South African Airways Voyager’s decision two years ago to increase the costs of earning loyalty points has had a ripple effect on other major groups offering reward programs, including British Airways, Virgin and Exclusive Books, says the third annual study of loyalty programs by World Wide Worx and Razor’s Edge Business Intelligence.
The study found that, particularly in frequent flyer and financial services categories, loyalty programs have significantly reduced the rewards earned from partner programs, particularly credit cards.
SAA Voyager, Virgin and British Airways have all increased the cost of a frequent flyer mile to R7.50 from R5, while Exclusive Books has halved the amount of points earned per purchase.
“The devaluation of loyalty (programs) seems to have started with Voyager, as it appears other frequent flyer schemes followed them, and they in turn affected all the credit card programs,” Razor’s Edge’s Bruce Conradie said. “They made it acceptable.”
The study, Value in Loyalty Programs 2005, rated the BA Executive Club highest among frequent flyer programs in SA for the second year running.
It found that SAA’s Voyager program, despite having become South Africa’s most popular rewards currency, offered lower returns than its competitors in two key measures used in the survey: Return on Spend for flights and Return on Transaction Value for credit card partners.
“We developed these metrics to assist the public in choosing loyalty programs based on real value rather than the promise of loyalty points for their own sake,” said Conradie. “Loyalty programs need to deliver on their promises if they want to earn true loyalty.”
Each rewards program was evaluated according to 19 criteria, including cash value, reward choice and appeal, and attainability of rewards.
Although the SAA Voyager program is the most widely used rewards currency, BA Executive Club has more financial services partners, a choice of credit card partners and offers the advantage of rising through different status levels, which some of its competitors do not.
A higher cost of earning points made the cost of linking up more relevant, the researchers said. Many credit card users are paying more in membership than they are earning in rewards. Conradie said it cost a credit card holder R150 a year to be linked to a frequent flyer program and it took R25,000 of spending a year to earn rewards equal to R150.