One of the theories behind revenue-based rewards programs is that at least the math is easy. One earns X points per dollar spent and it takes Y points to pay for a dollar of airfare when redemption time comes around. When the current iteration of Southwest‘s Rapid Rewards program launched things were a bit more complicated, but not too much. Rather than one earning level there were three, matching the three fare families the company offers. Higher fares earned even more points. And for redemption there were also three rates; the higher fare families required more points to create a dollar’s worth of travel. One could argue that Southwest already had dynamic pricing built in to the program.
Starting on 17 April 2015, however, Rapid Rewards a bit more confusing. And a lot more dynamic. Rather than redemption rates being tied only to fare families there will now be variation “based on destination, time, day of travel, demand, fare class, and other factors.” In other words, it is impossible to guess what a redemption will cost until you try to buy it.
This approach appears to follow JetBlue‘s TrueBlue model, where the number of points required is loosely tied to the dollar value of a flight but may vary 10-20% from that mean depending on a variety of factors (JetBlue also does not publish what the specific factors are). The same route on the same date priced in the same fare bucket with the same dollar fare could have different award costs and no one outside the company’s back office knows why.
In Southwest’s case, we are reminded that “there are still many flights which will stay at the current redemption rate,” something to take solace in, I suppose. But without additional details on how the numbers will trend it is hard to know if this is a small change or a massive one. It is almost certainly bad news – a proper Rapid Rewards devaluation – but of an unknown magnitude. Once the new rates are in place hopefully I’ll be able to do some analysis and find trends but it is unlikely the company will make that easy.
We’re just over four years in to the current iteration of program and this is the second Rapid Rewards devaluation in that time. The company chipped ~15% off the value on “Wanna Get Away” fares in late 2013. That changed the landscape a little bit, but at least there was clarity of the magnitude. This time around, not so much. It is interesting to contrast that devaluation (and others in the industry) with JetBlue’s TrueBlue program. TrueBlue point values have, generally speaking, increased over the past four years, not decreased. What is that carrier doing differently to make it work??
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Perhaps most challenging for the carrier, especially in this era of 3rd party partnerships driving the value proposition of loyalty programs, is that the redemption rates will skew even lower, and they already teeter close (and probably below) the tipping point for using a cash-back card rather than a dedicated partner card. This change will not help that situation. Yes, the Chase/Southwest co-branded CC is a nice one-time bump, especially if you time it right and get a Companion Pass out of the deal. But putting actual spend on the card (other than Southwest tickets) is unlikely to be a smart approach to maximizing return. Further reducing the value of the points simply pushes that curve further away.
And, in the meantime, we’ll just have to remember that Southwest is all about heart.
Southwest is all about moving People—by helping them travel from one place to another, and by genuinely caring for Employees and Customers. While we may look a little different, our airline is still built around: amazing Employees, legendary Customer Service, and low fares.
And a loyalty program which is worth just a bit less than it used to be.
- Comparing Southwest’s Rapid Rewards 2 and JetBlue’s TrueBlue programs
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