Why Loyalty Programs Always Disappoint You

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Tyler Cowen’s new book coming out April 9, Big Business: A Love Letter to an American Anti-Hero contains this passage final its chapter “If business is so good, why is it so disliked?”

It’s not about loyalty programs per se, but loyalty marketing is one of the key ways that businesses attempt to trascend the transactional and make us loyal. Brand positioning, charitable giving, along with recognition and reward, can temporarily make us see the business as aligning with our values and integrating with our life. And then we’re disappointed,

[I]t doesn’t quite work to think of businesses as our friends. Friendship is based in part on an intrinsic loyalty that transcends the benefit received in any particular time and place. Many friendships also rely on an ongoing exchange of reciprocal benefits, yet without direct consideration each and every time of exactly how much reciprocity is needed. In addition to the self-interested joys of friendly togetherness, friendship is about commonality of vision, a wish to see your own values reflected in another, a sense of potential shared sacrifice, and a (partial) willingness to put the interest of the other person ahead of your own, without always doing a calculation about what you will get back.

A corporation just doesn’t fit this mold in the same way. A business may wish to appear to be an embodiment of friendly reciprocity, but it is more like an amoral embodiment of principles that usually but not always work out for the common good. The senior management of the corporation has a legally binding responsibility to maximize shareholder profits, at least subject to the constraints of the law and perhaps other constraints embodied in the company’s charter or by-laws. The exact nature of this fiduciary responsibility will vary, but it never says the company ought to be the consumer’s friend, at least not above and beyond when such friendship may prove instrumentally valuable to the ends of the company, including profit.

In this setting, companies will almost always disappoint us if we judge them by the standards of friendship, as the companies themselves are trying to trick us into doing. Companies can never quite meet the standards of friendship. They’re not even close acquaintances. At best they are a bit like wolves in sheep’s clothing, but these wolves bring your food rather than eat you.

Here’s the logic for why frequent flyer programs devalue their currency.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Oh, cry me a river (or ocean) for these big companies which never get enough love and respect from the consumers off whom they make more than enough money. 😉

  2. [I]t doesn’t quite work to think of businesses as our friends

    Oh shock! Oh wonder! Please tell me what tree I can sit under to attain a flash of enlightenment like this!

    but it is more like an amoral embodiment of principles that usually but not always work out for the common good.

    I wonder if people who write this kind of Panglossian fluff understand exactly how much like a simpleton it makes them sound? The only principle a business embodies is the principle of profit (which is not, of course, objectionable in and of itself). The only way in which this is connected with increasing the common good is that it is the most effective known way to increase total wealth and total wealth when properly applied does increase the common good.

    In all other regards business is quite orthogonal to the public good; business has no interest one way or the other in promoting the public good. When profit and the public good turn out to be in conflict then the principle which guides a business requires them to harm the public good. In a functioning, Smithian marketplace that conflict is tempered by the existence of innumerable alternate businesses — the public good is represented by the public’s ability to choose which business to patronize and by the transparency needed to know when a side effect of business transaction is harmful to them. This mechanism breaks down in the absence of significant choice and also in the absence of transparency.

    The senior management of the corporation has a legally binding responsibility to maximize shareholder profits

    Pity the poor senior management, intent on promoting the public good and who are remunerated based on their public-goodiness, whose hands are tied by this troublesome legal responsibility!

    At best they are a bit like wolves in sheep’s clothing, but these wolves bring your food rather than eat you.

    Of, for F(riedman)s sake! They don’t “bring” you food. They sell you food. Even in this paragraph in which the author is trying to share his shocking revelation that business isn’t your “friend” he’s unable to use straightforward language to demonstrate the real, commercial, nature of the relationship.

    Seriously, this is a book? That people are expected to pay for?

  3. “In this setting, [women]…will almost always disappoint us if we judge them by the standards of friendship, as the [women]…themselves are trying to trick us into doing. [Women]…can never quite meet the standards of friendship. They’re not even close acquaintances. At best they are a bit like wolves in sheep’s clothing, but these wolves bring your food [no they will not, feminism has it consequences] rather than eat you.”

    To quote famous 15th century philosopher Desiderius Erasmus: “Women, can’t live with them, can’t live without them.” Well, in Three Musketeers, one smile from Constance, caused D’Artagnan to go to the end of the earth [for a 17 century Frenchman, that is going to England], risking life liberty and limb. So you can die for the smile of a woman.

    This higher philosophy is giving me a headache. I will make up my own profound quote: Companies or women are like an everything pizza, sometimes it taste great, but then sometime you bite into an anchovy and yuck.

  4. So corporations are not people after all? There have been proposals to change the law so that corporate boards may consider the interests of other stakeholders than just the investors.

  5. @GUWonder. I was making fun of Tyler Cowen’s pseudo profound statements and got a little carried away. But, of course, you knew that because you can read English.

    That being said, I wish I hated women. A simple movie date in New York (Japanese food after) cost about $200. A dinner date at a decent restaurant costs $200 to $300. Taking a woman on vacation for a week costs $5 thousand to $15 thousand (maybe more). Christmas present…… I would be way better off financially if I was a misogynist. In fact, I would save significant money, every day, every week, and every year.

  6. LarryinNYC – If you don’t read a lot of Tyler Cowen you are probably taking these few quoted paragraphs too literally. You’re imputing a lot of emotion that I guarantee you isn’t meant to be there, e.g. “Pity the poor senior management”, that’s not his point at all.

    I imagine your brain would melt trying to comprehend “Stubborn Attachments”.

  7. Sorry but Southwest Rapid Rewards is my friend. I understand the earning and burning thereof. They treat me right, as in, I can spend my points on any flight and any seat I see fit. I can change my mind and cancel, it the price goes down, I can get the lower price. No, they are not perfect. Some shun them because there is no first class, there are no flights to far off destinations, no Europe, Japan, or China but they treat me better than any of those other airlines. They understand I have have needs that change. We are friends. I am not friends with the other airlines I fly. I fly them only because I need to use them to get somewhere and I have somehow probably got points to spend on them. Most of them I detest but I found a good deal or a “free” seat. I guess I LUV SW because it seems like they LUV their Rapid Rewards members. I think there are some businesses, even in travel, who value their customers and I think Southwest is still one of them. They may change something tomorrow that makes me mad or sad but they still are the friendliest program out there. Sadly I can’t say any hotel program values us.

  8. Ignore the snark from the salty crowd.
    What Angela said! As a fairly late participant to the points/miles game, there’s still opportunity to get a reward worthy of the definition. However, the writing has been on the wall since 2015 when Delta started some of their games with awards charts and “dynamic pricing” for award travel in F or J. As we are seeing with United’s announcement yesterday, this is just the lay of the land today.
    Regardless of how many nights many a road warrior spent at SPG properties, how many points or what rank they’ve attained (million points, Uranium-238 tier member), Arne’s new Bonvoy is another sign of the plunging value of the points/mile currencies collected by travelers everywhere.
    Earn and burn has been a nonstop drumbeat on many a points/luxury blog for the past few years. Those who don’t listen risk that disappointment, again and again.

  9. @Larry B. “Earn and burn has been a nonstop drumbeat on many a points/luxury blog for the past few years. Those who don’t listen risk that disappointment, again and again.” I have been trying to tell friends that for a while. However, they do not believe me.

    I have points in a number of FF programs, so that I can use FF points to travel to exotic locations using different alliances, when I choose. That means I have a fair number of points that might be stranded by devaluations.

    However, I am flying First Class or Business class using my points all the time. I have even flown various female acquaintances (who GUWonder above says I hate) on First Class or Business (even when I have not even been there), just to see how much they enjoy traveling in luxury. Even if the Airlines wipe my points out through devaluations, I (and various women ) have already come out way way way way far ahead.

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