Two days ago, I received a promotional email from WestJet advertising a promo to “Save 40% off on purchases of WestJet dollars”.
After clicking through on the link in the email, I quickly realized that WestJet had made the very bold move to charge $2.00 per WestJet Dollar before the discount. With a 40% discount until November 16, 2021, each WSD therefore costs $1.20.
This is a bold move because the only way to spend WSDs is either on a direct dollar-for-dollar reduction of any flight’s base price, or on the use of their “Member Exclusive fares”, which tend to offer very minimal value.
This led to the question: Why would WestJet sell WestJet Dollars for more than a dollar?
WestJet has historically sold their WSD through their partnership with Points.com. The relationship was intended to facilitate top ups of WSD for loyal members that were looking to use their WestJet currency on Member Exclusive fares, as all Member Exclusive fares required you to have 100% of the WSDs in your account.
During this period, the purchase of WSD through Points.com had a very reasonable markup depending on how many WSDs you were wanting to purchase. Below is a chart that I had created for WSD purchase prior to their recent change.
If you recall, last November, WestJet revamped their program, eliminating the traditional Member Exclusive Fares that would allow you to redeem 125 WSD for any flight between two points in Canada or the US, assuming there was Member Exclusive award availability.
WestJet replaced the old Member Exclusive fares with what amounts to a very small discount on regular fares. These new Member Exclusive fares also required you to have 100% of the WSD in your account before you could redeem for the small discount.
Going forward in the article, we will refer to the old program as “Member Exclusive Fares”, and the new program as a “Member Exclusive Discount” to help differentiate between the two.
Member Exclusive Discount
WestJet may be of the belief that the new Member Exclusive Discount has been well-received, but I personally have my doubts.
One of the main differences between the Member Exclusive Fares and the Member Exclusive Discount is that the Member Exclusive Discount now shows up as part of the booking flow, without the need to check off a box in the search box, as was the case for the old Member Exclusive Fares.
This means that search results display Member Exclusive Discount whenever available, whereas before, the Member Exclusive Fares only displayed if the user checked the Member Exclusive checkbox.
There may be a net increase in bookings of Member Exclusive Discount tickets, but I would not use this metric to measure the success of the program, as this is likely better attributed to an improvement on the User Experience (UX) in the booking flow rather than an improvement in the program itself.
Doing the Math
Let’s do the math to understand if there is ever a reason to purchase WestJet Dollars, either at a 40% discount or at the full rate of $2.00 CAD per WSD.
I’ve chosen a fare from Toronto (YYZ) to Los Angeles (LAX) on Friday, May 13, 2022.
We will compare the Member Exclusive Discount to the Econo Fare, the closest fare that has similar benefits. If you look closely, it’s really the advanced seat selection benefit (for a fee) that aligns the fare classes.
Remember, WestJet Dollars can only be used on the base fare, so let’s just look at the base fares between the Member Exclusive Discount and the Econo fare.
The Member Exclusive base fare is $167, whereas the Econo base fare is $185. For those curious, if you choose the fare and move to the next screen, you can see the fare breakdown in detail:
You’ll notice that the taxes on the Member Exclusive Discount is $99.27, whereas on the Econo fare it’s $100.70. The difference between the two is negligible, so I’ll call it a wash, leaving us only to compare the base prices.
Comparing the Member Exclusive Discount base price of $167 to the base fare of the Econo fare of $185, we see that there is an $18 discount on the Econo fare, or ~9.7%. Is this a good discount? I suppose you could argue that it’s better than nothing – but what if you are even 5 WSD short of having enough WSDs in your account to book a Member Exclusive Discount fare?
The minimum purchase of WSD through Points.com is 25 WSD, and at $2.00 CAD per WSD, you are paying $50 – but also remember you have to pay taxes on that purchase.
Let’s imagine you live in Toronto and you are faced with 13% taxes. Well, now you are paying $56.50 for 25 WSD. As you can see, you are already underwater and paying more for the privilege of using your WSD than the savings offered by the Member Exclusive Discount.
What about using the 40% discount on WSD purchases that’s currently being offered? Well, to purchase 25 WSDs, you would be charged $30 CAD plus taxes, resulting in a total cost of $33.90 to purchase 25 WSD.
Again, here you are still spending more money than the difference between the Member Exclusive Discount and the Econo fare.
Would this ever make sense to purchase WSD? I can’t think of a reason why you would at the regular price of $2.00 CAD per WSD. And even at a 40% discount, it’s hard to imagine a situation where it would make any sense.
Why Would WestJet Employ This Strategy?
Selling WSDs as if they were on par with the Canadian dollar does very little to drive loyalty for WestJet.
Imagine the above situation, in which someone is short 5 WSD and WestJet allows the purchase of the shortfall for a very small premium.
Allowing someone to purchase your currency without organically earning it simply provides an avenue to buy into the program without doing any of the heavy lifting, like spending on the co-brand credit card or flying with WestJet.
It’s perfectly understandable why WestJet would want to make it more difficult for casual collectors of WSD to buy WSDs to top-up their accounts. In fact, one could argue that the previous pricing model of buying WSD for a tiny markup did little to discourage casual users from taking advantage of discounts meant for loyal clients.
However, to charge $2.00 CAD for each WSD purchased makes just as little sense. At $2.00 CAD per WSD, you are implying that by purchasing WSD, there is a premium associated with your loyalty currency – but in reality there is little to no value in the WestJet loyalty program.
The discounts I have seen on the Member Exclusive Discount range from 5–10% cost savings on the base fare in comparison to the Econo fare, but discounts of 15–20% are commonplace for the WestJet seat sales that run almost every week. So a customer should ask themselves, why would it ever make sense for me to purchase WSDs?
Now, Air Canada also uses Points.com to sell Aeroplan points to members, so perhaps WestJet noticed that Air Canada was valuing their points at 3¢ apiece and thought that the actual value was 1.5¢ per point, and therefore Air Canada was charging 2x the value of their points.
This could be the motivation for WestJet’s decision to sell WSD at a premium – but it’s an unfair comparison, because with Aeroplan points, you are actually able to derive outsized real value from your points.
For example, with my most recent booking from Calgary to London to Santorini, I was able to extract 14.6 cents per point (cpp) in value.
With such immense value on the table when flying in premium cabins, it’s very easy for Aeroplan members to justify paying for a top-up, especially when bonuses or discounts are offered on purchased points – whereas it is all but impossible to justify when purchasing WSD.
So, what could be the actual reason that WestJet sells WestJet dollars for two dollars each?
While I do not know for certain, based on the moves the program has made in the past, I have to wonder if this move was made with the belief that there would be a small incremental increase in revenues. Something along the lines of, if we have revenues of $10,000 a month through the sale of WSDs, and we double the price, we would bring in $20,000.
I would say that there was an egregious oversimplification of the revenue model, with no thought given to how pricing would affect the demand curve.
WestJet has continued to make questionable changes to their loyalty program, this time with a promotion to purchase their loyalty currency, the WestJet Dollar, for more than a dollar.
This promotion is unlikely to move the needle on the demand for purchasing WSDs, and it’s a curious move that screams of very flawed short-term thinking.
Purchasing loyalty currencies directly from the program is often hard to justify, but there are certainly some use cases where it makes sense. In the case of WestJet, I do not believe that any such use case exists.
Given that you can expect discounts of 5–10% using the Member Exclusive Discount, but at a cost of anywhere from a 20% premium (based on the current 40% discount on WSDs) to a 100% premium (at the standard $2.00/WSD), it leaves no possibility of value, nor any reason why anyone would invest their time in collecting WSDs.
WestJet must ask themselves: are these the markings of a program that actually attracts loyalty, or is it time to revisit the drawing board?