The Recession

Selling Vapor

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Thought experiment. Let’s say Simon Properties launched a new program that rewarded you with a free iPad for every $10,000 you spent in their stores.

So you go out of your way to buy most of your family’s needs at a Simon mall, bypassing many of your favorite shopping destinations like Costco, the factory outlets, and the internet. After 18 long months, you reach your goal and receive a coupon that can be exchanged for an iPad at any of the Simon Mall Apple stores. 

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Off you go to collect your bounty, but when you arrive, the Apple “specialist” tells you that the item is out of stock. You curiously scan the surrounding bustling retail landscape and see salespeople handing out hundreds of iPads to customers.

“What gives?” you ask. The specialist responds that only a certain amount of iPads can be dispensed to coupon owners each day, and today’s allotment has been filled. “But I paid for this coupon with thousands of dollars of my hard earned salary,” you say. “Why isn’t my money as good as the money those customers have?” The specialist just shrugs. So you ask if you should come back tomorrow, and the specialist tells you that tomorrow’s allotment has been exhausted as well. In fact, the entire allotment for the next 11 months has been consumed by way of a very long waiting list.

Frustrated, you ask about your options. You are told that you should come back every day because occasionally a scheduled coupon holder doesn’t show, and their reserved iPad will then be made available to the first coupon holder in line at the store. Alternately, however, you can receive an iPad today in exchange for 2 coupons. “But that’s bait and switch,” you say.  “You just doubled the price.” The specialist refutes the allegation saying that it’s merely an optional customer convenience premium.

Reflecting further on this issue, you demand to know exactly how many iPads are made available on a daily basis for coupon holders. That particular piece of information, you are told, is unavailable. Really? Could it be just 1 or 2 out of the 200+ product inventory per store? Or maybe zero on certain high traffic days? Isn’t this like Nathan Lane and Mathew Broderick selling 300% of their company’s stock to disparate qualified investors? Another shrug. “I wouldn’t know, sir.”

I used Apple as an example here because they have legendary customer service and sell killer products that are coveted by most people. I would argue that the above scenario, irrespective of the specific company or service promoting it, is not an ethical practice, and would further question its legality. And I would be most interested to hear a counter argument from anyone except those folks representing the businesses profiting from such a program. My guess is, it would be a one-sided debate.

If you agree, perhaps it’s time to examine your frequent flyer program and then call your state senator. Unfortunately, the “miles” scheme is only the tip of the iceberg. One could easily argue that the airlines have earned the collective wrath of multiple government agencies, including the FAA, FTC and Congress for abusing their oligopoly power and exploiting a worldwide recession and energy emergency.

They have quickly manipulated their market with the polished skill of Wall Street bankers and OPEC Ministers by strategically limiting supply (canceling flights), devaluing loyalty miles currency, and adding insidious charges for everything from fuel tax and carry-on luggage to seat selection, blankets and peanuts. Most of us believe in free markets, but air travel has become as much of a necessity as are utilities; hence the airlines’ status as a regulated industry. 

One would think it’s high time to evaluate the regulators. And beyond the necessity, wouldn’t it be nice to be able to use your frequent flyer miles to book a flight at the advertised reward level that departs before 2 am and has less than 3 connections, one of which is through Guam? They say you get what you pay for.

Unfortunately, we all paid for the promise, but were sold vapor.