The Cost of Rewards Cards

By: Rich DeMuro
Apr. 12, 2013

Today, almost all of the big retailers offer a rewards system that provides an incentive for customers to revisit their local supermarkets and businesses, but that loyalty comes at a cost.

While the idea is to create something mutually beneficial for the customers and the company, buyers may not be aware of the possible dangers behind rewards programs.

The average U.S. household is signed up for 18 loyalty programs from big retailers like Target and Best Buy, one consulting firm said in an interview.

Stephen Rapier, a marketing professor at Pepperdine University, says while most of theses loyalty cards are simply there to reward return customers, others have a clearer motive.

“They are looking to specifically get and figure out the spending habits, frequency, and usage every time you go into their establishment so they can better return the actual service, the product, target that product to you,” Bill Castelblanco of Loyalty Concepts, Inc. said.

With the information gathered, retailers are able to provide customers with personalized coupons.

Though practical in theory, sometimes things get a little too personal.

In one case, a father found out his teenage daughter was pregnant based on targeted advertisements for maternity clothes and cribs sent to his address.

That’s why Castelblanco advises to only sign up for programs customers know they will be committed to.

“You should be selective with the company you choose to work with,” Castelblanco said. “[But] at the end of the day, it’s designed to save the consumer time and provide great customer service.”

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