The Information Magazine

You order coffee from Gloria Jeans and are issued with a Frequent Sippers Card that allows you to redeem one free regular size drink after 10 punches on the card. You are in a shopping frenzy for shoes at Charles and Keith on one occasion and your $150 purchase entitles you to a 10% discount loyalty card on subsequent visits and 20% off any purchase on your birthday month. You sign up for Myer’s loyalty programme in which you can earn two shopping credits for every dollar you spend at the store and receive a $20 Myer Gift Card once you’ve earned 2000 shopping credits. You can’t resist Kinokuniya Book Store’s 20% storewide discount on its products every quarterly for just a small fee that can be renewed yearly. These are some examples of loyalty programmes that retailers offer to win customers and establish a long-term relationship that keeps them coming back to the store. But do customers gain from these loyalty programmes? This post looks at whether such programmes offer a win-win situation for both parties.

So what’s the purpose of the loyalty card? The loyalty card tells us we belong, we are special, we are entitled to discounts, points and freebies. It’s a sign that those retailers are finally recognising the importance of their customers and giving something back. And if we also recognise it as a marketing ploy, to keep us coming back, well, we’re savvy enough to understand it’s a deal and have the liberty to choose which loyalty card we’d like to keep on using.  

Loyalty cards are worth keeping if they encourage customers to save through discounts or through reward programmes. Such cards issued by stores that you frequent come in handy as this means you can take advantage of discounts or VIP sales. You save each time you purchase something you need from the store. Alternatively, points can be chalked up and then redeemed. I know of a friend who gets David Jones vouchers from points redeemed so she can buy a dress for a special occasion or new linen. I’ve recently registered my new Woolworths’ Everyday Rewards Card that allows me to accumulate Qantas Frequent Flyer Points each time I make a purchase. This benefits me since I fly twice a year anyway. Now isn’t that great? This is what I call a win-win situation. When Woolworths’ Everyday Rewards card scheme linked to the Qantas frequent flyer program in June 2009, per customer purchase at the supermarket increased “almost overnight”, according to the Woolworths’ chief executive Michael Luscombe and reported by Australian Food News. This scheme benefits the supermarket as well as customers.

However, if you don’t shop frequently at Woolworths but begin shopping there though it is several bus-stops away from a rival supermarket just to chase your dream of a free flight by earning the frequent flyer points you are then not using the programme wisely. This is true if you have to spend around $55 000 to collect 22 000 points to win a return ticket. It also doesn’t make sense to swipe your card for the $0.04 discount on fuel and drive six blocks away to the nearest participating petrol station just to save $1.20. So before you decide to establish loyalty with a certain store, weigh out the pros and cons of its loyalty programme.  

I have reservations about Frequent Coffee Sippers or Frequent Eater cards. Coffee or food joints issue cards offering free coffee after 10 punches on the card in the hope of establishing loyalty among customers. Hence people will come back to the store for more coffee just to get the free cup of coffee or side dish as promised. This leaves me with the question of whether this encourages one to save or to spend more. I believe that it is advantageous for those who partronise such outlets daily and get rewarded in the end. Hmmm hang on……don’t such habits discourage savings? For those like me who visit such joints once in a while, such rewards just don’t work. Don’t fall in the trap of being lured to the store just to have a drink or some food for the sake of a free drink or meal.

Loyalty programmes are good, as long as they are used in a disciplined manner. If you do extra shopping because you’ll get a loyalty program discount or shop just because you want to use the loyalty card, then it might be time to think twice because you’re not saving anything. If you are using it for purchases you would have made anyway, then you’re probably getting a pretty good deal. It always helps to ask yourself if you need the item before you feel tempted to purchase anything.     

To sum up, do loyalty programs save you money? As a consumer, if you use your loyalty program well, then it will indeed save you money. The best way to save yourself some cash is to research loyalty programs and sign up with the ones that suit your spending patterns. I’ve done my research and have signed up for membership cards offered by Priceline and Fly Buys Programme by K-mart. What are your views on this?