Grab's rewards revamp trades points for sustainability

Singapore

GRAB'S rationalisation of its rewards programme is unsurprising with the launch of the GrabPay Card, but may also reflect the SoftBank-backed firm's efforts to keep an eye on costs amid a push for profitability, market watchers told The Business Times.

On Monday, Grab announced that it will reduce the number of points users can earn in a transaction, in some cases by up to 60 per cent; it will also raise the number of points needed to redeem certain rewards from March 2.

The revamp of the GrabRewards programme follows the super-app player's unveiling of its GrabPay Card in December. The card can be used with merchants worldwide who accept Mastercard, while also giving users GrabRewards points.

At present, the number of points Grab users earn varies by the tier they are on and the service they are using, be this ride-hailing or food delivery.

For instance, a user in the Platinum Tier, the highest level, can currently earn 10 points for every S$1 spent when using GrabPay in stores, and six points for every S$1 spent on ride-hailing and food delivery.

From March 2, this class of users will earn only four points for every S$1 spent across all products.

And with Grab raising the number of points needed to redeem certain rewards, a S$5 voucher for a Grab ride, for example, will require 2,500 points across all user tiers. At present, users can redeem the voucher for between 1,900 and 2,200 points, depending on the tier they are at.

The launch of the GrabPay card means Grab will hand out points for transactions well beyond its original ecosystem. A company spokesman said: "While the points earned on each dollar spent will be lower, our customers have more places to earn and spend their reward points at millions of merchants."

It therefore makes sense that Grab would need to tighten its rewards system if transaction volume balloons, noted Nitin Pangarkar, an associate professor at the National University of Singapore (NUS) Business School.

"As a company moves from a customer acquisitions spree to a more consolidated stage, the rewards may become diluted... Also, there are more opportunities for users to earn rewards; they can also use them as the breadth of partners increases. It looks to me as if the earlier rewards were rather generous and hence, unlikely to be sustained," he said.

Grab's move could also be a broader indication of its need to keep costs in check to turn profitable. "As the space is maturing and the venture capital interest is becoming less rosy-eyed, many venture-capital funded firms would face greater pressure to achieve profitability," he added.

Grab has not released its financials at the group level, but its local entity GrabTaxi Pte Ltd posted accumulated losses of S$228.9 million in 2018, going by regulatory filings.

In December, The Information (a subscription-based digital media company) cited sources as having said that Grab internally projected a 2019 annual net loss of about US$1.5 billion at the end of 2018.

In this era of cash-burning startups, showing a path to profitability would be a good look for Grab, said Ang Swee Hoon, an associate professor of marketing at the NUS Business School.

"Look at Uber and Didi: they are all still in the red. It might well be that the founders of Grab want to find ways in which they can be the first unicorn in the ride-hailing business to turn in a profit," she said.

In the near term though, could the shrinking pool of goodies upset Grab loyalists? Thankfully, for companies like Grab, "consumers tend to have a short memory", he said.

Chua Joo Hock, managing partner at Vertex Ventures South-east Asia, a Grab backer, said: "Generally, people choose to use a service because of good experiences like a better availability of cars and shorter waiting time... There will always be a small group that is price sensitive. It is not as if Grab is withdrawing the rewards programme... There are also improvements that benefit the users." He cites as an example the GrabRewards flash sales that has been introduced.

More broadly, higher point requirements for redeeming Grab discounts could ease the price competition in the ride-hailing space, said Hian Goh, founding partner of Openspace Ventures, which is invested in Gojek.

"Both players must compete on quality of service and product as opposed to just buying market share, so this is very healthy," he said. Gojek does not have a rewards programme similar to GrabRewards in Singapore, although it does in its home market, Indonesia.

Using a weight-training reference, Mr Goh added: "The industry has been bulking for three years. Now, we need to cut and see how much lean muscle tissue is under all that fat."