Loyalty Programmes

[amcbean]

I apologise for the simplicity of this question but can someone please explain in detail how a frequent flyer / loyalty programme actually works ? I recognise that the greater acceptance of cards creates more spending and therefore more incentive (profit) to subsidise rewards. But how does it precisely work and how do the vendors put a price on the rewards.

Thanks anyone.

 

[Guest]

cards

Most cards are very easy to understand :: you spend $1 , you get 1 point.
Spend $10,000, get 10,000 points.

For those of us who pay the entire balance off every month, its hard to see how airlines actually make any money from us using the card, but it does create loyalty with the airlines involved.

I applied for an ANZ qantas telstra visa a few years ago, got it and didnt think anything of the points (didnt use them either!) .. then i started flying more, and like most, i had to make the descion of flying ansett or qantas.

After I learned that I'd racked up over 100,000 frequent flyer points, I quickly joined the qantas club, transfered them over and never looked back since.

There is some other posts on this forum about making the most of your frequent flyer points (best routing, adding sectors ect ect) .. best read up on those to maximize your points!

 

[amcbean]

Thanks for the reply.

I was trying to understand the programme from a different calculation. How do the airlines and other reward providers afford to give away rewards ? i.e. how can they value a reward item be it 20000 points for a return trip to Armidale or 40000 points for a new kitchen appliance.

I am not explaining this very well. What is the incentive to a retail outlet to offer reward items. Is it because frequent flyer programmes induce more people to spend therefore each shop / airline has greater turnover and can therefore justify offering rewards ?

Is thta any clearer ?

 

[shillard]

Thanks for the reply.
I am not explaining this very well. What is the incentive to a retail outlet to offer reward items. Is it because frequent flyer programmes induce more people to spend therefore each shop / airline has greater turnover and can therefore justify offering rewards ?

Is thta any clearer ?

Yup, because there are loads of points coughs out there who will vary their shopping habits becuase of the reward programme opportunities. I signed up for an American Express card, rather than a Diners, many years ago because I was already a QF Frequent Flyer, and Amex was in bed with QF ( Diners with AN).

Over the past three years, that fact alone put around $200,000 through Amex to QF - and I'm only one of many, and many spend plenty more than me.

I stay at 6 continents hotels, when there's no decent club available, because of the points incentives. They get my business, Hilton, Hyatt, etc don't. All because of the loyalty programmes.

Same reason I buy groceries at Coles rather than Woolies - flybuys.