Thursday, February 25, 2016

Customer Reward Programs

We learned today that Starbucks is changing its frequent-caffeinator program.  Where in the past you got a point every time you visited the place, now you will get more points, based on how much you spend.  Where in the past, it took 12 points (and visits) to get a free beverage, now it will take 125 points and a lot more dollars spent to collect your reward.

Like all companies, Starbucks said it introduced its program to cultivate customer loyalty.  The company still claims to love-love-love its customers, but it not surprisingly is mostly interested in goosing its revenue stream.

Frequent Flyer Programs

My understanding is that American Airlines kicked off the customer-reward trend some years back by introducing the first frequent flyer program.  At the time, most airlines had broad route systems offering regular service to just about every airport in the country.  The competition was such that there were few opportunities for any given airline to raise rates without losing business.

The American idea was to reward travelers based on how often they traveled on American flights.

At the time, many business travelers were stomping across the country, and around the world, on a regular basis.  American's program got those folks' attention with promises of free tickets and coveted upgrades to first class.

Given such incentives, executives naturally chose American over Delta or Continental or TWA any time they needed to make a plane trip.

Within a few years, all the airlines had frequent flyer programs.  This made many frequent travelers happy, but not all of them.

The saddest business travelers were those whose corporate travel departments booked them on flights with the best prices or the most convenient schedules. These unfortunate travelers had many miles scattered across multiple airlines' programs -- diversified portfolios, if you will -- but never enough miles to get seats in the front of the jet.

(Initially, these programs awarded benefits -- called "miles" -- based on the actual distances customers flew.  Then, as computer programs increased price discrimination, the "miles" became "points;" flyers who booked $1,000 tickets at the last minute got more points than people who planned ahead and spent $300 for the same flights.)

Programs Go Viral

Over the last 20 years, just about every retail business has adopted a frequent-customer program of some kind.

I have a punch card that, when filled, will get me a free carwash.  The Significant Other has a frequent-shoeshine card.  I used to have a frequent-coffee card at a spot in our town until it closed for renovation, at which point I threw the card out.

For a while I had cards for several drugstores and three supermarkets.  I had a Toys R Us card, a Sephora card and cards for I-don't-know-how-many other stores.  The cards strained my wallet, and so I got a circular wire key ring, punched holes in the cards, slipped them on the ring and carried that instead.

Then I lost my key ring.  I replaced my library card and gym card, but not the others.  My local grocery chain proved too incompetent to issue a replacement card, but it allowed me to sign in with my phone number to get those valuable discounts on canned goods.

I probably could have entered some of the rest of those lost cards into my cellphone, but my attitude was this:  Naah.


Have any institutions gone more totally berserk into the affinity-card game than banks?  No.

First it was cards for your alma mater.  Then came gas station MasterCards, department store VISAs and countless others.  Some of these companies, like Target, give automatic discounts at the cash register; others send price-off coupons by mail or email; and some provide gift certs for every $1,000 spent at the store.

It probably is fitting that airlines, which started this whole thing, now seem to run the biggest programs out there with bank-affiliated credit cards.  In my family, we have several.  With each one, we usually get a first year free of fees, thousands of points for spending a certain amount of money in a short period, and also free checked bags when we fly.

(I actually have more credit cards than I want or can use.  Recently, I called to cancel one airline card when the first annual fee was about to come due; I was immediately offered the same deal, again free of fees, just to keep the card.  This does not seem like a smart way to do business.)

Too Much

If you are a regular Starbucks customer, go ahead and keep your customer reward card or Apple Pay equivalent if it makes you happy.  I am not here to tell you what to do.

But as for myself, I say the whole "frequent" business has got out of hand.  I wish all these companies -- airlines, retail stores, banks, coffee joints, the lot of them -- would quote us their best prices and then leave us alone.

Businesses and customers are not loyal to each other; they just want to get things done as efficiently as possible.

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