Sometimes when you talk to airline or hotel employees that work in loyalty fraud they seem to think that a customer benefiting ‘too much’ (being unprofitable) is the definition of fraud. They’re in their own bubble, and they’re probably doing their own programs a disservice.
Air Canada Senior Vice President Mark Nasr points out,
You don’t want to design your program around a small minority. You want to design your program around the majority and just have some effective checks and balances and controls in place. I’d much rather lose out a couple percentage points at the time to win ten times that in frequency.
So when Air France KLM Flying Blue shuts down customers who open up a new account, transfer points in from a credit card partner, and book a ticket online ‘because the account is new and using points right away could be fraud’ they turn off customers and develop a bad reputation. (This is one reason I’ve long advised opening up a Flying Blue account now, to use later, and also making a first redemption by phone.)
Too much is often considered – or a flag for – fraud within the loyalty industry. But that doesn’t mean there’s not real fraud.
- A decade ago IHG hotels offered points for downloading their shopping toolbar. Only you didn’t actually have to download the program, just go to the download page, and their programming didn’t keep you from doing this over and over. I chose not to write about this.
Some people scripted it to do this thousands or even tens of thousands of times over a weekend. Knowing IHG would claw back the points come Monday morning, they redeemed the points right away – not for future reservations that would be cancelled, but for e-gift cards that would be spent right away. And they then spent those e-gift cards right away, for items that would ship immediately, so that the gift cards couldn’t be canceled and orders couldn’t be either. Naturally, their accounts were closed, but perpetrators knew that would happen going in and decided the score was worth it.
- Southwest started Hawaii service and offered residents of Hawaii 5000 points for joining the Rapid Rewards program. Joining and then immediately redeeming the points for a gift card was legitimate – within the rules.
Listing a fake address in Hawaii to join wasn’t ok, but what was really problematic was opening tens or hundreds of (fake) accounts to secure the bonus points, redeeming them right away, and using the gift cards quickly.
I’ve benefited from great offers. I earned 7 million AAdvantage miles from the SimplyMiles end of year promotion in December. I took advantage of Track-It-Back and the US Airways holiday shopping promotion. I even picked up Delta bonus miles for a hair loss consultation when I had a full head of hair. In every case I followed the promotion terms to the letter, and didn’t rely on IT glitches to earn the points.
Loyalty programs don’t often like it when they discover scale, or unprofitable customers. Bosley hair restoration never ran the same Delta promotion again, because it wasn’t profitable thanks to people like me – they had big marketing expenses but didn’t gain real customers the way they’d hoped at the cost they’d budgeted.
To be clear, it’s important for loyalty programs to be careful – pay attention – I’ve even thought they should put some consumer experts on contract to tell them how they’re going to be gamed before releasing offers. It’s self-defeating to focus too hard and worry too much that some member somewhere might benefit from an offer. But when they put out a promotion, with rules, and consumers follow the rules the idea that a consumer comes out ahead is great and it’s on the program.
Gary,
Very good article and I agree completely with your viewpoint. While I sometimes have an issue with certain posts of yours one thing I give you credit for is that you don’t focus on max spend, how to game programs, etc. I subscribe to a couple of other blogs that are always playing in the gray area and discussing max spend, cycling payments, how to benefit from referrals by signing up small kids and dogs, time share pitches and how to benefit from the smallest offers. About to drop them since very little actual “travel” info is posted. You are at the top of the list in posting about real travel issues and offers that people can use (without gaming the system). Again, I don’t always agree with what you post but wanted to let you know I do appreciate your ethics regarding these type of matters.
Gary,
I agree with your strategy mostly, and I won’t do anything that I feel is fraudulent. The one “deal” that I felt was fair game, that the airline cancelled on me, was a recent award redemption where the price (in miles) was unusually low. Well, this airline (that won’t be named) doesn’t publish an award chart anymore, so I think that any amount of miles that their website shows is the correct number of miles and they can’t claim that I should have known that it was too good of a deal. I really think award ticket “price mistakes” aren’t possible when you don’t publish an award chart. I think the airline(s) were wrong and unethical in that particular case.
Back when BA had lower qualifications for continental Europe based members I used an office address in Holland that I only visited 2-3 times per year. Someone grabbed any mail and sent it to me. Got me Flagship lounge access on domestic AA travel for 10 years.
I slept like a baby :D.
@Paul – Flagship Lounge access for 10 years? How many have even been open since 2012? Any?
Reminds me of the story where someone asks a venture capitalist how he sleeps at night knowing he’s invested tens of millions of dollars in companies most of which are going to go belly up. He says “I sleep like a baby.” The person asking says “really?” The VC says yep, I sleep for an hour, cry for an hour, sleep for an hour…
A lot of this is related to common sense or a moral compass. The problem is that sense isn’t common and many people have normalized bad moral behavior without knowing it’s wrong. The companies that choose to market scalable deals are open season unless you are attempting to defraud them. For example the Southwest Hawaii 5k acct deal. Is it OK to open 20 accounts on that when you live in Nebraska? No, it’s not but people do it and try to justify it in their own minds. Then when millions of points in cost go out the window people complain that the award prices or cash prices go up. Shocker. It’s like shoplifting, we all pay the price in the end. You can argue staying within the “spirit” of the deal all day but when it’s just outright cheating it crosses the line. As a side note, I think it’s harder to “game” the system on some deals. 10+ years ago the IT systems at award programs, airlines, hotels, etc. were outdated and it made it easy to open multiple accounts or apply for the same deal over and over again to exploit it. Or exploiting “error” fares, er I mean super deep discounts. Slowly the IT systems are catching up that is why the Amex RAT team and others have clamped down. Because of that, the more people try to cheat the system the harder it will be to earn good promotions on a large scale. As a group, we are our own worst enemies.