The sky-high charge of the mile-high card
Why do loyalty programmes require customers to work so hard?
AS SOMEONE WHO CONSIDERS herself a rational, sane human being, I’ve always found the term “free flights” with regard to airline loyalty programmes, a particularly offensive one.
The truth is, I dislike loyalty programmes. Most of them are a cruel illusion, a gimmick, because if we are absolutely honest with ourselves, we know they can only be profitable if they take more from us than they give back.
In my opinion, the most loathsome of “consumer evils” spawned from the loyalty programme cult is the never-ending barrage of airline-affiliated loyalty programmes linked to credit cards, which allow consumers to accumulate miles through spending. For months now I’ve watched like a sane patient in a mental asylum as people flocked like lemmings to get their Voyager and kulula credit cards thinking that the product was somehow beneficial to them. But I finally have conclusive evidence of my sanity.
Like manna from heaven, Virgin Money has released a report on the costs attached to these airline loyalty programme credit cards. Of course the research was not an altruistic act by Virgin Money. It was, in fact, very self- serving because Virgin wanted its existing and potential customers to understand why they didn’t have an earn-miles-as-you-spend loyalty programme linked to their credit cards. But regardless of Virgin’s motives, the report does highlight the insanities of such programmes.
After looking at 11 of these programmes in SA linked to various local airlines like SAA, kulula.com and British Airways, the report found that you would have to spend an average of R171 324 on a credit card to earn enough miles to fly from Cape Town to Johannesburg! And that’s just the beginning… With an average spend of about R3 000 a month on most credit cards, it would take nearly five years to obtain this ticket while incurring an average R1 444 in annual fees.
Remembering that of course an average means the spectrum will fall well above and below that figure, the “cheapest” credit card loyalty programme – if we can be so bold as to describe anything in this range as cheap – was kulula’s, which required its customers to spend R33 266 to earn enough miles to fly domestically. The most expensive ticket was on Nedbank’s Greenbacks miles programmes with SAA Voyager, requiring a whopping there are people out there who do spend that kind of money on their credit card every month but I am certainly not one of them! I also know that there are some clever folk who know how to manipulate the system to their advantage and get the best out of these programmes. One of my colleagues informs me that if you channel all your spending through your credit card and make sure to pay off the full balance every month without missing a single payment, you will eventually earn enough miles to fly to Cape Town (with your spouse) within a year with minimal cost but frankly that seems like too much hard work for me. And realistically, how many credit card users pay off the full balance every month? This kind of behaviour is not the normal banking habit of an Average Joe consumer out there.
If I am going to benefit from being a loyal customer to any bank or retailer, I would much rather enjoy the benefit of that arrangement immediately. I don’t want to have to toil, slowly collecting whatever intangible “assets” a programme has created over a year or more. Just give me discount upfront, something I can see, and I’ll thank you for it and be on my way.
To call the flights “free” that are accumulated after spending thousands of rands is an insult
to one’s intelligence.
R338 750 of spending to accumulate enough miles for a return flight to Cape Town.
Some of these figures may not be news to you. You might remember reading about them in the weekend papers on 27 and 28 January but the information was tainted by a miscalculation that affected the average and resulted in a backlash from the major banks. The original average released by Virgin was R215 000, which was later reduced to R171 132. But regardless of the negative impression created by the miscalculation, I think the point being made here is still valid. The value of programmes that allow customers to earn miles through spending is questionable. Now I know
Furthermore, giving upfront benefits prevents the customer from having to create elaborate and expensive systems to keep track of these benefits, which could be a cost saving for many companies. I would much prefer someone giving me a 10% discount on my next flight or halving the cost of my movie ticket because I am a loyal customer, than a “free flight” after two years of seriously hard work.
If loyalty programmes have any chance of providing any legitimate value to customers, then I believe the benefits that they claim to offer must be immediate and visible… not to mention affordable.