If you’re going to buy something anyway, why not be rewarded for it?
That’s the logic behind loyalty programs. These can take many forms, and some even cost money to belong to.
Once upon a time, Lamonts (anyone remember that store?) had a great loyalty program for bras and underwear. You got a card with several boxes in two rows: one for bras, one for panties. Once you filled up a row, you got a free pair. I think JC Penney had something similar.
Movie chains have taken up the loyalty program with fervor. Of course, this is only a good deal if you are willing to pay box office prices. Many frugal people aren’t.
If you budget for the tickets, though, this is a nice little kick-back system. You work your way up the points chain (each ticket is worth 2 points, max of 4 points a visit) and receive concessions and, ultimately, a free movie ticket.
The concessions are pretty much always a “small” — whether you’re talking drinks or popcorn. On the other hand, you can get another size, so long as you pay the difference in cost between the two. There are also periodic special offers that print up with your ticket, such as $1 hot dogs or $2 candy.
Regal Cinemas has a similar program, but offer extra points for specific movies, usually for a one-week period. Unlike AMC, Regal gives points for concessions purchases. In addition, on certain days of the week, program members get cheap popcorn or soda.
Many stores have similar incentives to get repeat business. Customers are given a punch card to fill up for a free item (Auntie Anne’s) or a discount on the next purchase (Hot Topic). Most of these are free, so it’s really a no-brainer.
On the other hand, some loyalty programs cost money to join. That seems pretty obvious too: Why would you want to spend money to save it? In some cases, though, the benefits outweigh the initial cost.
For example, Tim and I have a membership to The Body Shop’s program. It costs $10 a year and gives us 10 percent off our purchases. That’s about $1.50-2 off each item we buy for Tim’s skin. By the time we buy seven items, we’ve already saved more than we paid.
In addition, we get $10 off one item in my birthday month. (The employees argue that this more or less zeroes out the annual fee.) We also get rewards points for our purchases. Each $20 purchase is one point, $50 is two. After four points, we get $15 off any one item. After eight, it’s $25 off. Then the system resets back to zero.
Between the freebies and the discount — which applies even on sale items — we have saved a lot of money in the last two and a half years. That said, the casual shopper probably wouldn’t find much value in the program.
In fact, the average shopper probably needs to be careful about loyalty programs. They can be a great way to save some money. But they can also lead you to spend more than you normally would.
Businesses aren’t creating loyalty programs out of the goodness of their hearts; they’re doing it to keep customers coming back and, hopefully, spending more money. How do they do this? Well, they don’t have to do a lot of work. Most people are so eager to save money that they’ll happily buy more to save more.
But there’s another method. Businesses will often set point levels or freebies at a threshold that is not easy to obtain. Every year, Clinique offers a free gift with $30 purchase. But you’ll mainly find items in the $12-25 category. But if you buy a $20ish item, it seems silly not to spend a couple more and get the free gift — so you spend more.
It’s a completely irrational logic, I know; yet it works. The Body Shop does it, too. Most of its products are $20 or less. Since members get 10 percent off, it’s really $18 or less. But, to get a point for the transaction, a program member has to get a second item. And there are very few items that are under $10.
So, best case scenario, you’ve spent $27 ($20 – 10% and $10 – 10%) to get credit for a $20 transaction. And, chances are, you didn’t really need it. You just grabbed some impulse item near the cash register to make up the difference. It’s pretty crafty, you have to admit.
I guess the point here is that loyalty programs can be handy. They can also be dangerous. The trick is to never buy more than you intended. Know what the program guidelines are and do the math ahead of time to see where you come in, price-wise. That way, you’re prepared and not just dashing around the store to find something under $5.
It’s sort of like going grocery shopping: Plan out purchases ahead of time, and stick to the list.
What do you think of loyalty programs? Any favorites? Any bad experiences? Have you ever gotten caught up in the rush and overspent?