How does loyalty programs work?

Do you use MyClub card when shopping at Carrefour? Or SouqPlanet card when shopping at Abela? Or you ask for a stamp on your loyalty card if you buy something to eat at Subway? Or give your frequent flyer number when booking an airline ticket?

Why?

Quite easy, same reason as the rest of us, to save money!

We offer our loyalty to certain businesses or shops, and in return they offer us ‘free’ stuff, special discounts and promotions and other things that makes us feel like a valued customer. And when we feel valued, or feel we are rewarded for our loyalty, we are more likely to go back and spend more money with them, and so the cycle continues.

And that is the point with rewards programs, and airlines are the same. They will reward you for being loyal to them, and thereby it is more likely you will spend more money with them instead of their competition.

So how can you best benefit from this? Well, as you might know, financial institutions are teaming up with airlines, and they buy millions and millions of miles from the airlines for a very small amount, in order to offer benefits to their costumers. As a result, almost no matter what you do or what you spend, you can be rewarded with frequent flyer miles.

Now, the thing to note it, you don’t have to spend millions of dirhams a year or purchases or fly every week to get miles, by reading the small print with each credit card and keeping that in mind, you can increase the amount of miles you make, and by not taking any credit cards until there is a good promotion you make even more. As an example, ADIB recently offered 120.000 Etihad miles if you signed up for one of their credit card, worth much more than the cost of the card itself. Remember, the credit card companies make a profit from every purchase you make on the card, and they use this profit to buy cheap miles from the airlines, to reward you to spend even more on the card, and so this cycle continues.

And I promise you, by taking the right cards at the correct time, you can earn a lot more miles on your ordinary shopping than you ever will on your flying. Personally, I only pay cash for food home delivery, everything else goes on my credit card.

Why will the airlines sell cheap miles to the credit card companies? First of all, for your loyalty. If you just need a few more miles for that free ticket, of course you rather book with airline A instead of B where you don’t have any miles. Secondly, a lot of airmiles are never redeemed, so the airlines sell a lot of miles that will never be spent. And finally, most of the points redeemed are used on shorter routes in economy class, which doesn’t cost that much to start off with, and that would probably have been an empty seat anyways.

So everyone wins.

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So why fly economy class when you can fly like this?

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