Reward system’s domino effect

Exasperated parents will understand. Go on to eBay and you will find Woolworths’ Disney dominoes on sale.

These dominoes, which shoppers accumulate at the rate of one for every $20 spent at the checkout, are given away free by Woolies.

But in the online auction clearing house that is eBay, the going rate for one domino is about $3. For instance, the “bear triplets” domino (number 35) fetched $2.75 after bidding by four potential owners late last week.

The winner would have to shell out $1 in postage to collect their prize. That’s $3.75 for a domino with three baby bears on its plastic front that is being given away for “free”.

A full set of the 44 dominoes could be yours for $70 (plus postage) if bought on eBay.

At one for every $20 of spending, that equates to about $880. There are not many domino sets in the world worth that much. Type in “Woolworths domino” into eBay’s search engine and more than 3700 separate items come up.

The dominoes follow the success of the various sets of animal cards that Woolworths has rolled out in recent years to entice shoppers to spend more through the supermarket giant’s many stores.

And that’s on top of Woolies’ Everyday Rewards card, a concept copied from Coles’ FlyBuys reward system.

And that followed on from the grand-daddy of loyalty programs — frequent flyer points.

But retailers in this country appear to be jumping into loyalty programs, or gimmicks aimed at bringing shoppers through the doors, at an increasing rate.

Recent research suggests 93 per cent of women and 82 per cent of men are members of at least one loyalty program.

Men are likely to be members of three separate programs and women about five. In around 10 per cent of cases, people are members of at least 10 separate programs.

There’s a reason that retailers of all persuasions like loyalty programs. They boost sales.

About 80 per cent of consumers, according to consultancy Diversity and marketing agency Citrus, buy more from companies of which they are loyalty program members.

In the case of Woolies and those dominoes, they are being given away on top of the Everyday Rewards program.

A double whammy of inducements to get shoppers through the door.

What the giveaways and the loyalty cards play on, however, is the inability of shoppers to put a real value on what they’re getting for their loyalty. The obvious case in point — the $3 on eBay for a domino.

Pester power by children, the psychological demand to collect things and consumer innumeracy all combine to give companies an edge over their customers. As Choice noted last year, you need to spend about $5000 a month on your credit card — and pay it off in full — to make it worthwhile.

The net value of any points you collect would be gobbled up by fees if your average monthly spend is less than $1000.

Then there’s the value of points through the various frequent flyer stores. In some cases, the value of a single point can fall to about 0.7¢.

And finally there is the ability to use points for an upgrade or to put yourself on a special flight. As the terms and conditions of frequent flyer programs make clear, it’s up to the airline to decide whether points can be used for a particular flight or upgrade.

Hence, my recent time on the phone to a call centre in another country trying to use my points to get a flight. It came to nought because there were no “frequent flyer seats” available for flights seven months into the future.

Then there are the discounts or bonuses offered by companies to loyal shoppers. I was recently offered a $50 debit card if I took out pet insurance. Now I do love my hound — she puts up with my predilection to run in the dark while listening to Kate Bush on my headphones — but is a $50 debit card worth spending upwards of $200 a year on pet insurance?

And do I really want to spend at least $25 on soft drinks in one shop just to get 10 per cent off?

Companies love loyalty programs because they can individually target their potential shoppers. The information they collect is enormous. It can cover general demographics, the location of the shopper, their average spends, what they buy, their brand loyalty and whether a customer responds to promotional offers.

That means they can tailor goods to their clientele. That’s a good thing in terms of avoiding waste and delivering products that shoppers want.

But it does mean we, as shoppers, give up a lot in terms of personal information.

Yet the available evidence suggests we’re happy with that.

In fact, the Diversity and Citrus research suggests we put a tremendous value on loyalty programs, especially if it means immediate price discounts or surprise gifts.

Ultimately, loyalty programs really benefit companies and shoppers who always do their business with the same firms.

Accruing frequent flyer points with Woolies’ Everyday Rewards card, for instance, only makes sense if you always shop at Woolies. Getting points on a credit card only works if you pay off the card every month.

Chasing benefits in the short term rarely delivers.

Not that this helps the stressed parent watching the eBay clock tick down on a bear triplet Woolies domino.

The dominoes might be “free” but the look in a five-year-old’s face on receiving the bear domino is priceless.

Until the next giveaway starts.