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Pros and Cons of Loyalty Programs

January 8th 2015 by
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Many businesses offer some sort of loyalty program. Airlines, grocery stores, department stores and even small businesses will offer coupons, cardholder rewards or a point-based system to keep people coming back.

Most households belong to multiple loyalty programs. It’s typically fairly easy to sign up for these programs… but is it wise?

Benefits of Loyalty Programs

Good deals can be snagged when you’re part of a loyalty program. Besides discounts, other perks may include:

  • Early access to new products
  • Gifts
  • Service benefits such as being able to board the plane early

Some loyalty programs are also about incorporating a game to make it fun; McDonald’s Monopoly game is a good example of this. McDonald’s customers can collect stickers with Monopoly properties on them whenever they make a purchase. Certain properties earn special rewards ranging from free McDonald’s to one million dollars!

If brand names are important to you and you shop at certain stores on a regular basis, loyalty programs may be a wise move for you.

Issues with Loyalty Programs

The main issue with a loyalty program is this: you’ll probably spend more than you normally would have. You’re part of this “club,” and that idea makes you feel loyal to that company.

You may also become preoccupied with points, causing you to overspend and not hunt for the best deal.

On top of that, some companies with loyalty programs will mark up their prices. One study on grocery stores found that the discounts that club member received were equivalent to normal prices at stores that don’t offer club cards.

Finally, what if you overspend and shop exclusively at this store because of their loyalty program, only to have your points expire or the rules change when you’re not expecting it? This is a money-wasting scenario many find themselves in.

What Will You Do?

Do you think loyalty programs are worth it? Share your thoughts in the comments!

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