What the &#** is wrong with loyalty programs?


If you needed any more proof that loyalty programs are a cancer on the economy, sabotaging our collective moral compasses and compelling us to spend money we don’t have, you might want to check out the latest Colloquy survey.

The point of the research, of course, isn’t to show the complete futility of loyalty programs, but to tell companies how to run a better customer loyalty program.

As if such a thing were possible.

The study doesn’t just reveal the depths of consumer ignorance about loyalty programs, but also how we’ve abandoned our core values in the face of the promise of “free” awards. It is truly ridiculous on every level.

Put it all together, and the conclusion is inescapable: Loyalty programs must be more tightly regulated by law, and in some cases, banned outright. Fortunately, there’s some good news on that front — more on that in a minute.

Among the findings:

A “stunning” lack of awareness of basic tier status. Nearly one-third of U.S. and Canadian consumers can’t identify which tier they belong to in their favorite loyalty rewards programs, according to the study. Colloquy suggested program members show a lack of “basic comprehension” when it came to their program, further muddied by many of the recent rule changes in travel.

Now, it can’t be too difficult to find a travel hacker with a blog who is willing to “help” these poor, ignorant consumers with some advice, but the fact is, everyone benefits from our collective dumbness. The travel companies for sure. The mileage “experts”? Definitely. (Oh, and by the way, they can probably recommend a good credit card while you’re at it — watch for that scammy affiliate link!)

The willingness to abandon our core values. According to the Americans and Canadians surveyed, they “deeply believe all men and women are created equal.” Yet 75 percent of consumers said it’s acceptable for businesses to give special treatment to members of their loyalty programs. This is particularly troubling in light of the fact that many travel companies — chief among them, airlines — have actually stripped basic amenities, such as a humane amount of legroom, from economy class passengers in order to make room for the enormous lie-flat seats in business class, parceled out to their most elite passengers.

Excuse me, I have to vomit.

This is a basic betrayal of our core egalitarian values as Americans. We are not just endorsing a class society, we’re tacitly approving of the widening gap between “haves” and “have-nots” in travel. Indeed, the survey also reveals consumers with incomes below $50,000 a year are more than 50 percent less likely than those with incomes more than $100,000 to make it to the high-tier of a program. Just over two out of five consumers will never make it out of the low tier. We ought to be ashamed of ourselves.

We give more but we don’t always get more. Half of the survey respondents said they have increased their spending or changed other purchasing behavior in order to achieve a higher tier status in a rewards program. Have they lost their minds? They’re throwing good money at a company in exchange for a program that corrupts their morals, deprives the average consumer of basic benefits and, as I’ve said so many times in the past, is almost completely useless. Are we that stupid?

But help is on the way, my friends.

The Internal Revenue Service (IRS) is considering a plan that would rein in these ridiculous loyalty programs. Its Priority Guidance Plan includes a project aimed at making changes to loyalty program accounting methods prescribed by the Treasury Regulations under Code Section 451.

In a letter to the IRS, several travel industry trade groups, including Airlines For America and the US Travel Association, warn the new IRS rules would “impose a significant new tax on existing and future loyalty points that travel customers enjoy and rely upon.”

They’re wrong. The cost of these so-called “loyalty” programs is already too high. We are better off starting a bonfire and burning our platinum cards in the street than giving these preposterous programs and the companies behind them another cent of our money.

You bring the gas, I’ll bring the lighter.

Should loyalty programs be banned?

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