The value of unused Safaricom customer loyalty awards, popularly known as Bonga points, has fallen to the lowest point in 12 years, pointing to increased redeeming by customers after the telco introduced an expiry date.
Safaricom disclosed in the latest annual report that customers closed March 2023 with unredeemed points valued at Sh2.97 billion, marking a 34.2 percent drop from Sh4.51 billion in a similar period year.
The latest value of points is the lowest since the Sh2.45 billion that was seen in 2012 and points to the impact of last year’s move by Safaricom to set an expiry date on all points that were at least three years old.
Bonga points had risen for three consecutive years to an all-time high of Sh4.51 billion before Safaricom reacted last year by setting an expiry date.
The telco informed clients that effective January 1, 2023, all points older than three years would expire.
Setting an expiry date triggered aggressive redemption of points by customers for various uses such as the purchase of phones, accessories, air tickets, fueling cars, paying education loans or buying shares at the Nairobi Securities Exchange.
Safaricom also restricted the time within, which customers can use up data resources bought through the use of Bonga points to seven days to encourage more redemptions.
Points redemption is crucial for Safaricom since they are accounted for as a liability or deferred income in the telco’s books and are only recognised as revenue once they are utilised by customers.
The fall in the value of unused loyalty points helped Safaricom to cut its total deferred contract liabilities, which also includes unused airtime, data and bulk messages, to Sh11.73 billion from Sh12.15 billion.
The Bonga point scheme, introduced in January 2007, gives subscribers one Bonga point for every Sh10 spent on voice calls, short messages service, data and M-Pesa services.
This runs for both individual subscribers as well as enterprise business customers.
Enterprise business customers also earn loyalty points when they achieve their revenue targets and redeem the points after revenue contracts with Safaricom.
“Management defers revenue for every point accumulated and recognises the revenue relating to the points earned on redemption either at a point in time (for merchandise or Bonga everywhere) or overtime based on usage of acquired resources,” says Safaricom.
The telco also recognises revenue on the remaining loyalty points when SIM cards are churned.
Safaricom uses the same concept to recognise airtime revenue, where prepaid airtime sold to customers is held as deferred revenue until the customer uses it.
