Opinion: Fun Miles

POSTED: 02/13/12 2:57 PM

To say that they’re a funny lot over there in Curacao may very well be the understatement of the century. Newspapers in Willemstad are spending a lot of ink these days on a rather peculiar controversy – and this time it’s not about the integrity of the Schotte-government or about Helmin Wiels latest tantrum. It is about Fun Miles.

Fun Miles is a customer loyalty program. Participating businesses credit miles to their customers, who in turn are able to convert these miles in products ranging from airline tickets to gas and electronics.

The Bureau Telecommunication and Post in Willemstad ordered a chain of gas stations this week to stop giving out Fun Miles immediately because it amounts to unfair competition.

Why an entity called Bureau Telecommunication and Post should be charged with that task of market regulation is a complete mystery. Why don’t they stick to stamps and cell phones?

The gas stations are happily ignoring the order; they continue to give Fun Miles to their customers and they intend to get their rights in court. This is how people have to spend their energy under the Schotte-government.

There is of course something behind this goofy attempt to ban Fun Miles. If it were true that they create unfair competition among gas stations, how does this then hang for supermarkets, hairdressers, pizzerias and whorehouses? Some pizzerias give their customers a free pizza after they have bought ten – no reason why this would not work in other sectors as well.

Maybe the eggheads at that Bureau Telecommunication and Post don’t understand the first thing about loyalty marketing. They ought to look up Research Brief RB 002 written by Grahame R. Dowling and Mark Uncles of the Center for Corporate Change at the Australian Graduate School of Management. Then they would have read the following: “(….) loyal customers are more profitable to a firm. This profitability is thought to be generated by reduced servicing costs, less price sensitivity, increased spending, and the favorable recommendations passed on to other potential customers by loyal buyers. Add to this the claim that it costs much more to entice a new customer to do business with you than to get a current one to repeat purchase, and the strategy of gaining and maintaining loyalty seems like the source of a sustainable competitive advantage.”

This statement supports the usefulness of customer loyalty programs like Fun Miles. It gives businesses a competitive edge. Isn’t that what doing business is al, about?

Nothing stops other gas stations from developing their own loyalty programs. Fun Miles is not the only game around, but it is of course miles ahead of any newcomer. Fun Miles has an established customer base and it is still finding new businesses that want to join the program. Fun Miles is also successful in St. Maarten.

Are those good people at Fun Miles and the companies that join them practicing unfair competition? We don’t think so. They just understand that loyal customers are profitable, and if they have found a way to stimulate that loyalty by giving those customers incentives. It is a classic win-win situation.

The regulator in Curacao sets a maximum price for gas, but nobody forbids gas station owners to sell the product for less. With a smaller margin, they may win more customers and thereby realize a higher profit. A typical example of such a price-strategy is found at the Cadisco gas stations on the French side. If the price for regular gas stands at, say, €1.30 ($1.715) it looks way more expensive than the price on the Dutch side where the price just went up to 2.39 guilders ($1.33). But dollar-paying customers get their gas at Cadisco on a 1:1 basis, so they pay $1.30. That’s slightly cheaper than gas on the Dutch side. In the past the gap between these prices was much larger, and it inspired especially taxis and buses to fill up across the border.

Is that unfair competition? Not at all. What stops gas station owners from selling their gas at, say, $1.25?

Did you like this? Share it:
Opinion: Fun Miles by

Comments are closed.