The number of reward programmes currently available to consumers in South Africa has increased exponentially over the past few years; in particular within the retail space. While this industry growth might seem to offer consumers more opportunities through which to receive 'something' in return for their rands spent, not all programmes are equal in the value they offer.

Lezanne Human, CEO of eBucks, says: "With the expansion of rewards programmes within the local market, consumers have the benefit of greater earn and spend opportunities. However, as rewards programmes are generally quite complex and difficult to understand, there is frustration amongst consumers regarding the value that programmes offer."

To assist in navigating the world of rewards programmes, eBucks has prepared a guide outlining some of the criteria which can be used to evaluate a particular programme.

STEP 1: UNDERSTANDING THE REWARD MECHANISM

The first step in evaluating a programme is to understand how the reward mechanism works.

Programmes generally use one of three mechanisms to reward members, with each reward type offering its own set of benefits:

1. Discounts and cash backs:
   Discounts offer an immediate monetary reward to members, but are generally limited to transactions at specific partner stores. On the other hand, cash back programmes generally 'give' consumers cash back in the form of a credit against an outstanding balance.

2. Rewards currency programmes:
   In rewards currency programmes, such as eBucks, the currency received is not a reward in itself, rather a means to a reward. Rewards currency programmes offer versatility and allow members to choose their own reward. This choice includes being able to select when and where they would like to reward themselves and on what they would like to spend their currency.
   
   In a rewards currency programme it is important to evaluate how many earning opportunities you have. As a multi-partner programme, eBucks is able to offer its members a variety of partners from which they can earn eBucks.

3. Soft benefit rewards:
   In this case, consumers do not receive money back or accrue any rewards currency, but receive soft benefits such as additional services and privileges, for example, lounge access at airports.

The latest in the loyalty industry is to offer a combination of rewards currency, discounts and cash back in a 'hybrid' programme. This allows consumers to use their rewards currency as a way to extend their purchasing power. For instance, eBucks allows its members to take advantage of significant discounts on all of the most popular items in the eBucks shop such as airtime, movie tickets, kulula flights, Emirates flights, cameras and Woolworths vouchers; using either their eBucks or rands as a method of payment.

The different mechanisms are then packaged into a rewards programme offering, either in the form of a 'club', where you pay a membership fee, or as part of a free rewards programme.

Whether a consumer prefers several frequent, smaller rewards or the ability to save or pool their rewards currency for a luxury item, the success of a rewards programme to a large extent depends on how relevant the reward is to individual consumers.

Just as individuals exhibit different spending and saving habits, so too do they present diverse rewards currency earning and redeeming behaviours, based on different expectations of a rewards programme.

STEP 2: UNDERSTANDING THE VALUE OF THE REWARD

The second step in evaluating rewards programmes lies in answering the question: How much is a reward worth and what spending power does it represents?

How much is a reward worth?
While discounts are easily translated into a monetary value, rewards currency programmes in South Africa show varying levels of transparency in how much a reward unit is worth. This is problematic for two reasons: Firstly, unless the value of the rewards currency is defined it is difficult to compare apples with apples, thereby creating confusion amongst consumers. It is important to know how much the rewards currency can buy. And secondly, because of the lack of transparency, few rewards programmes are able to quantify how much they have given back to consumers.

Being able to measure and attach a clear value to a reward makes it more relevant and tangible to consumers. For example eBucks, which is pegged to the rand, has a clear value that is transparent to members in that eB10 is worth R1.

Another factor to consider is whether or not the rewards currency expires. Many programmes practice this so-called point-breakage, with rewards expiring if they are not redeemed within a specified period of time. This leaves the consumer unable to accrue their rewards currency for something bigger and in the case where the rewards on offer are 'expensive', most consumers never earn enough to take advantage of the reward. eBucks never expire and can be transferred or 'pooled' between members at no cost, allowing members to save up their eBucks for big ticket items.

Spend power:
The monetary value of a reward only represents one aspect of the full value proposition. The versatility in spending power, in other words, what you can spend your rewards currency on, is also crucial. Without this a member may be limited to only spending in one place.

For example, eBucks members do not have to earn and spend eBucks in the same place. Rather, the eBucks business model is based on partner companies allocating eBucks to their customers to reward them for their loyalty. These customers then have an almost limitless choice of products and services to 'spend' their eBucks on.

STEP 3: LOOKING AT MEMBER ACTIVITY

High member activity is the holy grail of rewards programmes and is a key measurement of success for a programme. Very few rewards programmes, however, actually make their member activity levels known to the public.

For members to be enjoying the rewards on offer they are required to earn the rewards currency and redeem it, once earned. The value of the rewards currency that members actually spend is an indication of how satisfied they are with the rewards on offer.

This ratio is commonly referred to in the industry as a programme's spend-to-earn ratio; and is largely influenced by how easy is it to earn the rewards and the choices and channels available to spend the rewards on. A healthy rewards programme has a 70% spend-to-earn ratio. eBucks' is consistently well over 80%.

STEP 4: THE EASE OF EARNING

While some programmes might offer the promise of amazing rewards, the consumers' actual ability to earn the rewards may be very limited due to a number of factors. In evaluating a rewards programme it is important to look into the actual earn rate (how many rands a consumer needs to spend to earn each reward unit and how much the reward unit is worth), the number of earn opportunities available, as well as the extent to which consumers have to engage in new behaviours to earn the rewards.

Multi-partner programmes, such as eBucks, offer members the benefit of accelerated earnings because they can earn from more than one partner at a time, significantly boosting their earning potential. For example if you use your financial partner credit or debit card to purchase from a retail partner, you would earn eBucks from both partners.

For a consumer to truly benefit from a rewards programme, it is crucial that they are rewarded for doing the things they do everyday such as shopping, banking and using their cellphones.

STEP 5: THE SPEND ENVIRONMENT

And finally it is important to evaluate the number of different opportunities available to consumers to spend their rewards currency. Some programmes only allow customers to spend in the same environment in which the reward units were earned. Other programmes allow customers to spend in a variety of places.

For instance, eBucks offers South Africa's widest selection of spend and earn opportunities; allowing members to spend their eBucks across a variety of channels, including: the eBucks shop, which was named as the top online retailer in the country in October 2008; at eBucks auctions; through eBucks travel; with eBucks' online partners; or at eBucks' in-store partners using the eBucks card.

"There is growing evidence that savvy consumers are using their rewards to extend their purchasing power. The most successful rewards programmes are therefore the ones that offer real value to the consumer by truly helping them to stretch their wallets; while at the same time providing the widest range of spend choices and channels," concludes Human.

Note to editor:
eBucks is South Africa's leading rewards programme and was named as the rewards programme that consumers get the most value out of in the latest Razor's Edge Value in Rewards Programmes survey. Over R1 billion worth of eBucks have been allocated to members to date.

About eBucks:

eBucks, the rewards programme offered by First National Bank (FNB) and RMB Private Bank, is acknowledged as one of South Africa's leading rewards programmes with highly active members spending in excess of 80% of the eBucks earned in any given month.