Thursday, June 27, 2013

Reward programs - the nitty gritty they dont tell you about

This post is about two things.

1. How the Witchery REWARD system works in comparison to CASH or GIFT VOUCHER transactions.

2. A word of warning about reward systems, 2 for 1 offers or gift with purchase promotions. In fact, any store promotion which affects the price of goods apart from straight price reductions on individual items. 

I'll start off with the Witchery system  because that's what I encountered today.....

At Witchery, if you have REWARDS accumulated from a previous purchase (say $15), you have 30 days to use them. Lets say you find new goodies for $150 which you want to buy. As the store applies the original $15 of rewards, they reduced the cash outlay you need to pay, but they also reduce the value of the purchase for the sake of working out whether you qualify for new rewards & the value of those new rewards.

So the value of your purchase now becomes $135 and you dont qualify for the $15 new rewards because your goodies haven’t reached $150. You need to find another $15 of spend (clothes, accessories, make up, breast cancer ribbons etc) to bring the purchase value back up to $150. 

On the other hand a GIFT VOUCHER is treated as cash & comes off the total of your cash to pay, but doesnt affect the value of your purchase for the sake of the rewards system. So if the purchase was sitting at $150 and you had a $50 gift voucher, then you need to find $100 in cash/credit card/debit card. But you still qualified for another $15 reward because the voucher doesn’t affect your $150 spend value.

But lets say I also had my eye on another item (say an $100 sweater). Yes, my eyes tend to be bigger than my wallet!!  If I bundled it into today's purchase I wouldnt have needed to top up the spend by the other $20 item as above. All of a sudden, I have spent way more than I planned today. Make no mistake, that this was the intention of the store. Absolutely. 

But I would have had to find the cash to pay the extra amount. Duh!  If I don’t have the extra cash/card now, I have to wait. I dont know about you, but what I tend to do is wait for it to go on sale (yes, I do this alot where stores have multiple branches aka loads of stock). But the reward is only valid for 30 days & there is no guarantee that this will happen. So what is more likely to happen is that I spend the top up on the full price $100 sweater instead of getting the benefit of the sale. Make no mistake, that rewards are specifically worked so they dont last a long time for this reason. 

THE MORAL OF THE STORY (& I know a lot of you know this already, but just to be clear):

By offering loyalty rewards or programs like 2 for 1 or gift with purchase, stores may benefit in one of two ways compared to the situation of giving you an UPFRONT REDUCED PRICE:

1. You spend more money topping up to qualify for the reward system; and/or
2. You spend the money SOONER topping up for the reward.

The trick for you as the customer is to be careful about the top up items you buy - I hope that they will be what you LOVE, rather than something thrown in to reach a reward threshold. 

If you weren’t going to buy the top up items to start with, be very careful about whether you really are benefiting from the reward transaction.

After all, I don’t want you to have a whole bunch of ordinary things in your wardrobe. Let’s face it, top ups often are ordinary. I want you to have only what you LOVE.  

This post is not meant to have a go at Witchery even though I have used Witchery as the example. The principles behind store promotions apply to virtually every high street store which has any kind of loyalty program or promotion, other than simple price reductions for individual items.  

Of course, before you make a purchase in any store, make sure you understand their promotion. If they have gone to the trouble of going blah, blah, blah in their Terms & Conditions, then maybe you should go to the trouble of reading the blah, blah, blah. 

Caveat emptor.

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