Employee Discount Programs Exposed: 10 Crucial Buying Questions

Knowing where to start if you are a business owner or HR professional new to evaluating employee discount programs can be intimidating. There are many things to consider when comparing different programs. In order to make an educated decision, here are some questions to ask when evaluating employee discount programs:

1. How do you compare various programs?
2. What are the most important features?
3. Why do some programs charge fees while others do not?
4. Which program best fits the needs and demographics of my workforce?

Remember, any employee discount provider confident in their offering should be happy to answer these questions.

Question #1: What merchant providers are in their network?

It is essential to consider whether the network brands are well-recognized and will interest your employees. Look for national brands with a strong presence, such as Costco, Target, Olive Garden, Red Lobster, Redbox, T-Mobile, Disneyland, and Walt Disney World. These brands can provide instant credibility, even if your employees may use them sparingly.

However, it is essential to note that not all brands offer discounts. Some providers, such as Walmart, Apple, and Amazon, may not provide promotional deals due to their business models or because they do not need to attract additional customers. Consider discounts offered by local merchants in and around your community in these cases.

Question #2: How many of the merchants are local vs. nationwide?

Despite the growth of online shopping in recent years, the majority of discretionary purchases made by consumers in the United States (less than 14%) still occur online. Additionally, most online purchases are made through a few websites, such as Amazon, Apple, and Walmart, which do not offer product discounts. Only 4% of all retail sales occur at a merchant participating in the discount space.

On the other hand, over 86% of purchases are made in person at local brick-and-mortar businesses, such as restaurants, department stores, auto shops, hair salons, and movie theaters. Therefore, finding out which discount providers are available in the communities where your employees live and work is essential.

This includes considering the number of participating restaurants near the office where they have lunch, the retailers located in the malls where they shop, and the places in their neighborhoods where they can have fun, such as movie theaters, theme parks, golf courses, and museums.

These are where employees typically spend the most money and where the impact of the employee discount program will be the most significant.

Question #3: Are these deals public or exclusive?

Some programs may provide publicly available discounts and can be found on other websites, such as FatWallet or Slickdeals.

These discounts are typically made available through advertising networks, in which retailers offer a commission to websites that help them drive product sales. Some employee discount programs can provide their services for free by populating their platforms with these publicly available discounts. However, these programs often need a large audience to generate sufficient sales commissions and may use employers as one of many advertising channels.

This approach can result in low perceived value, low employee engagement, and the risks associated with positioning advertisements as a benefit to the workforce. To ensure that your employees see value in the discount program and to avoid potential risks, consider a program that offers more private offers and discounts.

Question #4: How much depth is in their program?

The perceived value of the program will largely depend on the size of the deals. To get a sense of the overall value of a program’s offers, you can ask the following questions:

1. What is the average percentage discount across all offers?
2. What percentage of merchants offer buy-one-get-one (BOGO) deals?
3. How many merchants provide discounts for less than 10%?

For example, if a program has an average discount of around 31% and most merchants offer at least one BOGO deal, with very few offering discounts of less than 10%, this is a strong program with good value for employees. It is essential to consider these factors when deciding which program is best for your workforce.

Question #5: How relevant are these discounts to my employees?

While discounts on specific services, such as ID theft protection or laser eye surgery, may be helpful to some employees, they may need to be more relevant to the everyday needs of most employees. To get the most value from an employee discount program, look for one that offers frequent discounts on purchases that your employees make.

The average American household budget is typically made up of the following spending categories, according to the U.S. Census:

Retail shopping: 16%
Dining: 14%
Automotive: 11%
Consumer services: 9%
Recreation & Entertainment: 7%

When comparing employee discount programs, consider how well each program covers these categories. For example, if your employees frequently eat out, you should find out how many nearby restaurants participate in the program.

It is also helpful to know whether the program includes discounts on groceries, retail stores that sell clothing for adults and children, electronics, and children’s toys, as well as discounts on cell phone plans, dry cleaning, movie theaters, and fitness centers. You can use a detailed checklist of common consumer spending categories to help evaluate the relevance of the discounts offered by different programs.

Question #6: Is the discount redemption process simple and easy to use?

Previously, getting a value often required clipping a coupon from a newspaper and presenting it at the store. Nowadays, discounts can be redeemed in various ways, some of which are more convenient than others.

One convenient method of redemption is through mobile coupons, which can be redeemed by showing the coupon on a smartphone or other mobile device at the time of purchase. Mobile coupons are easy to use and can be redeemed at the cash register. When comparing employee discount programs, ask how many offers can be used through a mobile device and how many physical locations accept these coupons.

Other standard methods of discount redemption include print-and-go coupons, promotion codes for in-store, online, and telephone purchases, online booking of travel-related services, and direct purchases of discounted merchandise, such as movie passes, concert tickets, and gift cards.

It is important to note that while online purchases are convenient, they only make up a small percentage of consumer spending. In-store purchases, such as dining, groceries, and auto care, make up the majority of household spending, and even gift cards, which can be used in stores, are often not used by consumers when making purchases for themselves.

Question #7: Does the program have a quality customer support team?

Employees will likely have questions about the program, and it is beneficial to have a dedicated support team to answer them. Consider asking the following questions when evaluating a program:
What kind of customer service can employees expect?

• Is there someone they can call, or do they have to send their requests via email?
• If support is provided by telephone, is it toll-free, or is there a charge for each minute of use?
• How often is the account checked for new submissions if permission is provided by email?
• What are the hours of operation for the customer service department?

A reliable customer support team ensures that employees can fully utilize the employee discount program and remain focused on their work.

Question #8: Will your employees personal information remain private?

This information is often used to authenticate qualified users and communicate relevant information about the program’s benefits to employees. However, it is vital to ensure that this information is not being used for other purposes, such as sending frequent and irrelevant email promotions to employee email accounts.

It is helpful if the employee discount program provider has a policy regarding employee communications in frequency and content. Some providers may generate revenue by selling usage, redemption, or contact data back to the retail community, so requesting a copy of the provider’s data and privacy policy as part of the evaluation process is advisable. This will allow you to ensure that the provider’s practices align with your expectations and requirements.

Question #9: How much does this program cost?

Prices for these programs can vary widely, ranging from no-cost plans to upfront balloon payments. There are several different pricing options to consider:
“Free” programs may be offered by companies looking to reach a large audience to generate sales commissions.

Fee-based programs charge a monthly or quarterly fee based on the number of employees enrolled. It would help if you also asked about volume-based price breaks and pricing options for primary and premium discount content.
Hybrid plans are a combination of paid and free programs. These programs may charge a one-time access fee but do not charge additional fees after that. The access fee is often assigned to smaller employers who may need more commissionable volume for the provider.

It is also essential to ask about other potential costs, such as setup fees or charges for custom requests, such as recruiting businesses that you refer to or including discount providers with whom you already have relationships.

Question #10: How long is the contractual obligation?

It is advisable to find out the size of the contract and whether it will automatically renew upon reaching the end of the term. If the agreement does renew automatically, you should also find out how much notice you need to give to terminate the relationship and avoid being billed for the next period.

This will help you understand your options and plan accordingly if you stop using the employee discount program.