Shoppers beware the lure of loyalty and reward programs
By Whitney Sharp, Contributor
Customer loyalty isn’t a new concept. Neither is the idea of getting a customer to collect something—points, stamps, stars, stickers—with each visit. McDonald’s Monopoly pieces, anyone? Gone are the days of ratty, paper business cards encouraging customers to collect stamps with a “buy nine, get 10th free” incentive. Now everyone has a rewards card, and they’re not such a good deal.
Some stores, like the Body Shop and HMV, will charge you to join their rewards program. MasterCard and Visa now offer credit cards that come with rewards. Their fees vary depending on the card of your choice, but may exceed more than $100 annually. People are spending money just to earn points to spend more money.
Take the enviro Classic Visa for example. You get 2,000 points for joining and then one point for every $2 you spend, with a handful of “double point” exceptions. Now, 50,100 points will get you a new 64GB iPod Touch; yet even if all your purchases were double in point value, that’s still a couple thousand dollars to get you that iPod. Spending just over $400 would get you the same thing from the Apple Store. Tough choice.
Not all points cards and rewards programs have fees. Starbucks, Sephora, Best Buy, and Chapters are all free to join, but are they worth it?
Beauty giant Sephora has an insider rewards programs where $1 gets you one point. Reward levels happen at 100 points, or 500 points. So after you’ve earned 100 dollars of customer loyalty, what can you cash in for? A featured sample. That’s it. Ranging from mini-sized nail polish to a half-ounce of perfume. Did I mention you can walk into a Sephora store and ask for a sample of their products for free without purchase? At 500 points, a collection of samples (usually four to six) can be yours. They forget to tell you that usually for less than $500 you can buy the full-sized version of those products. But who needs full-size when you can have the mini version, right?
Best Buy Rewards are free to join, and members earn one point per dollar spent. Want to save 20 bucks? Simple, it just takes 1,600 points. So, when you buy that new MacBook, Best Buy will knock $20 off the price. How thoughtful.
Starbucks has mastered the art of customer loyalty through their rewards program. Want a free Starbucks coffee on your birthday? All it takes is a simple online registration. No big deal. Oh, and then you have to make 30 transactions using your registered card—paying through another method won’t count—to earn gold status. For all that hard work, and for spending anywhere from $75-150, you’ll receive your own personalized (yep, with your name on it) gold card with which you can start earning more stars. Now, every 12 stars (or $30-65) will earn you a free drink or snack. But not both. Want to keep your gold card? Just earn 30 more stars within a year to extend your status.
If you have an addictive personality like me, you’re screwed. Just when you think you’ve finally beaten the system and reached the top level, they add a new level requiring even more devotion (and money), and offering slightly more perks. Save yourself some cash; just say no.