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About Redemption Pricing

Members redeem points to obtain products offered by program partners for redemption. Products include such items as airline flights, hotel bookings, car rentals, or upgrades, for example, upgrades to first class on existing travel tickets, and so on.

You can define redemption pricing in two ways:

• About Pricing Using Redemption Rules
• About Pricing Using Base Redemption Promotions

About Pricing Using Redemption Rules

The price for a redemption is usually calculated using redemption rules. Redemption pricing can use the following views:

• Points. It is not common to define pricing for airline redemptions using the Points view, because it requires you to create a separate product for each pair of cities, and define the pricing separately for each of those products. It is common to define pricing for tangible products or services using the Points view. For example, you might use the following pricing:
  • 50,000 points for a rental car in London for one day.
  • 70,000 points for one night at a specific hotel in Tokyo.
• Points by zone. Some of the frequent flyer programs price air awards based on the zones derived from the origin city and destination city. You create generic flight products; for example, there might be products for an economy class flight, a business class flight, and a first class flight. Then you create rules that determine different prices for these products depending on origin and destination city. For example:
  • 30,000 points for an economy class ticket from New York to Chicago
  • 80,000 points for an economy class ticket from New York to Paris.
  • 120,000 for a first class ticket from New York to Paris.
• Points by distance. Other programs price their air awards based on zones derived from the flight distance between origin and destination cities for one or more segments in the itinerary. You create generic flight products, then you create the following rules that determine different prices for these products depending on the distance travelled:
  • 25,000 points for an economy class ticket from 800 to 1,200 miles.
  • 75,000 points for an economy class ticket from 5,000 to 7,000 miles.
  • 110,000 for a first class ticket from 5,000 to 7,000 miles.

Airlines typically provide an option to program members to obtain a redemption award by paying in points plus pay (currency). Members can use this option if they do not have a sufficient point balance for the redemption. For example, if redemption tickets for the member and the member's spouse require 100,000 points while member's current points balance is only 85,000 points. Siebel Loyalty programs allow you to set up multiple price options for the same redemption ticket. For example:

• 100,000 points only
• 80,000 points plus US$100
• 60,000 points plus 200 Euros

For an airline redemption, the activities can be grouped together, although the process of grouping the activities does not take place within Siebel Loyalty. Siebel Loyalty handles grouped activities by storing the activities along with their parent activity to create a transaction. If it cannot calculate the travel distance from the parent transaction, then Siebel Loyalty attempts to calculate the distance from the constituent activities if they are present.

About Pricing Using Base Redemption Promotions

Base redemption promotions give you a way to create redemptions that cannot be handled using redemption rules:

• Redemption rules, which are used for normal redemptions, update redemption prices based on the pricing setup done at the product level.
• Base redemption promotions can be used to create redemption pricing that also takes into account external factors, such as the load factor, the number of days redeemed before the flight date, or the tier level of the customer.

Here is an example of when base redemption promotions are useful: An airline wants to create a redemption price for flights that gives its platinum members a discount price of 10% less than the redemption price that other members pay and that gives a further 3% discount if the redemption is for flights during the month of October.

When you create the product, you must determine whether the product's redemption price is calculated using the price that is set up at the product level or using a base redemption promotion. If you choose Base Promotion as the product's pricing method, then Siebel Loyalty ignores the price set at the product level and instead it uses the price set by the base redemption promotion.

To set up redemption promotions, perform the following tasks:

1. Create the redemption product. When you associate the redemption product with a partner, select Base Promotion in the Pricing Method field. For more information, see Associating the Flight Redemption Product with a Program Partner.
2. Set up a base redemption promotion to calculate the base redemption price. The base redemption promotion can calculate the base price using either attributes in the transaction or custom attributes. For example, it might calculate the base price using inputs such as load factor and inventory available. For more information, see About Base Promotions and see Setting Up Siebel Loyalty Promotions.
3. Set up additional promotions to calculate discounts. The discount promotions might use inputs such as member tier and day of the week of the flight. For more information, see Setting Up Siebel Loyalty Promotions.
4. If this promotion uses points to pay conversion, then you must also set up a promotion to charge a cash price that makes up for a possible shortfall of points. When you create the Redeem Points action for this promotion, enter information in the Cost Per Point fields that is used to calculate how much cash must be paid for each point that the customer is short. For more information about points to pay conversion, see Points-To-Pay Conversion.
5. Add these promotions to a promotion design. The redemption price determined by the base redemption promotions gets assigned to the transient variable associated with that point type. The subsequent redemption promotions in the promotion design use this transient variable to update the redemption discount. The final redemption price is based on this value as updated by the last promotion in the base redemption promotion design. For more information, see Using Promotion Designer.

Base redemption promotions and other redemption promotions that are Promotion-Designer enabled use the following actions:

• Discount Points. Reduces the number of points that the customer must pay for the redemption product. Used in redemption promotions of the redemption promotion design to calculate discount.
• Discount Points plus (+) Pay. Reduces the number of points and the amount of cash that the customer must pay for redemption product. Used in the redemption promotions of the redemption promotion design to calculate discount.
• Redeem Points. Reduces the number of points in the customer's point balance.
• Redeem Points plus (+) Pay. Reduces the number of points in the customer's point balance and also requires the customer to pay cash.

The actions Discount Points and Discount Points plus (+) Pay can handle the entire redemption discount, including reducing the point balance and charging additional cash. The actions Redeem Points and Redeem Points plus (+) Pay do not necessarily have to be used in promotion design. However, one can use these actions in the promotion design if the business requirement is that additional points must be redeemed or additional cash must be charged beyond the normal price of the product.

Discount Points and Discount Points plus (+) Pay are the opposite of Redeem Points and Redeem Points plus (+) Pay. Discount Points and Discount Points plus (+) Pay reduce the amount that the customer pays for the product. Redeem Points and Redeem Points plus (+) Pay increase the amount that the customer pays for the product.

Related Topic

Example of Setting Up Redemption Pricing Using Base Redemption Promotions