An article in The Age yesterday is a reminder about how old points-based loyalty programs are and about the exposure to businesses of contingent liabilities.
While some loyalty programs operators reserve the right to change the rules and points balances without reference to shoppers, the risk of this is considerable – given that the program was about building loyalty and not crushing it.
The CPA website has information about contingent liabilities of loyalty programs.
Some newsagents I have spoken with have not considered the liabilities building up in their loyalty programs and the possible implications for when they sell their business.
There is another travel-related view of airline loyalty programs by Hal Brierley, published by Harvard Business Review. I agree with his core thesis about rewarding a small group of your customers.
A good loyalty program will encourage deeper and more active engagement from shoppers and it will do this with little overhead.
My personal view is that points based loyalty programs are past their use by date. Shoppers want something fresh, something that is easier and more transparent. This is why I have pursues discount vouchers instead.
I suspect many people with points based loyalty programs don’t account for this liability Mark. Accountants are not doing their job if they do not ask the question.