There are very many loyalty programmes these days and it is possible to get good value out of them, but in order to do so one must understand the costs and benefits of each programme. It can be quite tricky to properly calculate the costs and benefits of a loyalty programme. In fact sometimes it is deliberately made difficult in order to prevent people from realising that there is not much benefit in the programme.

When evaluating a loyalty programme, we need to look at 3 things:

1. Benefits
Cash in your bank account is the number 1 benefit. Point based rewards are generally complicated and seldom give the Rand value we think they will.

With cash we know how much it is worth and we have the freedom to spend it (or save it) how we choose. Points-based systems often require us to spend the points either where we earned them (think Clicks) or to choose products from a catalogue curated by the organisation. Some points can be spent more widely, eg. Discovery Miles and eBucks.

Benefits that must be spent where they were earned should be valued at the cheapest alternative. In other words, just because a SAA flight costs R3,000 that does not mean you are getting R3,000 of value when you get a free flight. You could have flown the same trip for R1,000 on Kulula, so you are only really getting R1,000 value for those miles, not R3,000.

There are also two ways your rewards can be reduced in value in a points-based system, and you need to watch out for them. The first is: when you earn the points, how many points are you getting per Rand spent? That can change any time. Eg. When my Standard Bank credit card was linked to Voyager, it started at one Mile per R7,50 spent on my credit card. By the time I cancelled the Voyager connection it was 1 Mile per R12,50. Thus, the earning percentage nearly halved in that time.

The second way your points can reduce in value is when you spend them. If they need to be converted to a Rand value when making a purchase, that conversion rate can change at any time. If the items are in a catalogue, rather than an independent retail channel, the prices of the items you purchase can also be inflated.

As you can see, when you move away from money to points, it becomes difficult to quantify the true benefit of the programme.

2. Costs
Some costs are simple to evaluate, like an annual membership fee. Other costs are more difficult to quantify.

Time and energy are very important costs that must not be underestimated. If a loyalty programme requires a lot of effort to meet all the requirements for increased benefits, it may be necessary to consider what an hour of your time is worth and how many hours you will have to dedicate to maximising this loyalty programme.

Additionally, if the loyalty programme is something you have to think about all the time, checking that you are using the right partners, that you have the right product portfolio, that you have your loyalty card on hand, etc, it takes a lot of your energy. That energy could sometimes be better spent, especially if you have a very busy lifestyle. Do you really need another thing to worry about, for the sake of a few points?

Additionally, if you belong to multiple loyalty programmes, it can be overwhelming trying to maximise all of them. It might be better to choose just 1 or 2 and focus on those in order to get maximum benefit from them.

3. Convenience
Do you have to shop at certain stores? Do you have to produce a card to get your points? Can you only spend your points in specific ways? If you have to change the way you do things, change the places you shop, the loyalty programme can be more inconvenience than it is worth.

If you have to buy fuel at a specific petrol station, shop at a specific grocery store, etc. How much extra time, fuel and energy is this loyalty programme costing you? The best loyalty programmes reward you for doing things you would do anyway. For instance earning points or miles for spending on your credit card. You can spend wherever you want and your credit card is the most convenient way of spending, so no change is required to earn.

As you can see, evaluating the true benefit of a loyalty programme is not as simple as one might think. 22seven is a very useful tool for calculating the actual monetary costs and rewards of a programme. It even tracks points and miles on various loyalty programmes.

But the costs of a loyalty programme in terms of time and energy will depend on your lifestyle. You need to consider them carefully and see whether the costs don’t outweigh the benefits.