So despite the fact that I like travelling more than spending too much time on points, I find it a highly fascinating topic. Not because of the collecting, but because of the apparent optimisations that make companies money (rather than rewarding loyal customers). You know the saying: "if you can't convince them, confuse them". That's what points are about.
Points are a means of obfuscation, of appealing to your dark, irrational desires. They are very much like bitcoins: completely worthless in themselves, highly unregulated, while mimicking real money. I've got a stack of points! Well, congratulations on that! So here's an overview of characteristics that I deem necessary for a successful points program:
- Give loads of points. Even if they're effectively worth nothing, high numbers still seem to impress people.
- Make it hard to value them. So do not emphasise that you need to stay 20 nights in order to earn one night for free, but instead reward longing for more points.
- That's where acceleration comes in. By introducing tiers, your more loyal customers earn more points. However, conceal the fact that then it still takes 15 nights to get one for free.
- Throw in perks for immediate reward. The longing needs to be there, but you have to get an immediate reward as well. So offer a free drink. Most people will order one more, just because they got one for free.
- Add a little gaming element. There are people chasing a reward scheme where they have to jump through all kinds of hoops in order to earn 35,000 points (with whatever value). Being busy with attaining the next goal, they forget about checking the real cost of what they're doing.
I prefer hotel loyalty programs to airline programs. Why? A hotel can offer you a room upgrade or a free breakfast, which represents real value (at least I think so). An airline throws in mostly perks that are at the expense of others. So you have made your thirty return flights and now you can make a free seat selection and get on board first! Of course, that's a seat where another passenger can't sit, and another passenger has to wait for you to have boarded.
It's just a zero-sum game in getting favours that other passengers aren't getting, without the airline spending a single euro extra (whereas, I think, a room upgrade or a free breakfast introduces at least some marginal cost for the hotel chain). I must admit that there is a tendency for loyalty programs to become revenue-based. You get a fixed percentage of 'value' per euro spent. In such a system, calculating that percentage is relatively easily and gives you an objective picture of your loyalty's value.