree. Very one sided and all about marketing. They shouldn't pretend otherwise but they do and I can't disagree that it is legit, if you accept that it is all about marketing and nothing about Loyalty. Every devaluation is somehow an "improvement". The rate of CPI or inflation for points is much much higher than for currency though. And completely unregulated. Hence the need for an ACCC investigation.

 

[MEL_Traveller]

A dollar is worth less than it once was.
A Point is less than it once was.

Our dollar may be worth less than it was, but we aren't buying points. We're earning them.

The cost for us to earn those points is increasing, alongside inflation. Where we might have paid $100 to earn 1000 points five years ago (MEL-SYD), we're now paying $130 (or whatever) to earn those same 1000 points.

The award (an economy seat) should therefore remain constant (it is a seat that would otherwise go unsold).

What has happened is a double, or triple devaluation... we are paying $130 for the one way fare, and also paying more for the award AND paying fuel surcharges as well.

There is an argument that the 'anytime' award - seats which are not unsold but which QFFF converts to points at 'full' price - those might increase with inflation.

But classic awards shouldn't.

 

[sjk]

Our dollar may be worth less than it was, but we aren't buying points. We're earning them.

The cost for us to earn those points is increasing, alongside inflation. Where we might have paid $100 to earn 1000 points five years ago (MEL-SYD), we're now paying $130 (or whatever) to earn those same 1000 points.

The award (an economy seat) should therefore remain constant (it is a seat that would otherwise go unsold).

What has happened is a double, or triple devaluation... we are paying $130 for the one way fare, and also paying more for the award AND paying fuel surcharges as well.

There is an argument that the 'anytime' award - seats which are not unsold but which QFFF converts to points at 'full' price - those might increase with inflation.

But classic awards shouldn't.

Just a longwinded and not particularly persuasive way of saying what you think *should* happen. Flying is obviously not the only way to earn points, and if you’re finding it more expensive than five years ago then you’re doing it wrong.

 

[RooFlyer]

. Flying is obviously not the only way to earn points, and if you’re finding it more expensive than five years ago then you’re doing it wrong.

Sure, but MT was also lamenting the devaluation and cost of redemptions which is the more insidious bit .

 

[zenyattamondatta]

Sure, but MT was also lamenting the devaluation and cost of redemptions which is the more insidious bit .

I reckon they're all just intertwined. If QFF makes it easier to earn points, it stands to reason those points are going to have less purchasing power. All the whining just ends up in giving QFF a marketing excuse for doing things like this past devaluation, where they made their ludicrously priced Y awards just a tad less ludicrous while making everything else even more ludicrously expensive.

The "it is a seat that would otherwise go unsold" part is particularly annoying to me. I'd prefer to leave that up to the qualified yield managers (disclaimer: some of whom we advise). It's really not up to MEL_Traveller or any customer to say how the company should price things, although they always have the right to walk their talk by just not buying (or in this case, participating in a lame scheme).

 

[MEL_Traveller]

The "it is a seat that would otherwise go unsold" part is particularly annoying to me. I'd prefer to leave that up to the qualified yield managers (disclaimer: some of whom we advise).

The concept that straight-out awards (classic/standard/saver, whatever the lowest category is in a particular FF program) are sourced from seats the airline doesn't believe it is going to sell has been around since the inception of FF programs. It's one of the reasons why airlines have a disclaimer that award seats won't be available on every flight: you don't 'give away' a seat that could otherwise be paid for at the asking cash price.

But it doesn't also mean that all unsold seats will be award seats. You don't want potential fare paying pax cancelling their cash tickets and swapping it for an award.

 

[zenyattamondatta]

The concept that straight-out awards (classic/standard/saver, whatever the lowest category is in a particular FF program) are sourced from seats the airline doesn't believe it is going to sell has been around since the inception of FF programs. It's one of the reasons why airlines have a disclaimer that award seats won't be available on every flight: you don't 'give away' a seat that could otherwise be paid for at the asking cash price.

But it doesn't also mean that all unsold seats will be award seats. You don't want potential fare paying pax cancelling their cash tickets and swapping it for an award.

Thanks for the condescending and completely unnecessary history lesson, but you still don't seem to understand that the logic doesn't run in both directions.

So how would things actually work in the MEL_Traveller regulatory world? Since you have no insight into which seats are actually unsold or "should" be "straight-out awards"?

What would you actually want to see done? Feel free not to skimp on the specifics.

 

[sjk]

Sure, but MT was also lamenting the devaluation and cost of redemptions which is the more insidious bit .

‘insidious’, perhaps, but...

MT has obviously spent a lot of time thinking about this, I just wish (s)he could think a little harder and more flexibly. Saying the same thing over and over and over and over again while adding zero to previous points helps no one.

[redacted]

 

[MEL_Traveller]

Thanks for the condescending and completely unnecessary history lesson, but you still don't seem to understand that the logic doesn't run in both directions.

So how would things actually work in the MEL_Traveller regulatory world? Since you have no insight into which seats are actually unsold or "should" be "straight-out awards"?

What would you actually want to see done? Feel free not to skimp on the specifics.

When an airline makes a classic award available it should be fairly clear that that's a seat they don't believe they are going to sell. (I'm not saying that there should be more award seats made available.)

The point was made above that due to inflation, points should also be subject to inflation (devaluation). And that's what airlines would like us to believe and accept.

My point is that this is actually leading to double inflation, because the product or service we're buying is already subject to inflation, then we're paying again when the airline devalues their chart.

Edited to add that I see you added to your post #89 to say no one really has the right to tell a company how to price. I disagree in the case of things such as loyalty programs where achieving an award can take a substantial amount of time. To have the rules or prices changed when someone is half-way to an award, without any recourse is potentially unfair.

 

[zenyattamondatta]

When an airline makes a classic award available it should be fairly clear that that's a seat they don't believe they are going to sell. (I'm not saying that there should be more award seats made available.)

The point was made above that due to inflation, points should also be subject to inflation (devaluation). And that's what airlines would like us to believe and accept.

My point is that this is actually leading to double inflation, because the product or service we're buying is already subject to inflation, then we're paying again when the airline devalues their chart.

Edited to add that I see you added to your post #89 to say no one really has the right to tell a company how to price. I disagree in the case of things such as loyalty programs where achieving an award can take a substantial amount of time. To have the rules or prices changed when someone is half-way to an award, without any recourse is potentially unfair.

So, once again, no specifics, and you just want to pay less?

 

[sjk]

My point is that this is actually leading to double inflation, because the product or service we're buying is already subject to inflation, then we're paying again when the airline devalues their chart.

The ‘double’ line is really just more nonsense. Any devaluation is going to take everything into account.

What outcome could you consider a win?

 

[cove]

The more points that are dispensed by Qantas and Virgin the less likely any or many of us will be able to fly on a redemption basis other than in economy.
To combat this on domestic flights I find it advantageous to have points with both Qantas and Virgin.
The last Qantas announcement was a downgrade but was hyped up as a win for us.

 

[straitman]

A few comments here are being removed as they are unhelpful and irrelevant.

Let us stick to the topic please people.

 

[pauly7]

I for one am glad this isn’t getting much air time and is basically being buried.

I think although good intentioned a lot of the proposed changes would have not have been very appetising for those of us who work the system to our advantage.

(Disclaimer: Yes I know this is incredibly selfish )

 

[rock86]

I for one am glad this isn’t getting much air time and is basically being buried.

I think although good intentioned a lot of the proposed changes would have not have been very appetising for those of us who work the system to our advantage.

(Disclaimer: Yes I know this is incredibly selfish )

Yes, that is incredibly selfish Pauly - but in this respect I'm selfish too

 

[drron]

Putting aside all your mumbo jumbo, people treat points like currency.
A dollar is worth less than it once was.
A Point is less than it once was.

Or maybe you need a P3, the rate of increase in the point supply....



There's your mistake.
Loyalty programs are just structured marketing programs. Nothing more. Nothing less.

However if a point was worth 2.2 cents in 1998 it should be worth 2.2 cents now as that 2.2 cents has already lost value.The fact that it is now 0.7 cents in the example given means a double devaluation.