The Benefits and Hidden Costs of Loyalty Programs

I love getting free stuff. Most of us do. A popular way to get free stuff is through company loyalty programs. Whether you are getting free schwag from the Old Chicago Beer Tour, a gold card from Starbucks, or a free burrito from Qdoba, you could be getting a great deal. However, it is not always as great of a deal as you think.

The Benefits

The benefits of loyalty programs are obvious. If you are a regular customer and join the loyalty program, you can get lots of free stuff. Free stuff is better than stuff you have to pay for.

My favorite loyalty programs are simple and give you something you would have bought anyway. The Wahoo’s Fish Taco punch card is great. If I go in for ten meals, I get my eleventh meal free. I go there a lot, so the benefit is noticeable.

Other programs, like the Old Chicago World Beer Tour, give you perks for going in regularly. When I got my tenth beer, I got a free deck of cards. Not something I would have really cared about, but it is fun when free stuff day comes around.

The Drawbacks

I recently won two Starbucks gift cards worth over $50. I am not a Starbucks regular, but I decided to register the gift cards so I could get stuff like free refills if I go in to work on the blogs. It wasn’t long before I noticed how far I am away from a Starbucks Gold Card.

If you didn’t know, the Gold Card is given to customers who go in at least 30 times in a year. Every other week is not a ton, so daily visitors getting their latte fix can get the card pretty fast. But you can even go in every week or so and still get the gold.

What do you get for spending all of that money? A personalized Starbucks gift card that is gold and has your name on it. Once you have that, you get a free drink every 15 purchases. At an average of $3 per visit, you have to spend $90 just to qualify for their loyalty program. And that is not a “for life” qualification. You need to go 30 times per year every year to keep your gold status.

What is crazy is how well it works. When I saw I was on track for gold, I got excited and tried to go in more often. When I consciously realized what was happening, I slowed down and went back to my regular Starbucks habit. No reason to spend extra just for a gold piece of plastic with my name on it.

Be Careful, But Enjoy

If it can happen to me, a conscious spender, it can happen to anyone. If you get a loyalty card, don’t go in extra just for the perks. Go in as often as you would have and enjoy the perks when they come, but don’t spend extra money just to get them.

What About You?

Have you been sucked into a loyalty program that led to more spending? Do you enjoy getting perks? Share your experiences in the comments.

Image by shawncampbell / flickr

Comments

  1. GenY Finance Journey says

    I have the Starbucks gold card. I’m addicted to their breakfast sandwiches of all things. I only allow myself to go in once a week, on Friday, and I don’t get a drink to go with my sandwich, so it’s a $3.45/week habit for me. When I rack up a free drink, I use it to treat my fiance to his favorite – a quad venti caramel macchiato that he never gets because they cost around $6.

    But I will be splurging at Starbucks this weekend because my fiance and I happen to celebrate our (dating) anniversary during the time when Starbucks sells their anniversary blend and it’s pretty much my favorite cute gift to give him. :)

      • GenY Finance Journey says

        Yep, with the card you get a credit every time you use it, regardless of what you’re buying. I believe it’s next week that they’re changing their rewards program. Instead of 15 purchases to get a free drink it will now be 12, and you can use the free credit to get a drink or food item. I think they’re getting rid of some of the other benefits though, such as free syrup and the free tall drink when you buy a pound of coffee.

  2. squirrelers says

    I often overlook loyalty programs at places that I rarely go to. Actually, the more I think about it, I almost always bypass them. Now, if it’s a place I go to frequently, I take advantage of them. That way, the loyalty card doesn’t change my purchasing behavior, but truly rewards me with incremental value without any change in my spending habits.

    • Eric says

      As always, it seems like you have a good grip on things. I agree 100%. Sometimes it is tough to pass by when you see free in the future, but when you see what it takes to get there, not always worth it.

  3. Shannyn says

    I love the Mug Club at The Rock Bottom (with plenty of locations all over the US) free upgrade to a big mug when you order a pint and totally free! I also have a Viccy’s Secret Credit card which has two prongs- either spend to Xamount to get a $10 off gift card, but they also send credit card holders a birthday gift certificate and regular freebies to enjoy with no purchase required!

  4. frugalportland says

    I go to Sbux like six times a year (insert some hipster Portland comment here) but I saw someone with a gold card in front of me in line and felt like a four-year old — “I want one of THOSE!” … wtf?

  5. Jason Clayton says

    I have the same type of card with Bigby’s coffee (instead of Starbucks). Although with Bigby’s coffee you only need to request the loyalty card and your 12 purchase is free! It takes me a while since I only go about twice per month, but hey – I love the free latte.

      • Jason Clayton says

        I use it mainly for work when I take out project teams for coffee. I would say it doesn’t cause me to go out for coffee more, but does cause me to continue using the same coffee chain – instead of another.

  6. Briana Myricks says

    My name is Briana and I am a Starbucks Gold member. I was so excited when I got my card (lame much?) I went pretty regularly between school, getting my fix before work, and even when I wasn’t working, I craved some Starbucks. Now, though, I don’t use it as often because I fix coffee at home. However, when I’m going to work from my in-laws’ house, I do get Starbucks because they don’t have a coffee maker. I don’t get coffee though. I get a Caramel Apple Spice (yum!) or Peppermint White Mocha during the holidays.

    I like loyalty cards because like you said, there’s benefits and perks! Starbucks is revamping theirs but I also like ones via Foursquare, like if you’re a mayor. They can draw you in to spend more money though.

    • Eric says

      I like when I check in on Foursquare and get a free item or a discount as a surprise. I never pick where I am going because of Foursquare, but it is a nice perk to find out I get a free drink or appetizer!

  7. Renée says

    I buy ten coffees and get one free, much better deal. :p I generally don’t get sucked in unless there is a real benefit to me, the trying-to-declutter thing helps because I consciously decide that I don’t need useless stuff around, thus I don’t buy much unneeded crap (except for clothes… and shoes, I can’t help it)

  8. John Preston says

    I can’t say that I’ve been suck in by a gold card, but McDonalds’ $1 any size coffee totally sucked me into buying way more coffee than I ever used to, which was $0. Now, I often feel the tug to stop by for a cup and why not? It’s only $1.

  9. Kelly Whalen says

    They are revamping their card. :( It used to have the benefit of free soymilk and free syrups which actually made it worth it since I use it when traveling (hello, it’s a write off too!), and it’s one place I know I can get what I need.

    Could I do without? Yes, but between travel and the occasional treat it’s fairly inexpensive if I use the card. Of course I can’t LIVE without coffee so that may have something to do with it. ;)

    The ones that require you to pay a membership fee to save make me laugh. Why not just slash the benefit and make it free? You’ll have to spend a certain amount just to make it worth it, and that gets you to buy way more than you would otherwise.

    • Eric says

      I read about the changes to the soy milk and syrup policy. It is always a bummer for loyal customers to lose perks they are used to having.