Qantas: 10 million points is worth $206,521.74
Does that add up, and why does Woolworths disagree?
One of the most common questions I'm asked about frequent flyer points is "How much is 1 point worth?"
The short (and annoying) answer is that it depends how you spend them.
As we've explained in much more detail elsewhere, redeeming your points for upgrades and reward flights makes your points worth much more than if you spend them on the proverbial coffee machine.
The Points Finder rule of thumb is that you need be getting at least $20 in value for every 1,000 points you spend, and that it's better to aim for $50 or more in value. That implies that 1 point is typically worth between 2 cents and 5 cents, with a few outliers where it goes up to 8 cents. (We use a 1,000 point baseline metric because the mental arithmetic is easier and redeeming points always involves using thousands of them anyway.)
A recent Qantas promotion throws an interesting new light on the question.
Right now, Qantas is running an offer where 10 lucky passengers will win 1 million points each. Any registered customer receives one entry for every Qantas Point they earn from a Qantas-points earning credit card. While the odds of winning aren't high, there's obviously no risk in entering, since it doesn't involve any extra spending.
What struck me is how Qantas is valuing those 10 million Qantas Points.
The terms and conditions for the promotion note that the prize pool is worth a very precise $206,521.74.
That means that each 1,000 Qantas Points is worth $20.65, in Qantas' estimation.
That lines up almost exactly with our rule-of-thumb figure of $20.
In other words, Qantas isn't imagining that you'll spend those points on a toaster. At the same time, it's also not assuming you'll definitely use them for an upgrade. Even if you did, it won't cost Qantas the same to offer you a Business seat for points as it would for you to buy one.
Above all, it's a reminder that if you're getting less than $20 of value for each 1,000 Qantas Points, you're not making the most of them.
So why is Woolworths going for a lower figure?
Another interesting sideline: Big W is running a promotion right now where customers who spend more than $50 go into a draw to win 1 million Woolworths Rewards points.
The terms and conditions for that promo value the 1 million points at $5,000.
Following a recent revaluation, those 1 million Woolworths Rewards Points would be worth 500,000 Qantas Points.
If we followed Qantas' valuation, those points should be worth $10,326, but Woolworths/Big W values them at less than half of that.
I guess the assumption is that anyone winning those points is more likely to settle for dollars off their shop, or that dream coffee machine. But that's not what I would be doing if I won.
Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on Finder.
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