The cost of loyalty programmes

20 million South Africans carried a loyalty card 2 years ago, according to Trade Conferences International, which hosts the Loyalty and Rewards Conference every year. That number has likely gone up, with almost every big and small business giving you points and discounts for spending with them. But before you sign up, read this.

What are loyalty programmes actually?

A company offers a loyalty programme for customers to encourage them to spend more money with them. The payback comes in many ways: points, discounts, special sales or offers only open to those who belong to the club or have the card. The more you spend, the more money they make, but also the more benefits you should be getting.

Do they save you money?

If you’ve watched the American television programme Extreme Couponing, you’ll know there are people who practically live off coupons, which help them slash their grocery bill by buying what’s discounted. There are similar programmes in South Africa. You sign up, get a code sent to your cellphone, and use it at the till to get the discounts. Simplicity is the name of the game here.

When to sign up

• If it’s easy to use and quick to reward – a stamp on a card and after 10 or so you get your free drink
• If it fits your lifestyle. Do you travel often and with a specific airline? Then it might make sense to enjoy the perks that come with their loyalty programme
• If you already spend a lot of money at the store, why not get the bonus

When it’s a waste of time and money

Not all programmes are transparent, and some experts argue that the reward you’re getting is built into the price of what you’re buying. Stay away from programmes that seem complicated. Ensure that you’re not spending more than you should just for a discount or to join a club. Watch out for programmes that lack real value, like those that give you only 1% back of what you spent. Some programmes set the bar too high: They suggest that you could “get up to 15% back”, for example, but on closer inspection, very few people ever actually manage to get that much back.

Avoid

• If you’re spending more than you’re getting out. Calculate the yearly or monthly cost of joining the programme, then check to see if the reward you’re getting is worth your money
• If it feels like there are lots of rules keeping you from cashing in then you’re probably being short-changed
• If the reward you’re being offered for spending is something you didn’t want in the first place
• If it means changing the way you spend for the worse. Meaning you now have to spend more than before

Get real rewards

The bottom line is that only personal contact, good service and a fair price for a good product drives loyalty. Look for a company that’s open and honest about its costs – whether there’s a bonus or not. Focus on what’s being offered, not what you might gain later. And always ask yourself if you are paying more than you should for it. If so, switch to something better.