I’m fascinated with behavioural finance, which studies and attempts to explain why people make irrational financial decisions. One of those weird ticks people have is called loss aversion, whereby the pain of losing is psychologically more powerful than the pleasure of an equivalent gain.
The folks at WestJet must also be fans of behavioural psychology because they understand loss aversion and they’ve designed a clever marketing trick to get their customers to increase spending on WestJet flights and vacations.
Those familiar with WestJet’s marketing may have seen this ‘exclusive’ offer in which the airline deposits 50 WestJet dollars into your Rewards account for a limited time, typically two days, for you to use towards a flight. The bonus dollars disappear if you fail to book a flight or vacation within the limited time offer period.
WestJet’s Marketing Trick
I reached out to WestJet to comment on what I think is a brilliant marketing tactic. Jayce Loh from their Loyalty team said WestJet started testing the targeted Limited Time Member Appreciation Offers in early 2015 and they have become an ongoing targeted marketing program.
The concept was developed in-house and is intended to show loyalty members how powerful WestJet Dollars can be.
“The ability to use WestJet Dollars on any available seat remains one of our biggest differentiators in comparison to our competition,” said Loh.
Loh said that while no specific behavioural psychology theory was cited in development of the initiative, loss aversion was certainly a factor that was considered when setting the short redemption cycle.
Only WestJet Rewards Members who opt-in to marketing emails will receive the Limited Time Member Appreciation Offer, something the team feels will entice non-members to join and hopefully “be delighted with bonus WestJet Dollars sometime during the year.”
Lisa Kramer, professor of finance at the University of Toronto, was not familiar with this campaign but also found WestJet’s marketing tactic to be clever:
“A $50 deposit in an account is a bit different from, say, a $50 coupon,” said Kramer.
Quantitatively they are equivalent, she said. If someone is going to book a trip, their final purchase price will be the same whether they use the deposit or the coupon. But there are likely to be differences in the way people perceive the two, and this could lead to changes in purchasing behaviour.
It boils down to framing. A coupon is a potential discount, and people don’t fret too much if they don’t use a potential discount. A deposit that will be withdrawn if not used, on the other hand, feels much more like money in your pocket. The idea of losing it is more painful than the idea of not using a coupon.
“I don’t know whether WestJet did any market research before launching the campaign, comparing the efficacy of the two approaches across large samples of their clients, but it wouldn’t surprise me if they had,” said Kramer.
When asked about the success or popularity of the Limited Time Member Appreciation Offer, WestJet’s Loh simply stated that the ongoing nature of the program ‘could be used as a proxy for the success of the program.’
Final thoughts
I’ll admit I fell for the ol’ loss aversion trick the very first time I received this Limited Time Member Appreciation Offer from WestJet. It was 2016 and I didn’t plan on booking a flight at that moment, but something in the message struck me and I couldn’t pass up the chance to use those $50 bonus dollars.
Related: WestJet RBC World Elite MasterCard – Should You Get This Card?
Trouble is, I booked too late. The two-day window had passed when I booked flights to Vancouver and the bonus dollars had already been whisked away! No matter. I called WestJet and they credited the 50 WestJet Dollars back onto my account, saving me even more loss aversion pain and regret.
**This is a sponsored post written by me on behalf of BMO Insurance. All opinions are my own.
Canadians enjoy a world-class public health care system that provides for many of our health related needs with one notable exception: your Canadian health insurance is limited outside of your home province and once you travel out of the country. That’s why if you plan to go abroad, even on a day trip to the United States, the federal government strongly recommends you purchase the best travel insurance you can afford before you leave Canada.
Out of country medical services can be extremely costly. Emergency evacuation, dental services or even prolonged hospital visits could end up costing you thousands of dollars in the event of an accident.
Travel Medical Coverage
Here are some of the coverage options that are available to you when travelling:
Medical Coverage: This basic coverage generally includes trips to the hospital, emergency dental work, doctor’s visits, emergency evacuation, flying a relative to your bedside and more.
Trip Cancellation: This added coverage lets you cancel your trip and get some or all of your money back. Every policy is different but a trip can be cancelled for a variety of reasons such as: you change your mind, get sick or have important work commitments. The trip cancellation premium charged to the purchaser is usually a percentage of the total trip cost.
Lost or Stolen Baggage: For even more coverage, you can insure your belongings against theft or loss. This coverage is usually capped at a certain dollar value so if you lose a $5,000 watch you will maybe receive $500. Again, this varies by policy.
Now that you know some of the options, it should be clear that medical coverage is the most important of the three as a trip can always be rescheduled and lost or stolen items can easily be replaced, but your health and well-being cannot!
So why don’t more Canadians purchase travel medical insurance when they travel?
It’s possible that some travellers assume that travel medical insurance is costly, but there are packages available at a reasonable price. BMO Insurance offers an annual medical plan that covers up to $5 million per insured person for medical emergencies while travelling. This is a convenient option for those who make multiple trips throughout the year and an annual plan is often less than the cost of two single trip plans.
As always, your mileage may vary so read any policy for the fine details.
When you travel, there’s a good chance are you are going to a place that you are unfamiliar with. Unfamiliar places may bring their own dangers and pitfalls.
Many of our readers are avid travellers and would never go on a trip without purchasing travel medical coverage. In fact, some readers have shared with me the need to use it on a few occasions!
One reader, Andrew, had to see a doctor in Australia when his ear became plugged with sand due to swimming in rough surf.
Another reader, Julie, injured herself jumping off a waterfall in Costa Rica. Turns out she sprained a joint in her back, which was determined after a visit to a clinic for x-rays and a visit with a doctor.
Finally, at an all-inclusive resort in Mexico, Marc tripped and fell on some stairs (he says no alcohol was involved!) and partially tore a tendon in his hand, which required medical attention.
As you can see both seemingly benign activities and more adventurous ones can lead to requiring medical attention. Don’t be stuck paying out of your own pocket for treatment.
Be sure to check your credit card to see if you receive travel medical coverage. Many premium credit cards include this as a feature for short duration trips. Also, if you are travelling for business your employer most likely covers you under their insurance plan. This should be verified of course.
In closing, always remember to have travel medical insurance coverage when travelling outside of the country. ALWAYS read the fine print for any policy in order to know what’s covered, what isn’t and what to do in case of emergency.