Reporter: Hannah Wallis
Loyalty schemes (rewards schemes), like Fly Buys and One Card, are massive - 2.3 million Fly Buys card holders, 1.1 million One Card users. The schemes are huge but are they worth it?
Compared with our own coffee cart here at TVNZ - one free coffee for every nine bought, the actual dollar for dollar value looks minimal. With our biggest rewards programme Fly Buys - to get a $1 back you'd have to spend over a $100. For every $100 what you will get back is about 90 cents, that's the basic Fly Buys reward.
With One Card, for every $100 dollars spent you're still only going to get 75 cents back.
Consumer New Zealand's CEO Sue Chetwin says her worry with the loyalty cards is that they can be traps if people buy items just to get their points up. They really need to compare the actual discount or savings from say, the One Card or Fly Buys - which would be less than 1% with what it would cost to buy the same item from another retailer who might have it on sale, or discounted, or just cheaper.
And she also warns not to impulse buy an item just because, for instance, it's got triple or quadruple Fly Buys attached, ask yourself - was I going to buy this anyway?
Tom Agee, a senior lecturer at the University of Auckland
Business School, says he's seen the Fly Buys lure work first
hand. His wife visited Noel Leeming during a triple Fly Buys
promotion and said it was like a Christmas sale - stacks of
customers. Tom says he buys from a Shell station in preference to a
closer station, partly because of Fly Buys.
But Tom says these rewards schemes will never take the place of good service for consumers - good service, good merchandise, good location all are very important factors when consumers choose one retailer over another. True loyalty for a brand or organisation, says Tom, is really based on things like quality, value for money, and trust - which is also tied up with risk - will you risk buying your insurance based on rewards, rather than from a company you know and trust.
Tom says the rewards schemes are recognition that the customer can be very valuable over a period of time - marketers talk about customer life time value, where say an average family spends $200 a week - that's $10,000 a year. Over 5 years, $50,000. If a company can, with a rewards card, hang onto that customer for a long period of time - gold.
And the schemes certainly work for retailers as far as getting
customers to switch brands. Tom says when Shell became a Fly Buys
retailer in the 1990s, they were number three in the market after
Mobil and BP. After Fly Buys, they steadily climbed over five
years, to be number one - and Tom puts that rise down to the
Tom also says that if you have a rewards card with a company, you are more likely to put up with one or two instances of poor service before you change companies, just because of the rewards you're being offered.
Sue Chetwin says the other value for retailers is information - every time you swipe your card, it's providing information about your taste, your buying habits, and so on, so the rewards scheme companies can actually start targeting in the shops the kind of products you want to be buying.
Tips to maximise your rewards scheme:
Shop around - compare, say, the 1% discount your rewards scheme might give you with other retailers who may have the same product at 10, 15, 20% less. But if it's the same item, for around the same price, using the rewards retailer makes sense.
If you are a rewards customer it seems obvious, but don't waste the rewards. Research shows up to a third of points across various schemes are not redeemed. You paid for them - don't lose them. Fly Buys points expire every three years; One Card points expire every six months.
Points on credit cards - it takes a big spend on credit cards to
get a decent amount of points again, the dollar for dollar value is
very low. Sue Chetwin says make sure you counter any points-earning
credit card against the card fees, any rewards scheme fees you
might have to pay, and the interest rate on that particular
Tom Agee says you can limit your costs by using two credit cards - pay for goods and services with a rewards-earning card, then move the debt across to a low interest card.
Link all the Fly Buys or One Card accounts in your house - otherwise, as individual points earners, you may not get to the targets quickly enough before your points expire.
Check with the rewards schemes that they have the right address - otherwise your rewards vouchers, or offers etc will be posted to the wrong people.
Fly Buys say you can double-dip on points using a Fly Buys-earning credit card at a Fly Buys-earning retailer.
One Card and Fly Buys both have bonus-earning promotions, so,
more points per spend - which will accelerate your rewards. With
Fly Buys, some of the rewards are a higher dollar for dollar return
than others, for instance, the equivalent of $1.40 back per $100
You can get details of those - and more tips on these websites: