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.