The truth about loyalty and reward programs
How many rewards cards are in your wallet?
Whether it’s frequent flyers, the local supermarket or a speciality store, Australians love loyalty and rewards schemes.
An inquiry into loyalty and reward programs by the Australian Competition and Consumer Commission (ACCC) revealed 80% of Australians are members of at least one program, with the average Australian carrying up to six loyalty cards on them at any given time.
The inquiry found loyalty schemes were a lucrative tool to encourage repeat business and could generate up to $370 million in earnings for companies annually.
RACQ Financial Advocacy Analyst Nathanael Watts said there was no such thing as a free reward.
“When a company offers a loyalty program with free rewards for shopping you need to ask yourself why they would be giving out free benefits,” Mr Watts said.
“Ultimately, the company benefits as they now understand your consumer behaviour.
“They know the types of things you’ll buy from their store and the price points you’ll buy at.”
The ACCC found the value provided by loyalty and rewards schemes varied greatly from company to company with some members receiving only 0.5c of value for every dollar spent.
The inquiry revealed companies often adjusted the price and value of their points depending on what members redeemed their points on.
For example, points redeemed on a flight may return a value of 1% per point but if used on a gift card may only return a value of 0.25%.
In terms of personal data, the inquiry revealed 96% of loyalty and rewards members said they wanted brands to be more transparent about the collection and use of their data.
Many loyalty programs were part of data exchanges which collected data on billions of individuals to be sold to companies around the world to complete member profiles.
Mr Watts said access to consumer data was central to how rewards and loyalty schemes work.
“Look at the value of what the company gives out as an indicator of what they’re gaining from the scheme,” he said.
“If they’re willing to give you $50 off your next shop you can guarantee they’ll be gaining $50 worth of knowledge and repeat business from you.”
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.