Bruce Conradie, MD of Razor’s Wire Business Intelligence, broadly categorises loyalty programmes into three segments.
The first is ‘loyalty currency”, which can be in the form of points, miles or bucks. These are accumulated and can be redeemed for rewards. Then there are loyalty programmes that offer the customer discounts on purchases. Finally, there are customer clubs that provide benefits such as a club magazine or contingency benefits such as car roadside assistance.
Most banks offer some form of loyalty reward programme, usually based on spending behaviour, so they fall into the first two categories. More often than not they are linked to a credit card, which encourages people to spend more. For the loyalty partners, it entices people to use the credit cards at their stores.
With most loyalty programmes, you will get the best value if you integrate your various financial products or use the same loyalty partners. In the end, if you like eating out, you may find yourself monotonously eating at the same restaurants that are retail partners of your credit card to get points.
Conradie encourages customers to be more discerning when they sign up for loyalty schemes so they are not wasting their money. ‘Consumers need to apply some common sense to their choices of programmes and to their behaviour. A classic example of a rewards programme providing poor value is a credit card that gives frequent flyer miles to a cardholder who never flies.”
E-bucks is First National Bank’s loyalty programme and works on accumulating points that can be redeemed against various goods.
The bank’s communications manager for eBucks, Jessica Yellin, says that apart from accumulating points on a credit card, eBucks can also be earned on other financial products, like cheque accounts, personal loans, home loans, vehicle finance and other products.
‘This implies that customers accumulate their eBucks faster from FNB than they can accumulate points from other financial services providers, hence making it an even better value proposition,” she says. The idea is that instead of shopping around for the best home loan rates, you end up having products from one financial institution to accumulate points. Readers may take heart from the fact that the eBucks programme has paid out more than R600-million over the past five years.
Most customers are really interested in accumulating airmiles rather than purchasing goodies with their points, yet industry analysts claim that some of the loyalty schemes are weak. For instance, the Nedbank Voyager miles and the Discovery Card’s Miles expire if they are not used within a set time period, and, if you are not a big spender, your points may expire before you have accrued enough to book a flight.
If you have ever tried to book using Voyager Miles, you will know it is not always that easy to redeem your miles. Kulula’s new credit card will be introducing an air miles programme that will allow you to pay for a part of your ticket with air miles so you don’t have to wait until you accumulate enough points for a full ticket.
Nedbank’s Greenbacks reward programme allows you to donate your points to a charity of your choice, so you can feel justified in blowing your budget as it is going to a good cause. But the consumer in you can also redeem points for shopping vouchers and air miles.
Discovery Card is another loyalty programme that rewards you for spending. It has a partnership with Altech Autopage Cellular, whereby a member who is also on Vitality can get up to 15% cash back on his or her monthly cellphone bill. Tied into this product is yet another, the Discovery Card Protector, thorugh which in the event of what it describes as a ‘life-changing event” (disability or illness), your average monthly bills are paid by Discovery for up to 12 months.
With the Discovery Card you get more from the card the longer you have been a member. Being part of the Vitality scheme is another plus. A gold card member of more than five years’ standing gets savings of 15%. Someone using a Discovery Card on a shopping spree will pay the full amount at the point of purchase, and will only be reimbursed any discount at the end of the following month. In the meantime, presumably, Discovery or its partners invest that money and make money from that money.
I spoke to a Discovery Card holder about what she thought about the loyalty programme. She did not know much about it, but said she would prefer upfront discounts.
She may then prefer Virgin Money, which falls into the category of discounts, but here you get them upfront. Unlike most cards, Virgin Money does not charge you for its loyalty schemes. While eBucks membership is free, if a customer wants to earn on a credit card, he or she will be charged a linkage fee of R150.
Like Pick ‘n Pay Go Banking, which links its loyalty programme to its own products, most of Virgin’s discounts are with Virgin companies, although there are a handful of ‘like-minded” brands as partners, such as leisurewear retailer Levi’s and Primi Piatti restaurant.
So, if you book a Virgin Atlantic ticket using your Virgin Money card or eat at Primi Piatti, you get upfront discounts of 10%. My friend should probably consider joining the Virgin harem, as long as she enjoys eating at Primi Piatti and wearing Levi’s jeans. She will even get a discount at Virgin Ulusaba, Richard Branson’s exclusive game lodge, but she would probably still have to wait until Virgin Money offers second mortgages before she could afford the stay.
How they stack up
Nedbank Greenbacks
Fee: R150 a year
Discount/reward: R5 spent = one greenback; 2 500 greenbacks = R100 shopping voucher, redeemable at several major shopping centres.
Flying high: R12,50 spent = one Voyager Mile. For a R962 SAA economy ticket from Johannesburg to Cape Town, you must have spent R338 750.
Discovery Card
Fee: R135 to R220
Discount/reward: Up to 15% off at selected partners
Flying high: R7,50 spent = one Voyager Mile. To get a R962 SAA economy ticket from Johannesburg to Cape Town, you must have spent R203 250.
FNB eBucks
Fee: Free, but R150 a year if you want to link your eBucks card to your credit card.
Discount/reward: R10 spent = one eBuck. Products can be bought with eBucks at selected partners, online or instore, at eB10 = R1.
Flying high: A recent promotional offer had a British Air/Comair flight to Cape Town for eB12 500. To earn these you must have spent R125 000 on ‘qualifying purchases”.
Virgin Money
An upfront discount on various Virgin products, as well as on ‘like-minded” brands including adventure company Red Envelope, restaurant Primi Piatti and Levi’s.