Marketing Tactics Prized Open
Sydney Morning Herald
Wednesday December 17, 2003
That discounted flight or loyalty scheme may not be as valuable as you think, warns Graeme Samuel.
Loyalty schemes, where businesses offer rewards and incentives to consumers, can appear very attractive on the surface, but take care.
The schemes offer a wide range of rewards, from free air flights to discount cosmetics and family passes to theme parks. Those who can afford to pay their credit card debts before interest is charged may find loyalty schemes attractive, but before joining a scheme ask yourself if you need to change your current spending pattern or incur additional expense to chase rewards.
Have you weighed up the cost of redeeming your rewards? You may qualify for a free or discounted flight to a holiday resort, but be liable to pay for insurance, accommodation, meals, car hire and spending money.
Many loyalty programs have deadlines for redeeming points, which can encourage households to buy unnecessary or unwanted goods despite operating on a tight budget.
Consumers worried about invasion of their privacy should realise that loyalty schemes involve the collection and exchange of detailed personal information that is otherwise unobtainable.
Some schemes allow participating merchants to share the information collected about consumer buying patterns and preferences. Consumers must consider if the gains from loyalty schemes justify any loss of privacy.
Before deciding to join a loyalty scheme consider and compare the benefits, as each program has certain conditions and limitations. Carefully read the promotional material, pay attention to any notices that describe changes to programs.
The Australian Competition and Consumer Commission does not regulate the quality of service provided by loyalty schemes but will act against conduct that is likely to breach the Trade Practices Act.
The ACCC investigated Coles Myer's Dollar Dazzler 21st Birthday competition following consumer allegations that the company had misrepresented the true value of Fly Buys prizes. The competition offered prizes including 21,000 Fly Buy points, supposedly worth $4200, when the true value was only $210. Coles Myers co-operated with the ACCC, agreed to write to all 21 winners of the Fly Buy points to apologise for the mistake and to provide each winner with an additional 399,000 points, to bring the value of each prize to $4200.
If you are dissatisfied with how a program is administered, take your complaint directly to the company. If concerned about a possible breach of the Trade Practices Act, call the ACCC Infocentre on 1300 302 502.
Please note that jurisdiction for misleading conduct regarding credit card (financial services) loyalty schemes rests with the Australian Securities and Investment Commission, and not the ACCC.
© 2003 Sydney Morning Herald