Friday, 18 May 2012

How much are Flybuys worth?

by Rob d'Apice
About a year ago, we wrote a story about how FlyBuys Rewards will earn about roughly $4 a year in rewards. It would take 56 years to earn a return flight from Sydney to Brisbane. This author would be claiming that flight well beyond his life expectancy, when the attraction of Wet & Wild or Surfers Paradise would be well beyond the capabilities of his brittle bones.

This year, Coles have revealed their revamped Flybuys program, apparently responding to their customers' cries for something worthwhile. Then they got Dawn French to salivate over that young male Coles ambassador, while he grins awkwardly at the camera. I don't know about you, but that certainly gets me in the mood to save on my shopping!



So does the new program check out? Is it 'Simpler and More Rewarding'? Our short answer: we think the program is possibly more complex, and the program is only marginally more rewarding than before.


More rewarding?


The key component of the new program is the increase in point earning rate for your shopping at Coles or Bi Lo, from 0.4 points per dollar spent to 1 point per dollar spent. The problem? They've halved the value of each FlyBuy point, so the net change in value to you is very small.

A year ago, you could redeem 22,500 points for a $225 flight, which equated to a value of about 1.0 cent of rewards per point. Now, while flight redemption is now easier since it is linked to the Webjet search engine, each point is worth exactly 0.5 cents. Half of what they were worth previously.

This means the huge increase in point earning rate is almost fully offset by the devaluation of points. It's no doubt confusing for consumers; people that are used to a particular flybuy point valuation may not realise points are now worth half what they used to be worth.

Don't believe us? Check out Coles' own Flybuys calculator, and remember to divide the total number of points you will earn by 200 to work out the $ value of your rewards. This author gets $4.98 of rewards per annum (that's an extra $0.98 per annum from the new programme).


Simpler?


The second major component of the program is the new my5 discounts. You can pre-register 5 different product categories (out of hundreds of possible categories), and you will receive a 10% discount on the 5 most expensive products you buy from each of those categories every day. Each category contains 1 or multiple related products. Any weighed products can be counted up to 5kg. You must spend at least $50 in a transaction to have your my5 discounts applied. You cannot change your product categories once you have selected them.

If that is a simple reward program, we may as well give up Prosple right now. At least this bit is simple to understand: the my5 program ends on October 31, 2012.

Are the my5 discounts actually worth it? Let's be optimistic and assume you spend $150 on your weekly shop at Coles, and managed to capture $20 of your bill under the my5 discounts (let's say you chose Helga's bread loaf, Coles free-range eggs, Coles chicken breasts, Coles-brand milk, and canned John West tuna - and you purchase those products each and every week). You'll get a $2 discount on your $150 bill.

It's not bad, but it's nothing to write home about.

Perhaps, though, if they get enough older women drooling over younger men, they'll manage to distract us from the cold hard truth: Flybuys aren't worth much at all.

7 comments:

  1. Heya Prosple,

    Although it is clear the program does not have a great value proposition for yourself, that does not mean that it is still a complete rip-off for the average Australian shopper.

    In addition to increasing the points earned per dollar and halving the value* of each FlyBuy point they have modified how many points are required to redeem particular items.

    The most basic redemption option, which is FlyBuys Dollars, can be used to show the difference in value. In the past the equivalent redemption option was a FlyBuys Gift Card

    In the old system 2,500 points will get you a $20 Gift Card
    In the new system 4,000 points will get you $20 FlyBuys Dollars

    Using your example of Coles and Bi-Lo points earning:
    The average Australian shopper spends $156 per week on groceries. Given there is no minimum spend in the new program or the old program we can estimate it as such:

    Old system: rounddown(156/5) * 2 = 62 points per week, or 3,224 points per year
    (it's 2 points per $5, not 0.4 per $1)

    New system: 156 points per week, or 8,112 points per year.

    Put that into the redemption options above and you get:
    Old system: $25.79 per year
    New system: $40.56 per year

    The program is clearly more rewarding, even if only using it as a grocery program and excluding the bonus partner offers.

    *value changes based on the redemption option you choose.

    In regards to simpler, they are referring to the ability to redeem your points for a saving at the checkout. As in, using the FlyBuys Dollars redemption option, not their my5 offer. This is evident in their media release, which contains the following:
    "
    - Over 50% more value for customers at Coles through flybuys points - my5 at Coles: it’s like picking your own specials
    - Simpler and faster money off at the checkout
    - More points from more partners as AGL, Telstra, and Webjet join
    - Redeem for any flight on Webjet, any seat, anywhere, anytime
    "

    Like you say though, they haven't done everything right by their existing loyal customers. Points that you did not redeem prior to the new program being launched are now worth half as much, but they did warn us about the change over and recommended redeeming your points before they did so.

    Cheers,
    Graham

    ReplyDelete
    Replies
    1. Points that you did not redeem prior to the program being launched are worth EXACTLY THE SAME. Flybuys increased them by 60% at time of relaunch.

      So where is the rip-off?

      Delete
  2. Hi Graham,

    Thanks for the comment. Always good to hear from you - you clearly have your head around this stuff!

    I agree with most of what you're saying, but I'd make a few important points:
    - I've calculated my value difference assuming redemption for flights. Previously, you could get 1 cent / point for flights, whereas the gift card redemption you have above is 0.8 cents / dollar. So if we were to assume flybuys users used the best redemption method previously, they would get $32.24 worth of rewards in a year (not $25.79). They means they earn only $8 more per year under the new rewards scheme.
    - The flybuys home page says 'simpler and more rewarding'. Irrelevant of which component of the reward program they think is simpler in a statement targeted at the media, I find it very difficult to believe the program as a whole is now simpler. The marginal simplicity gained from being able to redeem at the checkout rather than online is offset by the incredibly opaque My5 discounts and the now dozens of different partners through which I can try to accrue flybuys (at different rates and with different caps).
    - Despite the above, an $8 improvement in rewards? That's a 0.01% pay increase for the average Australian. We should be focusing on issues of MUCH more importance than this. I hate to think about the IT costs associated with implementation of the My5 discounts. My big fear is that big consumer businesses trend toward deals and programs that are more opaque and more complex which leads people to making financial decisions based on advertising and emotion rather than raw economics.

    Cheers,
    Rob

    ReplyDelete
  3. You raise some interesting points... Effectively flybuys have removed a high-value redemption option by partnering with Webjet. An object I am sure is intentional but might go unrecognised by most people.

    I guess there is always going to be an argument for percentage increase in rewards value, in this case 25%, but when we're talking about $8 over the course of a year it's certainly not as exciting as the advertisements make it out to be.

    Regarding your final point - Consumers should definitely not be changing their shopping habits to earn more points. If you can get the products cheaper across the road or were shopping elsewhere in the first place then the prospect of earning points shouldn't change that behaviour.

    Cheers,
    Graham

    ReplyDelete
  4. Hey Rob
    Nice post. Could be fun to do a video and see if you can get enough funding from Kickstarter (or wherever) to run it on TV. You would be like the GetUp of financial literacy!

    Greg A

    http://www.kickstarter.com/discover/cities/sydney-aus

    ReplyDelete
  5. Take into account the money spent in advertising this always silly concept 'flybuys' and the customer is worse off! Imaginary benefits only super tight people enjoy!

    ReplyDelete
  6. hi,
    You may be interested in this, I exchanged my points (6000) for $30 Flybuy money to shop at Target. The checkout Staff had no clue about the Flybuy Dollar and how to process it. i had to explain it to the lady and to be honest i don't know if she even understood English or what i was talking about. Eventually the manager told her what to do. And you are right about the point devaluation,.... i use to get a $100 Flubuy gift card for 12500 point now 6000 points only buys $30.

    ReplyDelete