It's a bit out of our normal vein, but it's an application of math, so it comes under our 'Maths in Real Life' posts.

My mum is ok with maths. Not great at it, but she knows how to do bits and pieces and stuff.

Now, tonight, she asked me about FlyBuys discounts. She was confused, this new system has come in, and people aren't exactly informed about it. The advertisements say 'big big savings!', but don't actually give any proof of that (compared to the old system).

For all our international readers, FlyBuys is a store loyalty card. A lot of places do them, especially overseas, and it's not unique.

However, it's very interesting, when you start to delve into the mathematics behind a loyalty card. I'm going to use FlyBuys as my example tonight. This will briefly talk about what a loyalty card is... then get to the point that everyone wants - how much money am I going to save?

#### So, what's a loyalty card?

A loyalty card is a card that customers sign up for, when they go into a store or supermarket. Remember the days where your favourite coffee shop gave you a free coffee once in a while?

Well, now, companies are using this to encourage their customers to come back. Marketing is hard, so offering a free card with rewards is often a good way to get them to come back. Again and again and again.

Speaking of which, here's an example of a loyalty card. This is one of my own (although, you can see I've only used it twice).

As you can see, on every fifth visit, I'm rewarded with something. Whether is may be a Coke and cookies, or a footlong sub, depends on how long I've been there.

You can see that the rewards offered encourage customers to come back.

For example, buying five subs at this subway will earn me a free Coke (worth $3), or two cookies (worth$2.50).

You have to keep in mind, that these things do come at a cost. Even if I were to spend the minimum amount on a purchase to get a mark on the card (in this case, I'd need to spend $4.90 on a six-inch sub minimum), I'd be looking at spending$24.50 to get my $2.50 saving. Now, it's all the more likely that I'll be buying footlong subs, instead of six-inch subs. Does that get me rewards faster? No. I'd instead be spending$35.00 for my $2.50 saving. That doesn't include adding drinks, cookies to the meal. Potentially, I could be spending upwards of$150+ to get my free footlong sub. Now, does that seem like a saving to you?

Actually, when you compare it to the big retailers, it's a considerable saving.

Let's do a quick case study.

Let's assume that I buy Subway once a week, and spend $11.50 per meal. Taking the costs of a 6-inch sub ($4.90), a footlong sub ($7.00) and a Coke ($3.00), it would take me 15 weeks to get to a total saving of $14.90. The percentage of this compared to the amount that I've spent? 8.64% (this is assuming that I get the rewards as a part of my purchases). Now, that seems pretty small, right? Actually, not so much. Let's take a look at FlyBuys, and the changes that they have brought in. Share → • chrissa good one josh. I guess the point is that I am going to buy all that stuff anyway, so i may as well get a bonus for it. what about these 5 items at 10% off.... that is kinda appealing. PS subway loyalty card is long gone isnt it? or is it? the stamps are. i have two local coffee shops - one coffee is$4 10th one free one is $4.50 6th one free...there's a maths quiz i should be giving my kids right! ? • http://mathematicalmischief.com/about Josh Young Exactly! I think it's still around, only at some stores, though. Because it's a franchise operated business, it's really up to the owner as to what they should do with it. I have to be honest, I don't see them very often. You could if you wanted to, haha! • http://onsarahsipad.wordpress.com Sarah DeBellis I have a similar take to Chrissa. I still shop at other supermarkets and don't let myself get swayed to buy things I wasn't going to get anyway just because they have a deal. I might be slower in gathering my points, but every now and then I get enough to get a shopping voucher. The new scheme looks promising, but I haven't checked into how they will be awarding points. My family needs to be gluten free as we have several coeliacs (myself included) so we spend nearly$6 on tiny loaves of bread. We'll be able to get a permanent 10% discount on these now if we nominate them as one of our 5, and this will add up because we go through a lot of these loaves in a week. Then again, we will be comparing that price to the other places we can buy the bread. I'm suspecting milk will be the other thing. You could apply the discount to big ticket items you only buy once in a while, but I'm thinking that getting 10% on smaller items you purchase more often will give you a greater benefit over all. A carton of nappies for $30 will be a$3 saving once every few weeks, where as I estimate we'll save at least $5 per week on our bread alone, and that is a conservative estimate as we are a family of 8. • http://mathematicalmischief.com/about Josh Young Sarah, is it ok if I use your data here as an example for the my5 post I'm writing up? I think it'd be a pretty interesting analysis. You know if you're a member of the Coeliac society, you get discounts on some lines as well? My friend has coeliac, she has one of those cards, gets a bit of a discount. • http://mathematicalmischief.com/about Josh Young I'm going to add a few extra product lines in there as well, just to show the types of savings that are made. • http://onsarahsipad.wordpress.com Sarah DeBellis Sure. And yes, the membership is great. The food is still expensive, but sometimes you get a 20% discount on a line for a month, so if it is a non-perishable that we use, we stock up. You also have to consider false economy. If a%-off or 2-for-1 deal makes it cheaper to buy more, so you buy 2 things at$5 each instead of 1 at $7.50, but then you don't use it before it goes stale, then in fact you've lost money (plus added to the landfill and your carbon footprint.) If you don't use much flour, for instance, a 2-for-1 deal might see one languishing in your cupboard breeding cupboard moths. • Trina Great explaination Josh. As soon as I heard about the Top5 I really thought about the products that we buy every single week and that are a higher price point. We have 10mth old twins so obviously our top 5 includes Huggies Nappies (box per week!) and Huggies Wipes. We always shop at Coles as it is most convienient location wise and find Huggies the highest quality product for our boys so we would be buying these items anyway but 10% off is a bonus as well as the points. I also added our 2 meat staples, mince and chicken breast and 24pk Coke cans as we own a small business and sell these. I was impressed that the nappies for example were not specific in size, any box of Huggies nappies are counted as one Top5. Absolute marketing genius, I wish I could borrow them for my own business! • http://mathematicalmischief.com/about Josh Young Thanks Trina, I have to admit, knowing how to maximise your savings is the best way to do it - otherwise you ending up saving less than what you potentially could (and I can see a lot of people doing that). My little brother (he's 14), actually asked me what the point of it was, and I told him to imagine he bought$20 worth of yoghurt, and $30 worth of chocolate. With the 10% saving on just the Yoghurt, he'd spend a total of$48, but with the 10% saving on the chocolate, he'd spend \$47. I'm glad that I've been able to apply this in a way that makes sense to people,
You may want to check out the post on my5 as well, that probably applies a bit more to your comment here,
I'd say that the nappies are less of a marketing strategy than you think - the only reason they would've discounted the entire range is because if they didn't apply to the whole line, you'd end up with a lot of angry parents (because the price is the same, why shouldn't they get the same discount?). Just something to think about,
Thanks for stopping by!