Vodafone’s new reward scheme… why not just give a discount?

Thought you may be interested in the following dialogue…

E-mail from Vodafone PR…

    “Vodafone has launched a new reward scheme for pay as you go customers, offering 10% back every time they top up.

    Let me know if you have any further questions.

    Warm regards”

Then details of the press release were attached.

My response…

    Yes… Why doesn’t it just cut the price by 10%?

Her reply…

    “It’s a reward scheme – just like a Tesco Clubcard or Boots Advantage Card.

    These ‘banked’ savings can then be put towards a new phone or Bluetooth headset, for example, not just to save on call costs.”

Of course any reduction is a good one, but like all reward schemes, the aim is to try and make something seem like a bigger offer than it is.

Rewards v just cutting the cost.

  • For consumers: Cut the cost and everyone gains by the maximum 10%, and the money saved can be spent anywhere. With a reward scheme you must actively obtain the reward and you can only spend it on products the company offers.
  • For the company: Rewards schemes mean the promise of goodies which oft go unredeemed, so there’s little cost, but lots of publicity and feel-good factor. Plus, since you can only redeem rewards on Vodafone products, the costs are reduced again. That’s because while Vodafone may sell something for a retail price of £10, its cost price is likely to be £3-4, so the cost to the company is far smaller than it appears.

As I write in the boost loyalty points guide, most reward schemes are simply costed in the product price anyway, so are generally (though not always) a false saving. Having said that, it’s always better to use a free loyalty scheme if you’re shopping somewhere that has one.

Comment and Discuss.