Another Consumer Burden — The Darker Side of Web Loyalty Programs

The latest, pervasive consumer burdens spreading widely on the Internet are the so-called Web Loyalty campaigns that have been, until recently, a significant income earner for a shockingly long list of major online shopping sites including 1800Flowers, Buy.com, Classmates, Continental Airlines, Expedia, Fandango, Hertz, Orbitz, Priceline, Redcats USA, Shutterfly, Travelocity, U.S. Airways, VistaPrint and many other ultrahigh volume, online retailers.

Since July 2009, federal investigators in the U.S. have been probing three companies in particular: Affinion, Vertrue and Webloyalty. If you've shopped online, you've likely seen Webloyalty, Affinion, and Vertrue's efforts in the form of a secondary transaction page which pops up asking if you're interested in 'cash-back', coupon or discount offers against future purchases. All you have to do is enter your email address and that's the end of it, or so it appears. The problem is that what you've actually signed up for (merely by entering your email address — no other information) is a regular monthly charge by Affinion, Vertrue and Webloyalty of anywhere from $4-$20 on the credit card you supplied to the original retailer or site from which you made a purchase prior to seeing that pop-up offer. In other words, Affinion, Vertrue and Webloyalty, many online retailers, and the bank which issued your credit or debit card, are all in cahoots.

Check your credit card statements right now for those small recurring charges. All such charges and the associated so-called loyalty programs have fallen under the uncomfortable scrutiny of the U.S. Senate Committee on Commerce, Science and Transportation.

Back in August, Affinion, Vertrue and Webloyalty denied any wrongdoing and argued that their services offer users savings and are valued by many subscribers. In my opinion, the three companies have only offered what sound to me (and, I think, to most members of the Senate committee) like rather vapid responses.

Subsequently, Webloyalty announced late in August that it would henceforth require in all its ads and pop-ups that customers enter the last four digits of the credit or debit card used in the previous/current transaction to confirm their agreement to pay the membership fees. Affinion similarly altered its requirements in November. New, more extensive and clearly worded language is being added to the pop-ups which specifically explain that you're about to sign up for a recurring charge. Visit Webloyalty and Affinion Group to find out more about the so-called loyalty industry of which these companies are a part. If you don't like what you read, complain loudly.

Caveat emptor big time. These companies contribute nothing to the world. They create profits without providing a service, without manufacturing anything, and without actually doing much of anything. They convince you to sign up to pay a recurring monthly fee for something they have determined quite accurately that most of us will forget about the moment we navigate off the web page. Will the 'cash-back', coupon or discount really work at some point in the future if you do remember you've got it? Yes — but only if the server is available, the campaign hasn't ended, and the item or service you've chosen next time actually qualifies. Remember though that as usual, and not unlike the rebate dodge in which retailers rely on the fact that almost 65% of rebate coupons are never sent in, the vast majority of people who willingly or inadvertently sign up for web loyalty programs either forget about the deals, lose their access codes, or never have an opportunity to take advantage of any legitimate deals simply because they don't do the required kind of shopping, all the while still paying a small monthly charge for long periods of time. Don't let down your guard either, because Affinion, Vertrue and Webloyalty aren't giving up this money maker without a fight. Their whole loyalty business model is based in my view on not fully presenting consumers with the reality of recurring monthly charges, as opposed to providing consumers with the sort of fully informed consent that actually reads and feels that way.

As of this writing, Continental Airlines, US Airways, Priceline and VistaPrint have cut ties with Affinion, Webloyalty, and Vertrue. I suspect, more bad press and more consumer pressure will convince other online retailers to get either out of the web loyalty business or devise yet another surreptitious approach.

This latest online headache got caught because a few sharp-eyed consumers started questioning recurring charges appearing on credit and debit card statements. Make no mistake though. In my view, Webloyalty, Affinion, Vertrue and the retailers and banks with which they partnered, never believed for a moment that the income stream (in the tens of millions of dollars) would go on forever. They knew the programs would be questioned eventually, and that the government would slap them all on the wrist, waggle its finger and admonish them to not do it again. No punishment and no penalties. In the meantime they've all made their money, so it's on to the next scam.

Some people will note that almost every Affinion, Vertrue and Webloyalty sign-up page contains informative, consumer language in the fine print. If a few people inadvertently sign up, then complain loudly when they see the recurring charges, caveat emptor and too bad for those people. It is when hundreds upon hundreds of consumers began to complain that the effective visibility and comprehension of the consumer language on the sign-up pages was called into question. To Affinion, Vertrue and Webloyalty I say shame on all of you. Find something better to do with your ideas.

Rogers Hi-Speed Internet — No Deals Here

It had to happen. The apparently coarse and transparent oafs who seem to be running many of the cable Internet providers have finally dropped the other shoe. After years of urging us to "get online and experience a world of information, digital photography, digital music, digital video, movies and entertainment" they've now got everyone hooked. So what better time than now to introduce blatantly abusive usage charges while remaining protected by rate increase legislation?

Rogers (in Canada) is just one example. Let's de-construct the first paragraph of the latest mailing to all Rogers business and residential customers:

"With households doing more online every day [at Rogers' urging - the company spends millions to market itself and its services every year] - from downloading music and streaming videos to joining online communities [Rogers of course already charges good money for music and video/TV streaming] - it's important to have an Internet provider that evolves to meet your changing needs [e.g., charging you for services for which it has already charged you]. At Rogers, we remain committed to always providing you with the best Internet experience possible [except for terrible business service, inaccurate records, service technicians who fail to arrive for a scheduled call, and throttling of the same client/server data exchanges for which its now going to charge extra fees]. That's why we are introducing changes to your current service that will help us to better meet your needs for speed, reliability and a continually improved network [read: we're effectively a monopoly in many parts of Canada, so we assigned our legal staff to find a regulatory loophole which allows us to charge more money for the exact same service!].

Bully for them.

According to Rogers, I am paying $54.95 per month (plus taxes) for a 10Mbps connection. The problem with that statement is simply that I've never achieved anything close to 10Mbps download speeds. Before starting to write this post at 10:30 AM EST in Toronto, I checked my connection speed at Toast.Net. The best I could do was 6.7Mbps. That's nowhere near 10Mbps. I tried the same tests at 1:00 AM this morning and the best I could do was 7.3Mbps. It doesn't matter what time of day you want to consider because the theoretical maximum speed on which all of Rogers customer marketing is based can rarely (if ever) be achieved in practice.

A curse on the collective corporate consciousness that eructs and promotes this sort of patented drivel. A curse on the regulatory boards and the government legislators who swallow the drivel. Rogers advertises speeds which it can't or won't deliver, but regulators seem blind to the situation. The Devil is in the details, but if nobody examines the details, the Devil has his way.

As of June 1, 2008, Rogers is going to cap monthly bandwidth traffic at 95GB for Extreme and Extreme Plus customers, and charge an additional $1.50 and $1.25/GB respectively for every GB over the limit (to a maximum of $25/month). Don't forget to calculate the additional cost the first time you decide to subscribe to a remote data backup service such as Carbonite, Mozy or even Dell's new service. That first 100GB backup could be a killer.

I really hate these people. They dig with buckets underneath the outhouse, run away with whatever they find, then reappear trying to sell us our own shit (or theirs) at inflated prices.

Start 2008 the Right Way . . . Buy Smart

On the DPReview discussion forums this week there was a hot thread about the variety and number of fly-by-night online digital camera dealers. One of the posters, Don Wiss, has done a terrific amount of cycling around New York City/Brooklin taking photos of the street addresses of dozens of online merchants. Some of the storefronts are shockingly awful. Dozens of online merchants are traced back to mailbox stores. Some of them trace back to false addresses. The general feeling among many of the respondents to the Don's post was simply that they'd rather see low prices on merchandise than merchants plowing money into nicer looking storefronts. Well boys, it doesn't work that way!

A well kept store demonstrates how much a storekeeper wants to present his customers with a pleasant place to shop. The effort that goes into a well kept store is also often reflected in the storekeeper's bookkeeping and, most important, his customer service. Most often too, the best kept stores are populated by owners and staff who are generally better informed. Smart, energetic and informed people generally want to work in a pleasant environment. Exceptions may exist, but those are the rules.

Any half-witted schmuck can create a snappy looking web site that leaves visitors with the impression that they're dealing with a serious business. The fact remains though that online purchasing can be a snake pit. The BBB and dozens of other consumer protection organizations are overloaded with screeching complaints from literally tens of thousands of customers who have been ripped off by horrible online merchants.

The best thing about shopping for quality & service rather than price alone is that it may force people necessarily into formal business relationships with brick & mortar local merchants. I think that's the best relationship to create if we want to ensure the best possible service and support from knowledgeable dealers. Some online merchants are safe, obviously, because they're big enough to carry the weight and overhead of exceedingly expensive online operations. Almost all the other online players are either kibitzers or outright thieves. Buyer beware.

We frequently hear complaints from ripped off consumers about the difficulty of checking out the quality and/or honesty of online merchants. My response is simply that absence of good quality information about any online merchant should be a big red flag in the first place. Don't deal with such a merchant. The better the ridiculously low priced deal, the lousier the merchant - another rule which applies 95% of the time. Figuring out which of the remaining 5% are legitimate deals is too much of a headache for most people, and the personal time consumed by people trying to figure out which witch is which is often worth more than any possible saving on a purchase. Buyer beware.

Consumer Alert: Best Buy's Secret Web Site

The Hartford Courant (Hartford, Connecticut) found evidence that some Best Buy sales floor staff are showing store customers products and prices on an internal company web site (Intranet) that walks and talks just like bestbuy.com. George Gombossy, the Courant's consumer watchdog, first tweaked to the alleged problem last month. Now under pressure from Connecticut state investigators, Best Buy is confirming Gombossy's reporting that its stores have a secret intranet site that has been used to block some consumers from getting lower prices advertised on BestBuy.com.

Best Buy spokesman Justin Barber, who in early February denied the existence of the internal web site that could be accessed only by employees, says his company is "cooperating fully" with the state attorney general's investigation. Barber also insists that the company never intended to mislead customers.

The Best Buy intranet site has been referred to variously as a staff training site, a shill site, and by a few other much less savory names. Whatever you want to call an internal web site that happens to contain a variety of price differences from the store's publicly accessible web site, at best you can be sure of two things: confusion, and opportunities for staff to inadvertently sell you something at the wrong price. At worst, such a site could be used to deliberately mislead customers.

As retail profit margins get razor thin, and as consumers continue to demand ever more aggressively competitive (read: lower) pricing, it should not be surprising to find out that retailers may be tempted to use every edge they can get, no matter how unethical it might be. My view is that Best Buy would have been better served by using the money it wanted to invest in the secret web site on staff training instead. As always, the best salesperson is the one who is best informed, ready and willing to help customers find what they need.

The state attorney general will have the last word, no doubt.