3 Comments

• thepenis says:

  November 16, 2009 at 2:16 pm

  Good question!
  Pros to you as the consumer, the company is rewarding you for use of the product or service. There is no downfall since you may use their competitor as well. I personally use JetBlue (TrueBlue) as well as Trip Rewards (Days Inn & Comp).
  I see all loyalty programs as positives. However I must stress caution as some companies, particularly grocery stores, use loyalty programs to track your purchases and inventory. This is a good thing for the company as they can use computer programs to identify goods purchases and stock more of the in demand items. This also saves you money, downfall may be lack of privacy if you are one of those people. All in all loyalty programs are a positive.
• fastcarc says:

  November 16, 2009 at 2:58 pm

  I don’t know all the pros and cons, but I do know that when Best Buy had their rewards system originally, it was awesome. I bought a washer/dryer and a few small things and ended up with a gift card worth 300.00 at about Christmastime. No requirement to purchase anything else and not just that BS percentage off coupon. Made me a pretty loyal customer. They changed it and now your points expire faster, so it’s kind of lame now.
• hrh_grac says:

  November 16, 2009 at 3:23 pm

  The answer really is it depends on how you accrure points and if there is any cost of being involved. Plus you have to be careful that you are actually impacting loyalty and not just giving things away because they would have bought from you anyway.
  From the business standpoint:
  Pros:
  In theory you get customers to choose you because they are getting points.
  The reward you give is usually valued higher by the consumer than the actual cost to you (i.e a free airline ticket is worth up to $500 but the cost to the airline is much lower).
  Ability to track customer behavior and manage products and promotions accordingly.
  Ability to send additional rewards to your best cusomters to encourage them to stay with you.
  Ability to understand (retailing) what items sell together and so reduce what is promoted and by how much if it would be bought anyway without the deal or at a higher price (model the data)
  Cons:
  You create a liability for all the free things you now owe the customer/consumer. Yes, you can change the system at some point, but you still have more liability.
  You may be spending money and not impacting loyalty at all. If the customer doesn’t actually choose the vendor (i.e some corporate travelers) you are giving points away for no gain.
  You encourage others to offer similar programs, costing everyone more money with little gain since customers can belong to all clubs.
  You reward every customer equally (as in the airlines) even though some people only buy bargain tickets while others pay full fare. A major flaw in the system.
  No way to really measure loyalty if you can’t see where else they buy your product or service.
  To the customer:
  Pros:
  Free stuff for doing what you would do anyway.
  Could get early access to inside information or sales (membership benefits).
  Discounts at supermarkets- so sharing personal information gets you good discounts.
  Cons:
  Possible privacy issues (if you care about that)
  One more number to remember
  Maybe no real benefit beyond price.

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