Loyalty rewards all about the feel-good factor researcher

Terry Harrison often uses his loyalty cards but hasn't redeemed points for some years. Photo / Richard Robinson

Millions of us swipe our customer loyalty cards every day, but most aren't getting the most out of the points earned.

Loyalty programmes, such as Fly Buys and Air New Zealand Airpoints, offer rewards through points that can be used for more purchases.

But a University of Canterbury PhD student has found most members don't redeem them for the highest value rewards, instead going for feel-good factor.

May Chan studied the consumer psychology of people in loyalty programmes and found they tended to redeem their points for luxury items that made them feel good.

"Loyalty reward schemes are difficult for people to understand. Even though [the points] are used similar to legal tender it's not quite the same. They have their own set of rules," she said. "Most people don't care about the monetary value, it's not something they look into."

Ms Chan said people couldn't tell which reward programmes were the best value for money, and preferred rewards that were considered luxury, such as overseas travel, regardless of the monetary value.

She said if two rewards were on offer, rather than choosing the best value for the points, consumers tended to opt for the most exciting.

"It makes them feel like they're getting more out of it."

Ms Chan said consumers felt as if they were saving money by buying flights with Airpoints, rather than spending points on other items on offer, regardless of value.

Brett Hibbert, head of rewards for Loyalty New Zealand, which owns Fly Buys, said flights and electronics were the most popular rewards.

He said 1.4 million households nationwide had a Fly Buys card.

"We communicate regularly with our members ... so they have a good idea of the value," he said. "Many people consider the rewards they receive as a little bit of a treat."

An Air New Zealand spokeswoman said the rate members earned Airpoints Dollars varied depending on how they were earned, whether through flying Air New Zealand or through other schemes.

Ms Chan at present lives in Hong Kong, where she will do the same research in a different cultural setting.

Auckland accountant Terry Harrison says he uses Airpoints, Fly Buys and his AA Smartfuel card frequently - but hasn't redeemed points for a few years.

He thought Airpoints were good value for money after he had bought flights for three people to Wellington with Airpoints he had accumulated through his mortgage plan.

Mr Harrison said he didn't take much notice of whether rewards were good value for money, but treated them like a free bonus.

"Normally I would check online for costs around the same item, but most of the time the points are about to expire so I have to use them."

He found the AA Smartfuel card useful because the rewards could be redeemed immediately.

5 tips for making the most of your loyalty scheme

From Consumer NZ chief executive Sue Chetwin:

1 Make sure you know when points are going to expire and use them.

2 Use points on smaller items more frequently. "If you've got enough Fly Buys for a slow rice cooker, maybe go for that rather than trying to save up for the trip to Fiji that might never come."

3 Think of the points as an added bonus, rather than a driver to the way you shop. "I wouldn't suggest buying a product on the basis you get points on it. If there's a cheaper option without the points, go for that."

4 Pick the right loyalty scheme for you. "Often people have loyalty programmes, particularly around credit cards, that might not be the best option for them."

5 Ensure the reward you're getting is the best option. "It's up to the individual to check they're maximising the value."