Southwest this week announced the newly added ability to gift or transfer Rapid Rewards points, and its first-ever discount on purchased points.
According to the news release, “It’s another way the airline is spreading the LUV!” The message Southwest sends to financial analysts and investors is probably more along the lines of, We’ve found another revenue opportunity to exploit, which will expand our bottom line.
So, who’s really getting the LUV here, Southwest’s customers, or Southwest Inc.?
Southwest points have been available for sale for some time. And the normal price remains the same: 2.5 cents per point. What is new is a limited-time discount: Through July 16, buyers will receive a 25 percent bonus on purchased points.
The bonus effectively reduces the cost of points to 2.2 cents apiece.
Because Rapid Rewards is a fixed-value program, there’s no fudging the value of points, as there is with traditional programs where it’s possible to get outsized value from points by redeeming them for pricey tickets. When redeemed for Wanna Get Away fares, Rapid Rewards points are worth about 1.8 cents each.
Would you pay 2.2 cents for something worth only 1.8 cents? Hopefully not.
Sure, there’s a convenience factor to be considered. The ability to buy a few thousand more points to reach an award threshold could come in handy if you’re a bit short. But otherwise the value proposition is a patent fail for consumers.
With the same pricing and discount, giving points to another Rapid Rewards member suffers from the same value disconnect. You’re spending 2.2 cents a point to buy someone a gift that’s only worth 1.8 cents a point. Mr. Moneybags!
Transferring your points to another member’s account involves a less straightforward calculation.
The price is 1 cent for each point transferred. But there’s no value baseline, so it’s a question of whether it’s worth it to you.
Two considerations suggest it’s not.
First, you already paid to earn the points. So paying more than half their value just to transfer them seems silly if not downright usurious. And second, there’s a better option: Simply redeem your points for an award ticket issued in the name of the person you would have transferred your points to.
Southwest customers looking for LUV aren’t likely to find it in these new initiatives.
Reader Reality Check
Does buying or transferring points at these prices make sense to you?
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- Do Travel Loyalty Programs Still Matter?
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