How rewarding is customer loyalty?

(Do you have something to say about this story? Tell us what you think by emailing us here. Don't forget to include 'Loyalty' in the subject line. Watchdog will publish a selection of viewers' comments underneath each story, both throughout and after the programme is on air. Please remember to include your name as you would like to see it published).

These days, staying loyal seems to mean being taken for granted. For far too many companies, the customers that matter most are the new ones. At Direct Line you get twelve months' home insurance for the price of nine - if you're a new customer. At the AA, you get a £20 Boots voucher with your breakdown cover - if you're a new customer. And with BT, you can get your broadband free for three months - but only if you're a new broadband customer.

Banks and building societies are well known for reserving their best deals for new customers. In fact Nationwide has taken a pop at its competitors for this very reason. But all sorts of businesses, from insurance companies to internet service providers, have learned that they can make more money out of existing customers than new ones. That's why many have so called loyalty schemes designed to make us stay with them. But although these schemes promise a lot, but they don't always deliver.

Take Tesco's Clubcard scheme: last year they devalued their Clubcard points by a quarter. Shoppers used to be able to exchange £10 of Clubcard vouchers for £40 of reward tokens which could be spent on luxuries like a holiday or a meal out. Now that same £10 voucher can only be exchanged for £30 of reward tokens.

Coca Cola's loyalty scheme, Coke Zone, allows regular drinkers to save up points in exchange for great rewards - great news for Coke fans like Alexander Black. He's been a member of Coke Zone for three years and drinks around two litres a day.

Alex commented: "I've got an iPod nano from there and a camera, and it's a great reward for something I like drinking anyway."

But recently the reward scheme has changed. The high value goods are gone, and they've been replaced with low value goods like Coke T-shirts and baseball caps. No wonder that customers like Alex who have been building up points are angry. "I noticed that they are still offering cameras and watches to Australian customers and all I can say is what about us Brits?"

Coca Cola told us that they changed their reward scheme because more people wanted rewards with "unlimited availability". That meant shifting the rewards away from high end electronic goods which were only available to a small number of members, to a wider range of easy to collect rewards.

And then there's Flybe - their loyalty reward scheme actually makes you pay more. Collette Hamill wanted to book a return flight from Edinburgh to Belfast. The cost: sixteen reward points plus £64.51. But when she checked what the price would be without her reward points, she found it was £51.97 - almost fourteen pounds less.

Flybe told us that loyalty members do not usually choose to redeem their points against flights booked far in advance that are already offered at the lowest possible fare. In fact, they told us, Ms Hamill's complaint highlights the fact that Flybe's fares are "in essence highly affordable".

So it seems that loyalty doesn't always pay - in fact, it can end up costing you more.

Coca-Cola Company Response

At Coca-Cola we value the loyalty of all our consumers, including Mr Black. Last year we made changes to Coke Zone so that more members were able to receive more rewards every month. Mr Black belongs to a small group of members with high balances who account for 0.6% of Coke Zone's membership. Since we implemented those changes 220,000 new members have joined Coke Zone and our monthly rate for points being exchanged for rewards has increased by 67%. We believe that Coke Zone is now a better way of saying thank you to all Coca-Cola consumers in Great Britain.

Flybe Company Response

The purpose of the Flybe Rewards4All programme is to reward our most loyal passengers and credit cardholders with bonus flights and other benefits.
Ms Hamill's complaint would appear to highlight the fact that Flybe's fares are in essence highly affordable and this is why, typically, our loyalty members do not normally choose to redeem their points for travel by booking far ahead for tickets that, anyway, are already offered at the lowest possible fare.
They rather prefer to use them for the privileged benefit of booking closer-in trips where significant savings can be made when using redemption points.
So were Ms Hamill booking today on the same flights in question, ie Edinburgh - Belfast City return, she would save £32.48.

Indeed, right now she could save £110 on a flight from Edinburgh to Bergerac this summer.

We can confirm that Flybe has recently greatly increased the availability of seats to accommodate the demand resulting from the success of our Rewards4All programme that was the aviation industry's first low cost customer loyalty scheme open to all passengers; and are continually reviewing and improving the product to ensure that our loyal passengers receive the best possible benefits.