One of the things that make online reward programs such a useful business and marketing tool is how flexible they are. The goals you set, the behaviors you reward, the amount of money you invest and the way you communicate to participants can all be tailored to your unique business needs and objectives. You even have options when it comes to the way you pay for your rewards program. In this article, we’ll walk you through the value of digital reward points, as well as five different billing models commonly used to pay for them. When you’re through reading this piece, you’ll be more informed on reward program cost options and better able to determine which billing model would work best for your business.
A reward point in the hand is worth…how much, again?
The basic idea of an online rewards program is this: along with rewards program software and services, a program provider sells you digital currency in the form of online reward points. Your program participants earn these points as their rewards, then spend them on items available in an online rewards catalog.
It’s usually at this point (no pun intended) that people ask us, “Okay, how much does a point cost?” Well, that depends. You can set your reward points’ value at whatever you want. The beauty of online points is that they’re a form of currency separate from salary, so they can motivate participants to go above and beyond the status quo performance, or set you apart as a business in a unique way the competition can’t match. But setting the point value too low or high can interfere with participants’ engagement and interest in earning rewards.
“Some people may think, ‘Two hundred reward points for a dollar sounds like a great value for us!’” says Incentive Solutions Senior Account Manager, Sydney Coleman. “But for their program participants, that means a movie ticket costs 4,000 points, which isn’t too enticing. We recommend keeping points at a value that doesn’t seem too low or high, so participants still see them as being valuable, but not so valuable that they’re too hard to earn.”
So what are the different reward points billing models?
Once you know what you want the value of reward points to be, you can decide how you want to pay for those points. Some program managers like the idea of paying for their points upfront. Others prefer paying for points after their “job” is done—ie, participants have spent them on reward catalog items. You can choose between five different billing models to suit your particular preference:
The Redemption Billing Model
If you want to wait until participants redeem their points for merchandise, travel, or event ticket items in your reward catalog, a redemption billing model is a way to go. With this model, you’re not charged for points until they’re spent and gone.
The Issuance Billing Model
An issuance billing model is the opposite of a redemption billing model—you pay for reward points upfront when you issue them to participants. This model relies a little more heavily on participants redeeming their points.
The Hybrid Billing Model
The hybrid billing model is a combination of redemption and issuance models. With the standard billing model, you pay a small portion of points’ cost when they’re issued (20%, for example) and the majority of the cost after they’re redeemed (80%).
The Face-Value Billing Model
With a face-value billing model, you pay for reward points with no additional mark-up.
The Subscription Billing Model
When you use a subscription billing model, you pay a monthly subscription cost per user, per month. This is the most reward neutral of all options, focusing on investing in the cost of engaging and motivation each participant, rather than the cost of rewards.
Choosing the right online rewards program provider means you bring a truly flexible marketing and operations tool to your business strategy. You should be able to pay for the program in the way that works best for your business. Have an Accounting Department of sticklers who want you to pay for points as they’re issued? Want to test-drive a pilot program to see how much participants will redeem? Whatever your current business situation or objectives are, your rewards program should be able to complement them nicely—that includes your reward points billing model.
Want to know more about online rewards points billing models or other reward program economics topics? Feel free to call us at (866) 567-7432 or fill out our quick contact form.