Unredeemed ‘Bonga points’ take up Sh2.45bn of revenues
Members of the public queue at a Safaricom customer care centre along Kimathi street to redeem bonga points on August 13, 2010. The company sets aside the portion of revenues received from customers that is attributable to the Bonga points programme, accounting for it as a liability in the financial statements. Photo/File
Safaricom is holding Sh2.45 billion in its books as liabilities accruing from its customer loyalty reward programme, Bonga points.
The company sets aside the portion of revenues received from customers that is attributable to the Bonga points programme, accounting for it as a liability in the financial statements.
It is only after the Bonga points are redeemed that Safaricom recognises the revenue, according to disclosures in the company’s newly released annual report.
“The deferred revenue relating to customer loyalty credits of Sh2.45 billion is expected to be recognised into revenue as customers redeem their points,” said the annual report.
Safaricom awards one loyalty credit for every Sh10 spent by its subscribers.
“It is only a matter of timing when the revenue is recognised as still the company has to service you at a cost when you redeem,” said Eric Musau, an analyst at Standard Investment Bank.
The amount accruing dropped from last year’s Sh2.57 billion, which Mr Musau said indicated increased redemption of the loyalty points or a drop in the company’s turnovers.
During the year, Safaricom’s revenues from its voice services rose by 8.9 per cent to Sh68.9 billion, with total revenues being Sh106.9 billion.
The higher rate of redeeming loyalty points could be attributed to the rise in cost of living, which saw inflation rates peak at 19.7 per cent in November last year.
With reduced disposable income, people would be more inclined to avoid cash spend.
Safaricom also reviewed the redemption structure raising the number of points required for specific rewards.
Bonga points can be redeemed in the form of airtime, SMSs, data bundles and merchandise such as mobile phones, modems and laptops. They can also be transferred to other users.
Currently, to redeem three minutes of talk time one requires 50 points compared to the previous 25 points.
Safaricom has also been accepting Bonga points as part payment for merchandise at its outlets.
Mobile phone operators have relied on reward systems to cultivate loyalty in the highly competitive industry. Airtel and Telkom Orange also have reward programmes.
Promotions
Apart from the reward system, the industry players have also been running promotions. Essar’s Yu has been gaining in market share following its tariff promotions targeted mainly at the youth.
