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The Real Value of Loyalty Card Programs

Loyalty Card ProgramsKeeping costs down is an ongoing challenge when it comes to necessities like food and gasoline. Drive by your local gas station any day of the week and you’ll see the price fluctuate up and down – a crap shoot for anyone hoping to save. Food prices fluctuate too; but not so noticeably, with each store adjusting their prices based upon the costs their distributors are charging that week. Loyalty programs were introduced as a way for consumers to save more money, but do they work and who is really benefiting?

The History of Loyalty Rewards

Programs designed to lure potential customers are nothing new. In the 1700s, copper tokens were given to customers to be redeemed for store merchandise. In the early 1890s, trading stamps were introduced and evolved to include a variety of participating companies, including dry good merchants, gas stations and grocers, making it easier for customers to earn quicker and bigger rewards for their loyalty.

Supermarket loyalty programs were introduced as a simple way for shoppers to access advertised prices and to convince you to do more shopping in one store. In return, the company received loads of data on their shoppers’ habits and preferences to use to better predict future sales. Swipe a store’s loyalty card at the checkout and the bill is automatically corrected to reflect the sale price of all of the items purchased, eliminating the need to clip, organize and present coupons to a cashier.

The concept has caught on with consumers, and in 2012, there were an estimated 2.65 billion loyalty program memberships. As competition has intensified and technology has improved, the shopping histories of customers in these programs has been used to send personalized offers online and through mail.

A Disloyalty Movement?

According to a study by the research firm Colloquy, the number of loyalty program memberships in the U.S. grew by more than 25% from 2010 to 2012. But there seems to be a new movement that doesn’t bode well for supermarket loyalty membership – less than 10% of those memberships are active.

Consumers are obviously opting out and one major grocery chain has even pulled the plug on their program. Advertised as ‘card-free savings’, Shaw’s Market can offer low prices to every customer without the hassle of a loyalty card. Eliminating the overhead necessary to run an effective program opens up revenue to be used for deeper discounts and lower prices in general.

There are several apparent reasons for this disloyalty movement.

  • The idea that you can’t save unless you are a member is offensive to many.
  • Having a key chain full of dozens of cards to flip through is a hassle.
  • The benefits are questionable.   
  • Collection of personal data can appear nefarious, when privacy policies are not clearly displayed.

The flip side of the issue is the apparent loss to customers who put an effort into gaining the maximum benefit from loyalty programs. While they may be losing the special status, they will benefit from lower prices on more items. In addition, they can still use manufacturer’s coupons to their advantage and see even bigger savings. Simple economics would show that artificially low prices on special card items are actually subsidized by higher prices on other shelves.

For now, there is a wide range of options for consumers who fall on either side of the issue. Major players in the supermarket industry are upping their game by pushing for more customers to jump on board; while others are doing well without resorting to loyalty programs, such as Aldi and Whole Foods. In either case, being a conscientious shopper in order to save on your grocery bill may require visits to multiple stores to reap the biggest benefit. As the old adage goes, “Don’t put your eggs all in one basket.”

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