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5.10.2013

Earning Points Is the Surest Way to Increase Spending Power

Points are now a currency and no one does that better in Japan than Culture Convenient Club's T-Point Japan who boasts a whopping 44.5 million members.

As at end March, 2013, T-Points can now be earned with 155 brands and 52,981 stores, and in this age of the thrifty-as-a-virtue-again consumers, one way to increase one's spending power is to make sure every yen goes to earn points, which are usually awarded at much more favourable rates than interest on cash.

And though once upon a time not so long ago, T-Point only accepted one brand/company per product category as partners, they have become less discriminate of late and has just announced that commencing on 21 May 2013, T-Point card holders can earn points for every 200 yen they spend online with Expedia.co.jp, according to the press release on 8 May 2013.

It is obvious that the very entrepreneurial and savvy Mr. Masuda saw no reason to build a ceiling in the blue sky of potential members and their point-earning universe, and lifted the early restrictions that justified the high premium T-Point demanded of its corporate partners to have the privilege of accessing their members and exposing them to ads at points of consumption to cross-sell. (When I was running a flash sale site, the first promotion proposal I received from Cultural Convenience Club, the owner of Tsutaya and T-Point, was for a 2-year exclusive deal at $1 million. And they told me that once the two years were up, they will open up to other flash sale sites like Gilt.)

Remembering that Japan has a population of 130 million, 44.5 million members means T-Points are being collected by 34% of the total population.

Once earned, T-Points can be exchanged for goods, tickets, and of course, be used to pay for CD and DVD rentals at sister company Tsutaya's outlets (Japan's version of Block Busters, in a nutshell).

T-Point also launched a service whereby members can donate their points in the wake of the 3.11 Great East Japan Earthquake and Tsunami, which was a novel way to collect donations and a further confirmation - if any are needed - that points are indeed a currency.

The Biggest Difference Between Rakuten and Amazon
One thing Rakuten does but amazon.co.jp refuses to do is award points for purchases.

Rakuten Super Points can be used in lieu of cash at an exchange rate of 1 point = 1 yen.

Rakuten offers favourable rates for Rakuten credit card users and vendors on the portal are invited to offer 5x, 10x, and higher rates of points for certain promotional periods and items instead of cash discounts.

Rakuten also has a system whereby miles earned on ANA flights or banking points earned at banks other than Rakuten Bank can be converted to Rakuten Super Points as well.

Rakuten uses points to get registered users to respond to questionnaires for research and to help their clients build up mailing lists by offering points for giving up your name and other personal details.

One thing I found interesting is that I can actually order a pizza with Domino's Pizza and elect to pay via Rakuten even if I am paying cash to the delivery person. This enables me to use my Rakuten points against my pizza order and earn more Rakuten points for the order itself. Since I go directly to the Domino's site or use the Domino's iPhone app because of incentives to do so (like buy one get one free or special discounts for ordering online), I often wonder what Domino's gets for this. It is almost like giving up your customer to Rakuten even though I am an acquired Domino's customer no thanks to Rakuten. Perhaps it is done in the hopes of ensuring that I stay loyal to Domino's and don't wander off to competition, but from where I am standing, it looks like a win for Rakuten and a lose for Domino's... But maybe I am missing something.

"Not Accumulating Points Is Like Throwing Money Away"
Points have become such an integral part of the way we spend and consume that a 44-year old friend says, "Now that I use my Rakuten credit card as my main card and earn points, all my utility bills are paid for on points alone. It's great! I buy things I would buy anyway, and the points are such a bonus."

A 60-year old entrepreneur who is very cash rich and still cash savvy says, "When I need to buy a book, I do my search on amazon but I buy it on Rakuten. I book my business trips and those for my staff on Rakuten Travel, and then use the points to buy other things. It is a really good system. I think amazon does a great job recommending things to me, but I will only buy on amazon if I cannot find the item on Rakuten."

Another entrepreneur, 42-years old says, "Whenever I see a great deal on bonus points for a credit card or site, I concentrate my spending on that card or site. It is foolish not to do that today because it is like throwing money away. Taking a little time to search and check for points creates money out of thin air!"

Free Mobile Phones Every 3.5 Years?
According to Garbagenews.net who visualizes government data into graphs, the average period a Japanese subscriber uses a mobile phone has declined to 3.5 years in 2012, from 2011's 3.6 years. The top reason for changing phones in 2012 was "to upgrade" (42.8%) - most likely to a smartphone; which was much higher than "due to the phone needing repair" (32.2%).

The number of years before users get new mobile phones in Japan
(Data based on Cabinet Office Report)
Phone companies also award points for every yen spent on their services, and my parents never pay cash to get a new phone, but rather, use their points. I have personally put them on the cheapest possible plans that meet their usage profiles, so combined, they spend less than 7,000 yen per month on their mobile phone bills. And still, every three or four years, they both manage to get new phones on the points they earn.

Japan managed to get mobile phone ownership to spread like wildfire in the early days when hardware was given away for 0 yen (because the retailers were given cash backs on the subscriptions the consumers took out). We still see a few 0 yen phones on the display cases, but consumers don't seem to mind the price tags much, because they just use their points to get what they want.

I am a heavy data user who has the largest fixed data plans and hardly use the mobile to have conversations except when we are on SKYPE or LINE. But my last upgrade on both the BlackBerry and iPhone were paid for by points with Docomo and Softbank accordingly after less than three years of usage.

Earn Frequent Flier Points With Banking
ANA, a member of Star Alliance, is an airline, but it also has its own branch with Suruga Bank.

Account holders can earn frequent flier miles in addition to interest for all their banking activities with Suruga Bank and purchase products like a term deposit with additional interest and miles.

As with Rakuten Bank, extra points are awarded to the account holder just for designating their account to receive their monthly salaries or to link automatic debit payments of utilities and subscriptions to the account.

While Rakuten Bank is an e-bank, Suruga has a retail network, though the ANA Branch is a virtual branch.

No Income Tax, No Inheritance - So Far
So far, the Japanese tax man has not demanded that points be declared as income, but rather, focus on collecting consumption tax, which is soon to go up, regardless of mode of payment.

While mobile phone points may be shared among family members and award tickets bought on frequent flier points can be booked for family members, there is no "inheritance tax" associated with the movement of points at this time. (I will need to do more research to find out, but I believe  once the natural person owning the accounts pass away, I believe his/her points expire and cannot be transferred to another person be it a spouse or other family member.)

But points are definitely here to stay and is a real currency and that through which banks now compete with an airline and virtual cash is created even through brick and mortar transactions.

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