Loyalty programs have reigned in the level of their rewards, but spread the options for redeeming awards with loyalty points. This was the main conclusion to emerge from the third annual study of South African loyalty programs, conducted jointly by Razor’s Edge Business Intelligence and World Wide Worx.
The study found that, specifically in the frequent flyer and financial services categories, loyalty programs have dramatically reduced the rewards earned for doing business with partner programs, in particular credit card partners, in the past two years. The level of reward has been reduced by a huge 50 percent by three of the major rewards programs operating in South Africa, with British Airways Executive Club and Virgin flying club both following the SAA Voyager program’s lead in increasing the level of spend required for a frequent flyer mile from R5 to R7.50.
Many programs have also eliminated a variety of “easy-come” reward points, such as Virgin’s enrollment bonuses. Given its dominance in the loyalty arena, SAA’s increasing the Voyager points required for upgrades and limiting upgrade availability also made a dent in the value of loyalty programs in South Africa over the past two years. American Express Rewards reports that Voyager miles are their most popular form of loyalty points redemption.
“The devaluation of loyalty seems to have started with Voyager, as it appears that other frequent flyer programs followed them, and they in turn affected all the credit card programs,” says Bruce Conradie, managing director of Razor’s Edge. “They made it acceptable for the sector.”
The good news is that most major loyalty programs are increasing their scope and range of partners.
“Frequent flyer points can now be earned almost anywhere one can spend money,” says Arthur Goldstuck, MD of World Wide Worx. “Rewards programs typically start out as single-vendor programs and evolve into multi-partner programs, turning them into virtual currencies that can be used across the retail economy.”
The study also rated the overall values of competing loyalty programs. For the second time, British Airways Executive Club has taken the accolades as South Africa’s most highly-rated frequent flyer program. The study concluded that SAA’s Voyager, 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.
BA Executive Club edged out Virgin flying club because it had more financial services partners, a choice of credit card partners and advantages in rising through tier status.