The Pitfalls of Customer Loyalty Programs
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The Pitfalls of Customer Loyalty Programs

Posted on Tuesday, October 18th, 2011 at 8:12 am
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Customer loyalty programs can be a great way to save money, but make sure to watch out for these pitfalls that might end up costing you more money!

Everyday Higher Prices

Studies have revealed that stores with customer loyalty cards often have higher everyday prices (by as much as 71%!) than stores without customer loyalty cards. One study in particular compared everyday prices on common grocery items at Target and Meijer (both non-card stores) with the same items at Marsh and Kroger (both card stores). The results were pretty shocking. The card stores’ everyday prices were higher on every single item, with the price markups ranging from 28-71%. For example, the average price of Chex cereal at the non-card stores was $2.89 and at the card stores it was $4.44 – a 54% increase!

Unnecessary Spending
In other cases, customer loyalty programs aim to coerce their customers into spending more than they would have spent without being a member of the program. Sometimes the cost is much, much more. For example, Amazon Prime customers spent 150% more on than they had before signing up for the extra membership program. What happens is that Amazon Prime customers pay an annual fee of $79 to enjoy two-day free shipping on every order. After paying the fee for this benefit, many Amazon Prime customers feel the need to shop and spend more than they would have before signing up for free shipping.

How to Avoid These Pitfalls

Avoiding the pitfalls of customer loyalty programs is easy. Before signing up for any program or special offer, evaluate the situation. Is signing up going to save money, or cost money? Will you feel the need to shop and spend more after signing up for a loyalty programs? Are the prices at the store higher than non-card stores? Almost everyone’s attention is easily caught by the promise of saving money, which is what customer loyalty programs count on. However, if you find they are inflating their prices or causing you to buy more than you normally would, then its time to opt out and shop elsewhere.

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Good Tip: Saving money is important – especially if you have a lot of expenses like bills to pay, loans to pay off, and all the other things that drain your bank account. Figuring out a way to save money can feel tedious to some, and like a punishment to others. U.S. News suggests that you try one of these money saving challenges. The “No Eating Out for a Month” Challenge This one is self-explanatory. The goal is to avoid eating out for an entire month. This might be super easy for people who enjoy making meals at home. People who really enjoy dining out, or ordering food to be sent to their home, may struggle with this one. It’s worth a try because spending money on take-out is more expensive than buying groceries. The Pantry Challenge This one is a variation of the “No Eating Out for a Month” challenge. The goal is to use up all of your groceries before you buy more. It forces you to try and remember why you bought a food or beverage that you don’t know what to do with, and gives you the opportunity to find a way to use it. The one exemption to this challenge is the foods that have expired. Don’t eat them! Throw them in the trash. The “No Spend” Challenge Make a goal to avoid spending money during an entire weekend. The only exemption in this challenge is that you are allowed to pay bills. This challenge is interesting because it requires creativity. You must be creative and find workarounds for problems that you would typically solve by spending money. You may have a different outlook on spending after finishing this challenge.