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| Blogs > 49AK > Out of the Ordinary |
The Economics of AFF Points
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The Economics of AFF Points First, a couple of important posts that I wrote earlier today. If you've not read them, please take a look - they are relevant to this one. First, there is IMPORTANT CityHookupscom is Stealing From You and More on CityHookupscom Points. The short of these posts is that CityHookups.com has changed a policy that will cause many members to be charged 100 points for return receipts for emails that they did not request. Please read them, and also please go to the Site Support Blog and complain. Hopefully they will change the policy back. But in the meantime... CityHookups.com points are worth approximately $1 per 100 points - or one penny per point. You can calculate this for yourself by going to the place in the site that describes the point system, and follow the link to 'Buy Points'. You can buy 1000 points for $10 - hence, $1 per 100 points. Sure, you get a discount if you purchase a larger numbers of points. But as I'll show below, the redemption value of the points is inflated anyway, so you never actually get to a par value on points... Lets compare two things you can do with CityHookups.com points: requesting 40 return receipts on CityHookups.com emails and purchasing a month's gold membership. For the sake of this discussion, we'll assume that you're an CityHookups.com gold member, and you pay for your membership by credit card. If you, as a paying gold member, choose to request a read receipt for 40 emails that you send in a month, you can simply make sure that the read receipt box is checked (this is done as a default now, and is a BIG problem), and CityHookups.com will deduct 100 points for each email, at the point where your recipient reads your email. In return, they will email you a note telling you that your recipient read your email. If you, as a paying gold member, decide that you wanted to redeem some of your points to pay for a month of your CityHookups.com membership, you could do that. Simply ask to redeem your points for your membership, and CityHookups.com will deduct 4000 points from your account, and you'll have a gold membership for one month. Now lets look at this from CityHookups.com's perspective. In the first scenario, you redeemed points for your email read receipts, and CityHookups.com delivered 40 of them for you and deducted 4000 points. From an accounting standpoint, other than the burdened cost of providing that service (which is essentially zero, since the overhead is a fixed cost whether you requested read receipts or not), there is no change in cash flow, but there is an accounting change of 4000 points, which have now been redeemed, and are no longer liabilities against the company. In the second scenario, you redeemed 4000 points, and in exchange, you were provided the access to the CityHookups.com system that is due a gold member. However, since you were a regularly paying member, because you redeemed points for your membership, you had a negative effect on the company's cash flow, to the tune of $29.95. There was also an accounting change of 4000 points, which you redeemed for your membership, and these are no longer liabilities against the company. Clearly the first scenario benefits CityHookups.com much more than the second, because for the same reduction in liability (4000 points) they had NO reduction in cash flow... whereas when you renewed your gold membership, you reduced CityHookups.com's cash flow by $30. So if you were CityHookups.com's accountant, and you were carrying millions of points on your books, wouldn't you prefer to find a way to reduce the liability that those points represent without reducing cash flow? Of course you would! But there is very little demand for return receipts... So how do you encourage people to redeem those points in that way? The answer is that you configure your system so that the default action is to redeem points in that way... and require that customers opt out. This is exactly what CityHookups.com is doing with the new default action that automatically requests read receipts (unless you uncheck the read receipt box). CityHookups.com will argue that the customer is still in control, and he or she can still request - or not request - a read receipt. The problem is that the cost of errors now falls on the customer. Moreover, CityHookups.com is counting on a high error rate, in order to bleed off points. CityHookups.com will also argue that their intent is not to do that, but that they have some other operational goal in mind. I don't buy that. From a software and process engineering standpoint, one designs systems to minimize errors. For example, assume for a moment that when someone requested a read receipt on an email that it bogged down the CityHookups.com servers and caused delays and downtime. If that were the case, then you can be sure that CityHookups.com would make sure that their system only requested read receipts when the customer absolutely wanted them, because there would be other system impacts. In this case, the software has been designed so that the most error-free state (from CityHookups.com's perspective) is the one where everyone requests a read receipt, unless they specifically choose not to get one. Since their system seems to be able to handle this increase in traffic with no ill effects, there must be some other motivation for the change... and the only one that makes sense is that it affects their revenue sheet to get those points off the books. It cannot be that it adds functionality to the customer, because the read receipt was always available, as long as you had points, and if you didn't have points, you could always buy them. At the top of this post, I mentioned that I would show that the cost of buying points would never reach a par value. If you buy 5000 points, you get a 20 percent discount - you get 5000 points for $40, or $8 per 1000 points. If you then use those points to pay for your gold membership, you use 4000 points, worth $32 - but you can pay directly by credit card for $30. So in a practical sense, points are actually worth a little less than $10 per 1000 points... but I suspect from an accounting standpoint, CityHookups.com assigns a $1 per 100 points value to them, because that is the base rate you pay for them when you buy them. CityHookups.com needs to change this policy. If they don't, I think the next course of action should be for people to either not renew their CityHookups.com memberships, or to use points to renew. If they won't be swayed by public comments, we can affect their pocketbooks. |
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I am tryin'! Please go to the Site Support Blog and let them know what you think... tell them you think they should change the default back! Thanks for reading!
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1/10/2020 9:39 pm |
Great post
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