Taxes, electricity, petrol prices and the general cost of living are on the increase, so it makes sense for individuals to utilise every rand-saving opportunity on offer. One such opportunity is the loyalty programme, where individuals really can get “money for jam.”
Taxes, electricity, petrol prices and the general cost of living are on the increase, so it makes sense for individuals to utilise every rand-saving opportunity on offer. One such opportunity is the loyalty programme, where individuals really can get “money for jam.”
A recent census in the United States revealed that US consumers hold 3.3 billion memberships in customer loyalty programmes.
It is estimated that in South Africa there are more than 100 different loyalty programmes, with over 10 million South Africans belonging to one or more of them.
Loyalty programmes are offered by businesses who want to modify consumer behaviour as well as to attract and retain customers.
Consumers earn rewards or points which then translate into real benefits.
Depending on the programme, loyalty rewards can be spent on petrol, groceries, luxury items or lifestyle purchases such as travel, accommodation or spa packages.
In other programmes, consumers may receive cash-backs, discounts, gym memberships, frequent flyer miles or the use of facilities such as airport lounges.
A well-informed consumer can even earn points from a variety of sources for a single transaction; for example purchasing groceries with a personalised discount voucher at a participating retail store and paying for the transaction with a credit card that has a loyalty programme attached to it.
Not all loyalty programmes are the same, and it is important to understand how a programme works before signing up.
It is also important to evaluate how the reward currency can be earned and spent, and whether the rewards expire after a certain period.
In some cases there are no explicit direct costs to the user, whereas in other instances there are up-front joining fees, or monthly or annual membership fees, or further hidden costs.
There are often tiered levels of membership where the real rewards only kick in at a significant level of spend.
At the lower levels, the benefits on offer may hardly be worth the effort and cost associated with being a member of the scheme.
Not all loyalty programmes are suitable for everyone.
For example, it would make little sense for someone living in a small rural town to pay a monthly premium to belong to a loyalty programme that provides discounted membership to a chain of gyms that are only located in metropolitan areas.
On the other hand it almost defies logic not to take advantage of certain loyalty programmes that have no direct cost, but which only reward the consumer.
Benefits or rewards from loyalty programmes are not taxed in South Africa, as they are currently seen by SARS as a type of “discount” offered by the provider.
A loyalty programme is never “free” as the cost of the programme is inevitably built into the cost of doing business.
Because of this, all users subsidise these programmes, and individuals who don’t participate are unquestionably losing out if they do not take advantage of the various built-in benefits when shopping, banking, booking flights or doing other day to day transactions.
