What is a loyalty program?

Looking for ways to shop and save? Loyalty programs are a staple of today’s shopping experience. A 2022 study shows that eight out of ten Americans are members of at least one loyalty program — and at least half of consumers think these programs are essential.¹

Often referred to as rewards programs or points programs, loyalty programs can offer benefits that extend beyond traditional transactions, such as perks, discount codes, or access to special deals.

In this article, learn how loyalty programs work and the potential pros and cons of using them.

How do loyalty programs work?

With a loyalty program, people can earn rewards or points based on their purchases or interactions with a brand. These rewards can accumulate over time, allowing someone to redeem their points for benefits like one-time discounts, free products, exclusive offers, or even cash back.

Earning points usually requires someone to sign up and make qualifying purchases. Once a person collects enough points, they can exchange them for an available reward or even pay with rewards.

Choosing a loyalty program

It’s possible to earn rewards in lots of different categories — from food and dining to retail, entertainment, travel, and even pet products.

Here are some potential considerations for those exploring signing up to a rewards or loyalty program:

• Identify preferred brands: Choose a program that aligns with one’s preferred brands or retailers to maximize rewards for products or services regularly used.

• Look at spending habits: Assess which categories one spends the most on, such as travel, dining out, or groceries, and evaluate which loyalty programs offer the most rewards for those categories.

• Evaluate reward potential: Some programs offer generous points for every dollar spent, while others may require more significant spending to earn meaningful rewards.

• Personalized offers: Some programs may offer personalized deals and recommendations.

• Household benefits: If someone often shops or travels with family members, check if the loyalty program offers family or household benefits to maximize rewards.

Potential pros and cons of loyalty programs

Loyalty programs come with possible benefits and risks. Here are some factors to keep in mind:

Potential pros of loyalty programs

• Discounts and exclusive offers: Loyalty programs often provide access to discounts, exclusive offers, and promotions.
• Free products and upgrades: Some programs may offer free products, upgrades, or complimentary services as rewards, adding extra value to purchases.
• Early access: People may gain early access to sales, new product releases, or special events.

Potential cons of loyalty programs

• Membership costs: Some loyalty programs include membership fees, which can offset the benefits.
• Points expiration: Points or rewards may have expiration dates, leading to loss of benefits if not used in time.

• Overcommitment: People may feel pressured to shop more than they initially intended to earn rewards, potentially leading to overspending.

Loyalty programs may offer enticing benefits such as discounts and exclusive offers, but they can also come with potential drawbacks. People should carefully consider their shopping habits and preferences to determine if a particular program aligns with their needs and whether the potential benefits outweigh the disadvantages.

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