Revenue based Frequent Flyer Programs

Mr Liu Yiqian, a Chinese businessman and art collector, paid a whopping $ 170.4 million through his American Express Centurion Credit Card to buy an artwork at a Christies' auction. The transaction earned him 2 billion American Express points (approx. 32 million FFP Miles) enough to do 733 LON – NYC roundtrips in First Class. For a moment, let us assume that AmEx awards loyalty points on the basis of the number of credit card transactions, Mr Yiqian would have earned the same number of points as any one could get for buying grocery at Walmart. Such a strange parity in awarding points based on number of transactions rather than the value of transaction may appear strange, though not unfamiliar. Since inception, airline frequent flyer programs have followed a similar approach where in the number of points are awarded based on distance travelled rather than amount spent. The airline paradox strangely worked well for the given macro and micro conditions of the time.

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