With the whole AE debacle it got me thinking about this.

The problem is that at its base, a loyalty program trades something with easily quantifiable value (flights, toasters) for your brand loyalty which is damn near impossible to account for. I used to fly TPAC leasiure 5 times/yr to various NA, and would always fly *A, varying dates and destinations to get a deal. Now I don't, and their changes are a big reason for that. But how do you account for that change on a balance sheet? Comparing the cost of the old program (profit from 75k *A flights - rewards) compared to (lost revenue from 60k *A flights that never happened)? Some people quit flying for other reasons, others are going to fly regardless. How do you quantify how much and for whom AE programs are the tipping point for revenue? The downside is one of absence, and if it doesn't happen how do you count it?

And that's the crux. Most programs now are operating on a basis where you need to show dollar for dollar returns. As in, we'll give you lounge access worth maybe $500, but only if you've spent $5000 extra compared to Tango (at 100% margin for us) on premium level fares. Or with Credit cards, we'll charge merchants 3 cents/$, then give you an aeroplan point worth 2 cents, which can be redeemed for something worth 1 cent. Easily quantifiable where the profit is. Straight up cash back is even more transparent.

Loyalty programs are in a sense becoming merely a shell games to inflate prices of things 2-4%, while giving back 1-2%, while a few people profit in the middle, and there is a lot of overhead in the middle.

Ironic that these loyalty programs as a whole make society poorer.

These programs are not about loyalty any more, they're just about having another way to squeeze customers, hopefully convincing them to part with money they wouldn't otherwise, on the promise of giving a few percent of it back.