Research Report: No Freebies

October 31, 2007

There really is no such thing as a “free lunch.” Now research shows companies offering free food, flights, and other goodies often won’t stay in business long enough to hand out those gifts.

A University of Florida study shows a connection between companies that offer freebies and other loyalty rewards and those companies cutting employees. Researcher Steven Shugan says many businesses offer rewards as a way to stay afloat.

Shugan: “We’re observing this now in the travel industry where there are points being awarded for hotels and airlines and now suddenly the free flights and the free hotel rooms are not as available as they were at one time.”

Researchers say you’ll find “sham” loyalty programs in many industries. The Internet can help consumers choose companies worthy of their loyalty.

Shugan: “The firm has a very short time before they are found out if they’re not delivering on services, where maybe in the past they could have gone a few years before people figured out the promises made by the firm weren’t being fulfilled.”

So consumers might not want to stockpile a lot of frequent flier miles.