Rands and Sense - Personal Finance

Financial Planning – Your loyalty may be rewarded.

Despite this client having not formally retired from his place of work, he was nevertheless still entitled to receive a pensioner card from the service provider.

The first thing he wanted to know was which businesses or institutions in town provide pensioners with discounts. It emerged that a wide variety of businesses provide incentives in various formats to pensioners. For example, certain retail chains provide pensioners with cash back rewards if they do their shopping on a certain day of the week and double loyalty points on another day. In order to receive these benefits, he would merely need to present his pensioner card. Opportunities to save money in this way are few and far between and it is advisable to make use of any such opportunity wherever it arises.

It is not often that you get something for nothing but when retailers, banks and other institutions really want your business, they are often prepared to give you something back as a reward or discount. This is known as a loyalty programme. These programmes are usually available to everyone who is a customer of the particular business, not only pensioners.

The aim of a loyalty programme is twofold. Firstly, to encourage you to spend your money with a particular business rather than with its competitors and secondly it is an opportunity for the business to really get to know about your spending habits.

Once you have joined its loyalty programme, the business will try to entice you to place the majority of your business with it instead of supporting its competitors by tailoring its service offering to support your individual needs.

Depending on the programme, you may be able to spend your loyalty rewards on fuel, groceries, luxury items or lifestyle purchases such as travel, accommodation or spa packages. Other programmes may offer you cash-backs, discounts, gym memberships, frequent flyer miles or the use of facilities such as airport lounges.

Loyalty programmes have been responsible for changing the way people exercise, the way they drive their cars and how and where they spend their money. It is estimated that there are more than 100 loyalty programmes in South Africa with over 10 million South Africans belonging to one or more of them. Not all loyalty programmes are the same and it is important for you to understand how a programme works before signing up.

A loyalty programme is never “free” as the cost of the programme is inevitably built into the cost of doing business. Participants subsidise these programmes and those who choose not to participate potentially lose out if they do not take advantage of these benefits when shopping, banking, booking flights or doing other day to day transactions. This may be as close to a free lunch as one could get!

Rands and Sense is a monthly column, written by Ross Marriner, a CERTIFIED FINANCIAL PLANNER® with PSG Wealth. His Financial Planning Office number is 046 622 2891