The Loyalty Program Revolt Starts Today

I HATE most new loyalty programs at stores.  When loyalty programs really came in vogue with airlines, they made sense.  Airlines gave their best customers bonuses for spending lots of money with them.  Today, though, every store I go into has a loyalty program.  I have a Fry's card, an Albertson's card, and a Safeway card (grocery stores);  I have a Borders and a Barnes and Noble card;  I have an Ace Hardware card and a Best Buy card;  For god sakes,  I have a TGI Friday's card.  Not to mention the cards from American, America West, Southwest, Hilton, Hyatt, Marriott, National, Hertz and probably 20 others I can't remember off-hand.  I carry a stack of the travel related ones in a big rubber band in the bottom of my briefcase.  The rest bulge my wallet up to about an inch thick, even when it is (all too often) devoid of cash.

Did I mention I hate all these programs?  Most of them have no real reward for purchase volume, you just have to have their card in your pocket to qualify for the best deal.  What is the point of this --its not like they are rewarding purchase volume (in fact, grocery stores do just the opposite, by rewarding the people who buy the least with better service via the express lane).  Why do I need to fatten up my wallet to unmanageable proportions just to get a store's best price? 

This analogy will date me, but its kind of like all those women who used to carry eggs and live chickens in their purses on Let's Make a Deal in the hopes that Monty Hall will ask for that item to qualify for some prize.   When I check out in the grocery store, they even put little asterisks by certain items to remind me that I am not getting their best price because I have not shown them their plastic card.  Come to think of it, my Monty Hall analogy may be flawed.  It is more like the pagan gods refusing to provide rain until their hapless subjects had sacrificed the right kind of goat.  Now how would that be for a loyalty program -- "I am sorry Mr. Meyer, but you sacrificed a goat, and Best Buy requires that you sacrifice an ox to get 10% off that DVD player".

Well, the revolt (or, if you accept the pagan religion analogy, the reformation) begins today.  I chucked everything in a drawer except the travel cards.  The book store cards are easy - its Amazon all the way now.  I used to drop in and buy some impulse items at my local Borders, but with free 2-day shipping for the rest of the year at Amazon (I signed up for the offer) there is no reason to buy anywhere else.  Amazon always gives me their best price without a piece of plastic in my pocket or an animal sacrifice and I don't have to deal with that irritating reminder from the cashier at Borders that without their card, I'm not going to get their best price.

Time will tell whether I can live with the increased grocery prices that will come from not having their card, but I am going to give it a shot on principle.  The revolt begins -- anyone want to join me?

PS - should I name this effort my loyalty pogrom?

UPDATE:  Thanks David, I fixed "principle".

UPDATE #2:  Per the comments, I do indeed understand that  one of the major goals of  well-structured loyalty programs is to gather data about the customer.  However, I would argue that out of 100 companies gathering customer purchase data, maybe 3 know what they are doing with it - meaning that they do more than just make nice powerpoint slides for the bosses with the data.

Take an example of my grocery store, Fry's.  Fry's has a loyalty card you must present at the register to get the best pricing.  Once you present the card, the checkout person will tell you at the end of the transaction how much you saved by using the card.  But half the time the people around me forget their cards, and the checkout person asks other people in line to lend their card, so the hapless customer who forgot theirs can still get the better pricing.  In other words, if the data is really being used, it is corrupted.

But how do they use the data?  Certainly bricks and mortar stores have limited options - they can't do like Amazon does and present me with a custom selection of goods when I first walk into the store.  They might send me a customized coupon package, but I have found no evidence that any loyalty program I have used has ever done this.  My guess is that most of the data just feeds the voracious appetite of the bosses to see data.  At best, the data might be used in vendor negotiations, but I doubt this too.

By the way, to provide a customized customer experience

UPDATE #3:  One of my friends who used to work with me in the pricing practice at McKinsey & Co. suggested that the cards may be a way of maintaining multiple pricing levels for different customers, much like airlines have done for years with business and leisure travelers.  The theory goes that the most price sensitive will get and use such a card, while the busier, perhaps wealthier and less price-sensitive shoppers won't bother.   This is certainly possible, but if this is the strategy, they certainly need to train their register people not to shout all over the store to find a card for shoppers that don't have one.  Since I put my Fry's card in the drawer last week, I have visited the store three times and every time the register clerk, without my asking, has borrowed a card from someone else so I could get the discount.


  1. Craig:

    Not to mention the fact that reward cards can be used to track purchases, for those with privacy concerns.

  2. david:

    *principal* should be *principle*


  3. Luca:

    By using store cards you get the best deal because you are giving them very valuable information in exchange. They can track all of your purchases and therefore analyze your habits and patterns, determine pricing and positioning, design promotional campaigns, etc. They use that information internally, but they also sell that information to their suppliers.

    If your concern is privacy, also skip credit and debit cards and pay cash. Store chains analyze purchasing information based on your credit card number.

  4. Bill:

    Not only will I join your pogrom, but you have inspired me to rachet it up a level. I think, on the way home tonight, I will stop at Barnes & Noble, take an armful of books to the register and, when the clerk tells me I'm not getting the best price, tell him/her, "then I don't want them," and walk out.

    Too bad our local grocer doesn't have a program. It would really be fun to do that with a cart full of groceries!

  5. Zoran Lazarevic:

    I cannot believe that a college educated person (and an economist too) would use these cards. The worst thing is, economists think that these are good for them!

    I wrote about this issue before, and my arguments are the same as Luca's above.

  6. Rich L:

    Loyalty cards have little to do with loyalty. They are simply a way for a business to advertise a low price and (for the handful of people who are blissfully unaware(ADD?), too busy, or "principled") sell at a high price.
    If the programs are thought of as a game, you use the loyalty card, and charge the purchase on the rebate credit card with the best deal, and use coupons, you can get some outstanding discounts.

    If you choose not to play, you subsidize the store.

  7. James C. Hess:

    I suggest making the matter simple: Bring back Green Stamps.

  8. The RFID Weblog:

    Carnival of the Capitalists Arrives

    Welcome to the March 14, 2005 edition of Carnival of the Capitalists, the Internet's most intriguing weekly round-up of free-market articles. We have some superb entries this week, and all are well worth reading. Affiliate Recruiting Blog - Franklin Ba...

  9. Yvonne DiVita:

    While your ranting is understandable, and your analogies humorous, your resulting decision is flawed. Loyalty programs work. Unfortunately, they need a new focus...they need a new design..they need to address the customer's needs, not the store's needs. I'm especially troubled by your "it's Amazon all the way" comment when it comes to books. Amazon is the equivalent of the 800lb gorilla that can sit anywhere it wants, and usually sits on every little publisher it can. When you shop at Amazon, you may save a few bucks-- but you are telling the little publishers, who exist to help new and emerging writers get published, that they can't have your business because cheaper is better.

    Amazon takes a large chunk of change off the top-- leaving pennies, literally, pennies to the small publisher and his or her author, to share. The idea is that more books will sell, and the profits will accumulate accordingly, but...the reality is that even Amazon is more supportive of the named authors, of the big guys, of the books that will sell hundreds of thousands. So, again, the new, emerging author struggling to market his or her book, and to make enough money to be able to write another book, looses.

    Amazon is a great company. I am not saying boycott Amazon. I'm just saying, be aware that they, too, have a loyalty program. It's called free shipping. Now, THAT'S what other companies need to learn. How to build loyalty without causing customers annoyance. And, I hope you'll give us small publishers a chance to compete... we just want to get our authors the attention they deserve.

  10. The RFID Weblog:

    Carnival of the Capitalists Arrives

    Welcome to the March 14, 2005 edition of Carnival of the Capitalists, the Internet's most intriguing weekly round-up of free-market articles. We have some superb entries this week, and all are well worth reading. Affiliate Recruiting Blog - Franklin Ba...

  11. mark smith:

    Amazon doesn't need a loyalty card to track users. They already have that info by the mere fact that you have logged in to buy something. In fact through the miracle of cookies, Amazon can trivial track everything you even look at but then don't buy.

  12. Different River:

    Some ideas on how to get the "best price" without the cards:

    1) If your concern is only the heft of the card in your wallet, then even if they don't shout out for someone else's card, most of the grocery stores I deal with will let you type your phone number into the PIN pad (or tell it to the cashier) and use that in lieu of your card. I misplaced by Safeway card years ago, but I've been using it anyway via my phone number.

    2) If your concern is privacy, sign up for a new card under a made-up name, address, and phone number.

    3) If you are concerned with both, sign up for a new card under a made-up name, address, and phone number -- then remember the made-up phone number and don't carry the cards.

    By the way, I haven't seen the "calling out for cards" around here, but I've seen something even dumber, from the point of view of collecting data -- some stores have the cashiers' keep a card behind the register SPECIFICALLY DESIGNATED to give the discount to people who say they forgot their card. This card basically has "data on hundreds if not thousands of people who claim to have forgotten their cards" which is probably only slightly more useful than overall sales data. If this is really corporate policy, not just store managers and/or cashiers trying to avoid the I-didn't-get-the-best-price complainst, it would seem to indicate that the real goal is price discrimination, not collecting data. However, it doesn't work for that, either. More than once I've been in a store where I don't shop often and have been asked if I had a card -- and when I said no, the cashier just pulled out the store card and gave me the discount anyway.

  13. Alfred:

    At some loyality card stores you can just give them your phone number as a substitute for packing the actual card.

    Wanting to have the loyality cards work for me not just the store I sent the following letter to our three local grocery chain stores. King Soopers, Safeway, and Albertsons.

    I don't use shopping lists so I didn't put two and two together until a recent shopping trip with my mother.

    My mother uses shopping lists that are hand written and I assumed were written fresh every time I took her shopping. Not true, she uses the same list over and over with the usual items she buys noted so she won't forget.

    Well that led me to think why don't the customers get to use their loyalty card for more than just savings. Give us back the information you collect for our use.

    When we enter the store there should be a kiosk where we enter out loyalty card and a shopping list is printed out .

    This would provide convenience for us the customer and marketing opportunities for you the store.

    First the list should be in order of location in the store. I know not everyone operates in a linear fashion when entering a store, but please reward those organized enough to use a list. And don't forget two entrances require two different lists.

    Highlight or color those items that are bought in a time repeat frequency. Just a reminder that we might be running out of our usual purchase.

    If you have a special on items I usually purchase please highlight or color those items. I might not need them right then but the special price might get me to purchase.

    I am very brand loyal and wouldn't be interested, but for your other customers you could alert them to brand savings. You might even charge brands for this notation, and the change could be very easy to track.

    Automatic coupons noted for items I usually buy. No need to cut them out of the newspaper I don't read. And no need for you to keep all those little slips of paper.

    I'm sure there are many marketing possibilities that I haven't thought of, BUT be careful not to clutter up the list with too much. Maybe use the back of the sheet for advertisements.

    I am also sending this to other stores where I have loyalty cards.

  14. lazy shopper:

    I put the loyalty card (keychain types) on my cloth shopping bags to remind me to take them in the store and use them!

    If there has to be a card and I am hoping it is keeping costs down somehow (better shipping?), I prefer a grocery that has reasonable prices and maybe a good deal on some items with the loyalty card. Some groceries have ridiculous prices and the card only gets it down to reasonable. If I am traveling and don't have a card for that grocery, this is annoying.

    Harris Teeter tracks my purchases and gives a small piece to the local art center. Every year I have to choose the school, etc I want to support.

    They also send me an email once a week with the sale flyer in it. I can see items I have bought before on the top of the email and make a shopping list. I don't usually use this much except when raspberries are on sale. This is something I really, really, like to know.