Your loy­alty may be re­warded

Grocott's Mail - - ADVICE & OPINION -

It is not of­ten that you get some­thing for noth­ing, but when re­tail­ers, banks and other busi­nesses re­ally want your busi­ness, they are of­ten pre­pared to give you some­thing back to thank you for your busi­ness. This is known as a loy­alty pro­gramme.

From a busi­ness point of view, the aim of a loy­alty pro­gramme is twofold. First, it is to en­cour­age you to spend your money with them rather than with their com­peti­tors, and sec­ond it is an op­por­tu­nity for the busi­ness to re­ally get to know your spend­ing habits.

The bet­ter the mar­ket­ing de­part­ment of a com­pany knows its cus­tomers, the more ac­cu­rately it will be able to tai­lor its mar­ket­ing strat­egy to gather and use cus­tomer pur­chas­ing data to at­tract, re­tain and grow its cus­tomer base.

Once you have joined its loy­alty pro­gramme, the com­pany hopes that the ben­e­fits of be­long­ing to it will en­tice you to place the ma­jor­ity of your busi­ness with them and be less con­cerned about the price or ben­e­fits of prod­ucts of­fered by com­peti­tors.

De­pend­ing on the pro­gramme, you may be able to spend your loy­alty re­wards on fuel, gro­ceries, lux­ury items or life­style pur­chases such as travel, ac­com­mo­da­tion or spa pack­ages.

Other pro­grammes may of­fer you cash-backs, dis­counts, gym mem­ber­ships, fre­quent flyer miles or the use of fa­cil­i­ties such as air­port lounges.

Not all loy­alty pro­grammes are the same, and it is im­por­tant for you to un­der­stand how a pro­gramme works be­fore sign­ing up.

It is also im­por­tant to eval­u­ate how the re­wards can be earned and spent and whether they ex­pire af­ter a cer­tain pe­riod.

Of­ten there are no ex­plicit di­rect costs to the user, whereas in some schemes there are up-front join­ing fees, monthly or an­nual mem­ber­ship fees, and other hid­den costs.

There are of­ten tiered lev­els of mem­ber­ship where the real re­wards only kick in at a higher level of spend.

At the en­try level, the ben­e­fits on of­fer may hardly be worth the ef­fort and cost as­so­ci­ated with be­ing a mem­ber of the scheme.

Loy­alty pro­grammes have been re­spon­si­ble for chang­ing the way peo­ple ex­er­cise, the way they drive their cars and how and where they spend their money.

It is es­ti­mated that there are more than 100 loy­alty pro­grammes in South Africa with over 10 mil­lion South Africans be­long­ing to one or more of them.

The ben­e­fits or re­wards are not taxed in South Africa, as they are cur­rently re­garded 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.

Par­tic­i­pants sub­sidise th­ese pro­grammes and those who choose not to par­tic­i­pate will be los­ing out if they do not take ad­van­tage of the built-in ben­e­fits when shop­ping, bank­ing, book­ing flights or do­ing other day to day trans­ac­tions.

This may be as close to a free lunch as one can get!

Rands and Sense is a monthly col­umn, writ­ten by Ross Mar­riner, a CER­TI­FIED FI­NAN­CIAL PLAN­NER® with PSG Wealth. His Fi­nan­cial Plan­ning Of­fice num­ber is 046 622 2891

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.