Customer incentive programs, typically referred to as loyalty programs involve rewarding customers for buy from a company. In most cases, customers amass points which can then be redeemed for consumer goods, gift cards, and airline tickets. While many people subscribe to a long roster of loyalty programs ranging from video and bookstores to supermarkets and restaurants, others choose not to sign on with any.
It seems that just about every major company is now offering some form of incentive program to keep you on as a customer and get you to spend as much as they can squeeze from you. Even the banks and credit cards such as Visa help push the loyalty plans in your face.
Programs both large and small remain popular around the globe, but some experts say that every positive aspect of a loyalty program almost always has a negative side. Here are the major pros and cons of loyalty programs.
Financial Savings
Better Beals: Many nation-wide and international loyalty programs do provide savings when it comes to purchasing products or services. Joining most programs can results in instant and long-term savings.
Truth Bending: While it’s true that people who subscribe to the loyalty program do save over those who don’t, research indicates that, before loyalty savings, initial product costs can be 28 to 71 percent higher than they are at businesses without such programs. This schematic creates a scenario where customers eventually pay about the same as they would anywhere else.
Customer Benefits Through Profiling
Pro: Better Service: In cases like pharmacies and restaurants, loyalty programs can result in more efficient service as the store keep tracks of the customer’s name, spending habits, preferences and needs.
Con: Tracking: The negative side to programs that track purchases and shopping habits is the market profiling that tends to occur. Tracked customers are often on the receiving end of spam, junk mail or even telemarketing that is tailored to their taste. Many companies sell personal data and make tremendous profit for doing so, all without your knowledge.
Consumer Rewards
Pro: Rewards: Be it Air Miles or gift cards, the list of rewards is endless. There are frequently chances to win big through reward programs. Some stores will even give a certain amount of store credit for every dollar spent, allowing customers to benefit from free or heavily discounted purchases. Even hotel rooms and airline tickets can be free if you amass sufficient points.
Con: Spending Tempations: Customers are often tempted to spend beyond their means or, at the very least, to buy more than they need just to build points, gain credit or take advantage of discounts. The companies adjust prices accordingly so they actually gain rather than lose. Nothing is ever truly free.
Selling You the Moon
Pro: Variety: When companies sell you on joining a loyalty program, it’s with the promise of all kinds of benefits. They sell you the moon to get you to sign up and promise to deliver all kinds of rewards “for free.”
Con: Lack of Availability: One of the most irritating and frustrating parts of loyalty programs is the lack of availability of airline seats during peak periods (and increasingly during non-peak periods). Many programs sell out quickly because even if you have tens of thousands of air mile points to use, they may only make 3 seats available on a given flight. To make matters worse, they may ask you to pay a premium such as twice the regular amount of points to get on the flight you want. Travelers also learn the hard way that there are so many hidden taxes on flights that they end up spending hundreds of dollars out of pocket anyways because the air mile points don’t cover taxes, the non-sensical and moronic “fuel surcharges” (do they think we are all idiots?!!!), and other gimmicks aimed at collecting money under the guise of a legitimate fee.
Easy to Sing Up, Difficult to Deal with Confusing Contracts
Pro: Simplicity: Swiping a card with every purchase is easy. Programs allow for point savings and discounts just for signing up and taking advantage of the deals. Joining a loyalty program often means no more coupon clipping. The stores make it as easy as possible for you to spend, spend, and spend some more.
Con: Confusing Contracts: While many loyalty programs are simple and straightforward, many have long paragraphs of fine print. Where a customer might think they have achieved some goal or won a prize, a few sentences in the contract may nullify or change the end result. Experts encourage customers to read contracts carefully. There’s also the bait and switch method that is common among credit card companies where they let you sign up for a low interest credit card and then jack up the rate a short time later, often using an array of “pre-planned excuses” for why they are doing so.
Word to the wise is to be careful with what you sign up for. You might not be getting the deal you want or expect in the end.
RSS