We are Writing Our Own Loyalty Program - Points.com Dumped Us

Discussion in 'General Discussion | Miles/Points' started by KenInEscazu, Jul 11, 2014.  |  Print Topic

  1. KenInEscazu

    KenInEscazu Gold Member

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    I own a packaging distribution company that was built exclusively online and from the referrals that have come from our many repeat, happy customers. It's competitive. We generally have a pricing advantage over our competition because of the way our business model is structured with very low overhead, but being the travel geek that I am, I wanted us to be the first (still only!) to offer miles and points to those who opted in to our program.

    Buying Miles directly from the airlines is an expensive proposition if a company wants to offer a variety of programs. After doing much research, we came upon a division of points.com that gave small to mid-size companies like ours a chance to offer a choice of award miles/points in ten (at the time) programs. Perfect!

    So we bought in, placed all the code on our site as contractually obligated and started spending all of our advertising money on this, the one thing (besides price) that most obviously separates us from the competition. It has been expensive and time consuming, but we have seen the participation slowly grow as a percentage of our total sales volume. In short, it has been successful. Not because of points.com, so much, but because we have done everything right to promote it.

    Long story short, out of the blue last week we received a Dear John email from points.com. No reason was given, other than that they have, "made the decision to reduce the number of businesses authorized to award loyalty currency through our platform." Our requests for more information regarding the basis for their decision have been completely ignored. No response.

    We were not a "low maintenance" customer for them, we were a "NO maintenance" customer. We bought our points online, and we awarded the points to our customers online. Why they would no longer want our money just floors me. This is particularly true when you see their price per point.

    Having gone from furious to determined, however, we have decided to design our own loyalty program into our new site. We already have the new site under development for launch later this year, so now we will simply build in an even easier means for customers to earn awards, including gift cards for countless retailers for those who have no interest in travel programs.

    Thanks, points.com! You have liberated us to expand beyond the limits we were not even aware held us back. Now we can add even more airlines, hotel gift cards, etc. than those offered by points.com. Instead of instantly awarding 50 miles for a purchase, we will now give our customers an incentive to come back and accumulate points to get larger chunks at a time. We aren't really fishing for $50 orders anyway, so alone they became a nuisance for us with points.com. Once accumulated, however, I will simply gift them through my own account in each airline, and even give our customers the opportunity to take advantage of any bonus offers.

    This thread is being posted for several reasons.

    1. Alert others considering partnering with points.com to proceed with caution.
    2. Hopefully learn how Randy and the Milepoint team managed to award 2000 MileagePlus miles for the premium membership enrollment.
    3. We are looking for feedback from fellow Milepointers regarding what kind of awards would motivate your loyalty in a B2B vendor with all other things equal or better.​

    Because our new site is currently being built, now is the best time to design the program right. We are planning to have various award redemption categories, Including Travel, Dining, Electronics, Entertainment, Shopping and Automotive. Each category will have a variety of sub-categories to make shopping with our points easier.

    • In addition to the six categories listed, what other categories might you suggest?
    • Do you see any potential problems with our plan of action?
    • Aside from travel programs, what loyalty programs currently motivate you to return to specific merchants?
    • If you are a business owner, are you currently awarded for loyalty by any of your vendors?
    • Are hotel gift cards as valuable/more valuable to you than points in their program?​

    Thanks to all in advance for your feedback. We think this is the best place to get a sample of folks who are inclined to participate in earning awards, and we value your input.
     
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  2. MX

    MX Gold Member

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    Uhmmm... are you sure that "loyalty" is the best word to describe your award scheme? Yes, all of us here in this community enjoy taking advantage of travel points. However, no sane travel company would reward their customers with packaging service points. Loyalty rebates always come as your own free products. If I understand your program correctly, you give free business to unrelated companies that give your business nothing in return.

    On the other hand, if you have metrics that show your program helping your company to succeed, then obviously one can't argue with success. But perhaps you could at least offer your loyal customers an option of rewards with your own company. Make it more generous than the rewards with unrelated businesses. Then your customers will vote with their dollars which benefits they value more.
     
    Last edited: Jul 12, 2014
  3. Jaimito Cartero
    Original Member

    Jaimito Cartero Silver Member

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    I'd guess it's similar to employees earning miles on a flight. They may not personally pay for the ticket, but decide which airline they fly on.

    Points.com has always seemed like a crappy site. Sure, I've used them when forced to, but they're a PITA to deal with. I'd guess Ken was paying 1.5-2 cpm for the miles. Not a deal for most people on this forum.
     
  4. MX

    MX Gold Member

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    Loyalty programs are for customers doing business with you -- you provide the benefits. When your employees earn miles while traveling on your behalf, you have no say on the matter. You don't pay those miles, and can't take them away. How's that similar?
     
  5. KenInEscazu

    KenInEscazu Gold Member

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    Oh no... no... no... Try $0.0425/point! The reason it worked was because we could give any denomination of any participating program, and less than 10% of customers opted in. Still, it was costly. This is all the more baffling why they would dump us. It's kind of funny when you think about it.

    MX makes a good point, and one I can't believe I left out. We will certainly have our own gift cards in the reward redemption offering. There will surely be many who opt for that one, as our retention rate is incredibly high.

    The point of the program is to give people a reason to look more closely at us when their eyes glaze over with options. We have eliminated a very costly PPC campaign since starting this program, yet our sales have continued to grow substantially. PPC is the downfall of many online businesses. We are rewarding our customers instead of the giant whose name starts with a "G." Who do you think will be more likely to remember us? ;)
     
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  6. MX

    MX Gold Member

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    It makes more sense now, if the primary use of points.com was free advertising! So for getting your name out, it was a great success, right? As far as your customers being interested in the bonus, it was meh by 9:1.
    Points.com would rather it be the other way. Perhaps they figured it out, and dropped you for that reason. ;)
     
  7. KenInEscazu

    KenInEscazu Gold Member

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    Here's the way I see it. The old program with points.com had a narrow appeal that drew a very loyal following with a higher than average ticket value. Adding more options will have a very broad appeal that will draw a very loyal following with a higher than average ticket value. Only we will be paying less for their participation. $0.0425/point was steep!

    Choice number 1: Buy from online vendor A and get plastic bags.
    Choice number 2: Buy from My online store and get bags - plus - miles, a night on the town, a free night at a hotel, a big discount on the next order of bags, etc.

    Vendor A is paying a big ad budget, and we are simply giving back to our loyal customers. We have not raised our prices to cover even the points.com program, and we won't raise them to cover the loyalty program. The volume pays for itself, so it's a win-win!

    The giant in our business gives away junky stuff, and their sales are into 10 figures. Their advertising budget is hard to imagine. Their prices are - in general - representative of their extra expenses. We can do ours with our low overhead by keeping the ops center in Latin America, something few, if any, competitors will ever be willing or able to do.

    Plus we fuel the U.S. economy in many ways. We sell mostly Made in USA products. Everything is shipped from and to the USA, so we keep UPS, FedEx and the freight lines busy. We provide good jobs in Latin America, so there is no need (or desire) for our employees to go north to find work.

    This has been a very exciting experience, and I think this next step is going to make it even better. We are making the lemonade from points.com's lemons. I could still use some specific feedback, though. How can we do it even better than what I described?
     
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  8. WilliamQ

    WilliamQ Gold Member

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    If I read this right, you are thinking of a program that allows your customers to accumulate loyalty points that can then be exchanged for airline miles. To get those airline miles, you are not buying from the airline directly but using your own personal account which you have either accumulated them via flying or credit card spent. As such, you are not a direct / official partner of any airline or hotel programs (etc). My question for you and the community is, will this not be viewed as trading or worse, misuse of the program for commercial benefits, opening yourself and your clients to potential legality headaches down the road. If I misunderstood your plans, my apologies but what I get from reading the first post was this and thus the thought of program violations.
     
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  9. JCellieur

    JCellieur Member

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    Your direct competitor is Godzilla? Sorry I'm as always completely lost. Ok from the beginning a One anna two anna three.
     
  10. NYCUA1K

    NYCUA1K Gold Member

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    If you misunderstood then so did I because the concern that you just expressed was the first thing that had crossed my mind after I read the first post, specifically this bit:

    "Once accumulated, however, I will simply gift them through my own account in each airline, and even give our customers the opportunity to take advantage of any bonus offers."

    Gifting or transfer of miles must be done through the airlines' established channels. I am not aware of any other way one can do that without running afoul of the airlines' restrictions on how their miles can or cannot be used [e.g., gifting or transfer can only be to another account within the same FF program]. UA expresses the restriction as follows:
     
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  11. Counsellor
    Original Member

    Counsellor Gold Member

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    I infer that what Ken is proposing is to transfer miles from his account through the airline frequent flyer program to his customer's frequent flyer account (and pay the airline any transfer fee).

    All of the frequent flyer programs I'm familiar with allow such transfers for a fee (usually a penny a mile). I suppose for any program in which Ken didn't already have miles, of where the program does not permit transfers, Ken could simply buy miles from the airline to be gifted to the customer's account. Frequent Flyer programs usually allow this, charging ~2.5 cents per mile, which is still less than the 4.25 cents he was paying points.com.

    Ken, I understand the point WilliamQ and NYCUA1K to be making as being that essentially by transferring the miles from your account, you are bartering them even though you're going through the airline's "transfer" mechanism, and thus could be exposing both yourself and the customer to adverse action by the airline. You may want to consider whether it's worth it just to always buy the miles as a "gift" even though it may cost you an extra 1.5 cents to do so. As noted, even if you pay the airline the usual ~2.5 cents per mile, it's still a saving over what you had been paying points.com. (You may run into limitations on how many miles you can gift with some programs, but I'd think you can work that out somehow.)
     
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  12. KenInEscazu

    KenInEscazu Gold Member

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    Thanks for your concerns. My intent is to buy miles as a gift, not transfer them from my personal account. I think that is 100% legal. Am I missing something? I certainly care more about my company's reputation than my own FF program.

    My analysis, and I'm no attorney, is that I can buy miles and give them to anyone I choose. Some charge fees on top of the price/mile for the purchase, and some use points.com, ironically, as their administrator. In any event, it is almost always less than the $0.0425/mile or point that we were paying before. It's incremental income for the FF program, so it seems like something they may not outwardly encourage, but certainly wouldn't want to discourage.
     
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  13. NYCUA1K

    NYCUA1K Gold Member

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    There is only one slight problem. As I indicated above, at least for UA miles, they must be transferred or gifted to someone who has a MileagePlus account, and this can happen only online through UA. From the FAQs:

     
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  14. KenInEscazu

    KenInEscazu Gold Member

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  15. KenInEscazu

    KenInEscazu Gold Member

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    From a business perspective, another thing that we like about the idea is that we plan to put a set percentage of each sale into a reserve account to cover redemption costs when they are claimed. This will insure the ongoing integrity of the program, and allow us some flexibility in how to invest some of those funds while we wait. :D
     
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  16. NYCUA1K

    NYCUA1K Gold Member

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    As long as you do that, then you are fine, but UA must the middle man. The impression we got was what you, in fact, just repeated in the previous post: "I can buy miles and give them to anyone I choose". That is true only if the recipients have an account in the FF program in which the transfer or gifting takes place.
     
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  17. KenInEscazu

    KenInEscazu Gold Member

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    Of course. I can't imagine, however, why anyone would want to redeem our points for M+ miles if they don't have a M+ account into which those miles can be deposited. :confused:
     
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  18. LarryInNYC

    LarryInNYC Gold Member

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    Don't most programs limit the total number of points you can purchase in any year?
     
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  19. NYCUA1K

    NYCUA1K Gold Member

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    You gave no details so what you were planning was unclear. However, the requirement for the customers to get an account with a specific FF program may be very limiting, since some may not be into such things and others may simply hate a particular program with a passion. That consideration may, in fact, be why "universal points" like Chase's UR were created...
     
  20. NYCUA1K

    NYCUA1K Gold Member

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    UA limits the number of points transferred to each individual to 150,000/yr, but there is no limit on the number of people who can be gifted the points
     
  21. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    You may have already thought about this since your previous program advertised airlines miles as rewards, but some companies have rules about using their names and products in promotions. E.g.,

    https://www.apple.com/au/promotions/
     
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  22. Jaimito Cartero
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    Jaimito Cartero Silver Member

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    A employee purchases things on a website for their employer, and gets the miles in their account. Seems pretty similar to flying for the same employer, and getting miles in their personal account.
     
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  23. KenInEscazu

    KenInEscazu Gold Member

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    Exactly. When we started with points.com, it was after careful analysis of our margins and our ability to absorb the cost of this program as an advertising expense. In other words, we are not building the cost of the program into our pricing. It's not even a consideration beyond what has always been required to cover our promotions budget.

    In a lot of B2B transactions over the history of my career, I have uncovered many situations where buyers were paying too much for something they purchased for their employer just to get some kind of favor (monetary or otherwise) from a vendor. That is unethical, and we did not want to have any possibility of our program being interpreted as such. It is merely a means of motivating customers to check with us before making any purchase of items we sell. We are already cheaper on most items than our biggest competitors, so they are not overpaying for personal gain.

    Now... Anyone have any ideas for awards that haven't yet been included in our list? Travel is certainly the one that appeals most to this crowd, but it will not likely be the category chosen most often among our "normal" customers. :)
     
  24. MX

    MX Gold Member

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    Excellent point -- indeed our hobbies are similar to yours. Perhaps you can find a way to poll your customers instead. I would start with my own product as the first option for a reward. The second (or third) option would be "name your own reward". If there's a common theme in the responses, I would then make it a permanent reward option. I have a feeling there will not be many requests for UA miles, but we never know until we try. ;)
     
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  25. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    I have no idea how other companies handle this, but I am fairly certain that accepting any kind of "kickback" as an employee would violate my employer's ethics rules (earning airline and hotel loyalty points on corporate travel is explicitly okay'ed in the employee handbook). I don't think they would care whether we would have bought from your store anyway at the same price or not. In fact they might then say that clearly they could have negotiated a better price for themselves if your company was willing to accept a lower margin by giving a shopping reward to the employee doing the purchase (that's how we ended up with Amex cards that can't be enrolled in MR).

    I wonder if that explains the relatively low participation rate you have seen so far?
     

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