Loyalty programs - worse than cigarettes or crack cocaine.

[Cruiser Elite]

Crikey - I have sat and broken bread with RF - never realised he was so sharp and on the money!!!

Can’t believe peeps have so much time to waste writing War and Peace type posts

 

[Wanderlust_tim]

I think in an ideal world where the business delivers on the details CONSISTENTLY, I could understand your line of thinking. But it would be no shock to most here to know that the delivery has been anything but consistent. And as I alluded to briefly in the opening post, the failure to provide a particular service each and every time ends up having a rather negative impact. Love, Joy, and Freedom are not emotions that I would associate with most of my flights with QF

I will be very cheeky here and suggest that a seminar that refers to an environment of customers feeling love/joy/freedom is probably far more succesful in evoking those same delicious feelings in the attendees than it is in real-life airline passenger sensations

Yes, I recognize that when a traveller gains some status, gets a tad ahead of the "pack", it is a good feeling in some ways. I have certainly also felt moments of Love and Joy in moments where my status really helped me or staff made me feel special. But I really think that, at least in my case, that is not the truly addictive thing. I know from personal experience that nicotine in cigarettes is very addictive. And the consistency of that drug was part of the whole joy. But if Qantas was a cigarette, then only about one in five smokes would actually contain nicotine. Smoking that product would become actually quite irritating. I think that is my service-experience from QF. Dread of the unknown was a more common emotion for me than Joy.

I think there are two far more addictive processes at work that the feeling of emotion during travel. The first relates to SC and status. Which is to slowly get to different milestones, which equally slowly made improvements in my travelling life. I think this is where QF and many other Loyalty schemes are very well designed. They entice you to the next level, then they show you another slightly higher level, etc etc. This is perhaps why many of us find it so annoying when we reach the top - the game is over. It is very hard to be happy when you lose status. Doesnt matter whether it is dropping from P1 to WP, or SG to zero - it is not nice

Reading this made me wonder. Normally when we think of buying a flight we imagine that the primary thing we are buying is the transportation to a destination and the service on board. This as @juddles points out is inconsistent at best and a huge debating point on AFF. In flight service is expensive and with so many human variables and touchpoints, service failures do occur, sometimes frequently. Rationally then you might suggest that you would seek alternatives. However, the loyalty scheme minimises customers willingness to switch.

Whilst the onboard is infuriatingly inconsistent, what is consistent are the status credits that are awarded through the loyalty scheme and i think this is the crux of the matter. Subconsciously, i wonder if the primary thing you are buying are the status and status credits associated with a flight to where you need to go. The flight and experience onboard (no matter how bad) is merely the mechanism to achieve this. As long as the rewards of retaining status are there, you don't switch your purchase decision. You are more likely to continue purchasing these status credits until the experience onboard is so bad that you don't see value in the status or you have no need to keep attaining status anymore.

As an example, I see this play out here on AFF with people who achieve LTG and then promptly switch their spending.

 

[Forg]

Reading this made me wonder. Normally when we think of buying a flight we imagine that the primary thing we are buying is the transportation to a destination and the service on board.
…
Subconsciously, I wonder if the primary thing you are buying are the status and status credits associated with a flight to where you need to go. The flight and experience onboard (no matter how bad) is merely the mechanism to achieve this. As long as the rewards of retaining status are there, you don't switch your purchase decision. You are more likely to continue purchasing these status credits until the experience onboard is so bad that you don't see value in the status or you have no need to keep attaining status anymore.

Maybe this comment belongs over in the Crazy Ideas thread … but what about that "bad service" not being bad enough to override the positive returns people get from playing the status game?

 

[woodyren]

Most of the discussion here seems to involve status and points accrued from flying.

If one gains their majority of points from other sources and flys on whichever reasonable airline reward flight that can get them to their destination I can put up a reasonable argument that:

1. It is possible to very closely understand the value of your points.

2. You are not emotionally involved in the recognition you receive.

We have taken a total of around 20 long haul J reward flights. None of those have been taken or any points earned on Qantas or Virgin despite all our bookings being made through those two programs. I treat my points earning in a similar way to my work. That is it's more of a means to an end in order to earn a travel budget than any form of addiction.

 

[Dec1971]

.............and people complaining about long posts could easily ignore the post and move along. Sorry. Couldn't help myself.

 

[andye]

Gambling is also a potent dopamine trigger as evidenced by its popularity (and profiiltabity) throughout history. I sometimes think of Loyalty Programmes as a Casino.

We are currently playing Poker where the experienced Member having more skill than their table-mates will (more-often-than-not) result in an outsize reward.

Note that the House (the Scheme owners) will always win overall, even if its cut is data

There is a danger that the ACCC will have us playing Blackjack where the House still wins but everyone else loses in the end

 

[waratahbay]

Qantas points ticket search tonight. MEL to JFK 14 June 2020 offered as J points ticket, as follows:

MEL -> PER in J on QF783
PER -> SYD in Y on QF568
SYD -> LAX in Y on QF11
LAX -> JFK in Y on QF11.

I guess this is how you cook the stats on the number of international J points tickets offered to punters. (Points required reflect the cabins to be flown.) And add 7 unnecessary hours flying time + layovers.

 

[ozfflyer]

many people seem to be giving up on frequent flyer/stayer programmes.

"it's all getting too hard"

some say & the way the economy is & the deals around for everything with cash being king, it does often make you want to put away that credit card & save $$$.

+ sometimes the fees are almost as much as the cheapest fare on another carrier

 

[Bell21]

Such a good thread. Wish I jumped on board earlier. My best attempt to catch up:



Mrs Excel often reminds me that I am probably not as smart as the team of data analysts, etc that Qantas loyalty employ. While I like to think I am gaming the system, I think she may be right.

Could there be pokies jackpots if nobody gambled?



"A higher standard of living does not mean a higher quality of life". Andy Stanley from a four part series called breathing room.



I seem to remember a psych concept that unexpected rewards are more likely to train a new behaviour ie when teaching a dog to sit, you only give a treat some of the time. Random upgrades (if ever), or award flight availability, fit this perfectly.



I would like to think that my spend $50 for 4 weeks target at Coles doesn't influence my likelihood to buy blueberries even though they're full price.

But I'm sure it does, and even if I do outsmart their data scientists, it can't make the masses better off or it would lose Coles money, as you have said.



Are we ok with pokies, tobacco, you name it ruining some people's lives, while the tax revenue from the masses pay for roads etc?

I think we are inherently flawed and selfish, and as long as loyalty programs make us feel important (read how to win friends and influence people), they will be successful.

Whether it's a toaster or a piece of toast at 30k feet, if you're made to feel important when you receive it, you'll quickly forget the money you may have wasted "earning" it.

Yet, I continue to play the game. Tut tut tut

Yep, good one, it's called intermittent variable rewards in 'learning theory' - they tend to be the most effective ways of reinforcing behaviour

 

[MEL_Traveller]

many people seem to be giving up on frequent flyer/stayer programmes.

"it's all getting too hard"

some say & the way the economy is & the deals around for everything with cash being king, it does often make you want to put away that credit card & save $$$.

+ sometimes the fees are almost as much as the cheapest fare on another carrier

As far as I can see there are only two negatives... chasing status, and actually taking up the 'deals' offered by airlines to get bonus points on everything from travel cards to travel insurance to health insurance.

For anyone else, you're either (a) a frequent flyer/stayer and earning the points anyway, (b) are maximising opportunities (including loop holes) or (c) doing nothing than your regular spending at Coles and Woollies and earning a few points here and there. None of (a), (b) and (c) are costing you anything.

it's the chasing status and 'bonus points' tat can become costly.

 

[Bell21]

Gambling is also a potent dopamine trigger as evidenced by its popularity (and profiiltabity) throughout history. I sometimes think of Loyalty Programmes as a Casino.

We are currently playing Poker where the experienced Member having more skill than their table-mates will (more-often-than-not) result in an outsize reward.

Note that the House (the Scheme owners) will always win overall, even if its cut is data

There is a danger that the ACCC will have us playing Blackjack where the House still wins but everyone else loses in the end

What a great comment - I always saw the points game as playing in a casino except the house changes the rules more frequently but the distinction between poker and black Jack is GOLD

 

[andye]

Another similarity is that although you can 'win' with a small pile of chips, it's easier with a big pile

 

[lydea]

QF Loyalty is an extremely significant and profitable part of their business. Profitability comes from cash, from somewhere...

Great rant, thank you. I gave up my Amex card some years ago on the ground that its profitability is at a high cost to the shopkeeper...

 

[Hvr]

We are currently playing Poker where the experienced Member having more skill than their table-mates will (more-often-than-not) result in an outsize reward.

Note that the House (the Scheme owners) will always win overall, even if its cut is data

An interesting analogy given that poker is a game played amongst the players not the house. The pot is limited by the actual game and the amount of dollars players gamble. Also, unlike other casino games, poker is a game where there is an element of skill rather than pure luck.

 

[MEL_Traveller]

An interesting analogy given that poker is a game played amongst the players not the house. The pot is limited by the actual game and the amount of dollars players gamble. Also, unlike other casino games, poker is a game where there is an element of skill rather than pure luck.

I suppose it's true? The pot in FF programs is limited - there are a finite number of seats and they have to be shared among the members (players). And it's most certainly a game of skill... searching MEL-LHR in the hope of being lucky and finding two F seats will probably leave you disappointed. The skill is knowing that searching SYD-SIN followed by SIN-LHR will likely yield results.

And like a poker pot, the house takes its cut

 

[exceladdict]

An interesting analogy given that poker is a game played amongst the players not the house. The pot is limited by the actual game and the amount of dollars players gamble. Also, unlike other casino games, poker is a game where there is an element of skill rather than pure luck.

Don't forget the 2% rake (Breakage according to loyalty programmes - and 10%+ at QFF)

 

[couchlife]

Hi all,

I enjoyed your post. You should have called it "The Things We Think and Do Not Say" =)

I agree with you on a lot of points, but also think "buyer beware" - it's everyone's responsibility to play this game with awareness of what they are getting themselves into.

I only play because of FOMO, and wanting access to things that money can't buy (although lounge access does seem to have a price nowadays).

Telling the cab driver "Singapore Airlines T3 First class entrance please" and then walking into the Private Room is one example. I wouldn't have been able to do this if it wasn't for the loyalty game.

1.- Juddle's is on holiday at the Gold Coast
2.- someone in his family drinks lactose free milk
3.- Juddles bought a "marked-down" potato salad - so is a consumer who will buy discounted things
4.- Juddle's bought both sausages and a vegan bun - so there are both meat eaters and vegans in his family group.

I've thought about this alot over the years too, and my conclusion is that I dare them to make these assumptions.

They don't know that you are on holidays in GC, because you are on there on biz. You went to GC because there were no flights to your intended destination, BNE. You bought the potato salad cos you were $3 short for a monthly Woolies promotion (and they certainly don't know that you went to Coles earlier that evening because you used your other card).

Qantas thinks you take your annual 3 week trip to London every year? Well BA thinks you live in London and fly to Dublin once a year for 2.5 weeks. Woolies thinks you do all your groceries once a month, while Coles thinks you do it 3 times a month... what a weird shopper. Commbank thinks you cancelled your Netflix this month, Westpac is thinking geez, Netflix got yet another customer.

Am curious if anyone here works for Big Data. Would love to hear their thoughts.

 

[Bell21]

It's been an interesting thread --- thanks Juddles! As someone else mentioned, there seems to be two (+ more) intertwined concepts around earning status and earning points. I can see how earning status can be addictive, and Tripping the Riff is kind of right re motivators of human behaviour that tie us into the loyalty game + the gambling elements mentioned above.

For me, it's almost purely a ROI game, especially with regards to earning points --- yes, it's addictive, but it's also fun --- but most importantly, I clearly see myself as 'buying points' (whether through credit card surcharges, online payment processor surcharges, credit card fees, etc), and then using those points within a relatively short time frame (since the game always changes). As long as my return on using points is well ahead of 'my spend' to obtain them, then that works for me. Maybe partly b/c I'm still relatively new at 'the game', it doesn't even overly bother me when FF programs make significant changes, as I just look at the adjusted ROI to see what is viable.

It may be there is an inherent fallacy in the ROI perspective, in that without points, I wouldn't have stayed at the expensive hotel or flown J, but that's ok, as my sense is that typically, I probably would have paid a similar amount to what I end up outlaying (or probably somewhat less) in earning points for economy flights or much less fancy hotels, so it's still a good outcome.

 

[dfcatch]

I seem to remember a psych concept that unexpected rewards are more likely to train a new behaviour ie when teaching a dog to sit, you only give a treat some of the time. Random upgrades (if ever), or award flight availability, fit this perfectly.

Yes - variable ratio reinforcement schedules (aka "surprise and delight") can be very effective. QF's approach of 'randomly' upgrading P1s from time to time... or the years-old strategy that QF employed of upgrading new QP members shortly after enrolling - is another example.

There are actually 5 different schedules of reinforcement, and getting them right is one of the biggest challenges for loyalty programs.

I have written extensively about the application of psychology to loyalty programs - The Psychology of Loyalty Programs

The ACCC report essentially summarizes my article.

Trippin's comments on the emotional aspect are spot on - EVERYTHING about loyalty programs is about emotions and behaviour.

They are designed to elicit irrational behaviour.

Some people will overspend due to not "shopping around"; or in the pursuit of points or status - particularly when in range of the next tier (status run anyone?).

Others will not spend a cent more than they would otherwise but use the points accrued through organic earning for true "free" flights.

And others will take advantage of arbitrage to get outsized value from programs.

All of the above groups could be profitable or unprofitable on an individual basis - you cannot make generalisations that one group is more or less profitable. You can make individual assessments on whether that person should or should not have participated on an economic basis.

Remember - that if you ignore the value of data (connecting the dots, ability to cross sell, ability to generate insights that would be otherwise unavailable); and if you ignore the direct monetisation of member data; and if you ignore the value of a permission-based marketing relationship - remember that programs can (and more than often do) make a profit from an earn and redeem transaction where the member also comes out ahead.

So do not assume that savvy AFF-types scoring super cheap J awards are actually costing QFF (or whichever program) money. Often - these are win win.

Remember - emotions and behaviour are everything.

Juddles - don't forget other behavioural economics come into play such as loss aversion - incredibly powerful.

 

[juddles]

.................

They are designed to elicit irrational behaviour.
............

Remember - emotions and behaviour are everything.
........

dfcatch, I think your entire post was awesome - understand and agree with pretty much all of it - but have highlighted those two small bits because I think they so precisely define the two huge realities in this whole affair.

Furthering your comments, and those of others like Trippin, what do you think about the ability of an individual to avoid such manipulation? Can we all do it, or are some more prone than others?

I have known on an intellectual level since the start that this is how loyalty programs work, but I still think I got suckered. IE I think that some of my behaviour was succesfully induced to be irrational, despite this awareness.

(P.S. I will read your linked article tonight when I am not rushed and so can do it justice (and @sjk, no, I do not wish for a "tl;dr" version )