Five ways to use loyalty cards effectively

Many stores offer loyalty cards.  These plastic cards often come in pairs: one for your wallet, and a smaller one with a hole in it for your keychain.  Presenting the loyalty card at checkout entitles you to special prices on particular products, as well as other periodic perks like announcements of special sales, follow-on coupons, etc.

Stores don't provide loyalty programs out of the goodness of their hearts.  Providing the customer loyalty program costs them money, and they want to profit by it.  They get their money back either by targeted advertising that others pay for, or by getting you to spend more at their store.

I have a number of loyalty cards.  When signing up for them, I usually had to provide some personal information like address, email address, and phone number.  This information is now of value to the store immediately — they now know how to contact someone who spends money at their store.  I can expect to get fliers in the mail containing special sales announcements.  I can also get the same through e-mail.

What you're giving away when you sign up for a loyalty programWhen I purchase something and swipe my loyalty card, the store now knows what I bought, when I bought it, and how I paid for it.  I give my loyalty account number each time, after all.  Over time, they're building up a profile of my purchasing habits, which enables them market to me more effectively.  If I buy a particular kind of movie (let's say) then I might get e-mail notifications when similar movies are released.

The purchases also make more valuable to them for targeted third-party offers.  If I have a habit of buying one kind of cereal, for example, a competitor might pay the store to get a coupon in front of me at the time of purchase for $1.00 off of their cereal.  They can then subsequently track me to see if I used the coupon.  Or, just as easily, the company I'm loyal to could give me a coupon for their new cereal.

Overall, I think loyalty programs are a good thing, because you get access to deals that you wouldn't otherwise.  But it always is good to remember the store's purpose of customer loyalty programs:  to extract more money out of you.  Here are a few ways to get more than your fair share from a store loyalty program:

• Put coupons in context.  If you're offered a coupon at checkout after you scan your card, see why it was given to you.  Also, see if the coupon makes the item a good deal or not.
• Keep your own data on what things cost.  A special price through a loyalty program looks special, but is it?  Another store may have the same item cheaper without any loyalty discount.  (Case in point:  Walmart doesn't have a loyalty program, and they claim the reason for this is because they want to give everyday low prices to everyone, all the time.)
• Realize that any deal-induced urgency is created on purpose.  Some stores will offer a coupon, say, for $5 off an order of $50 or more, but the coupon will be good only for a week.  Translation: “Come back soon and spend a lot of money with us.  But hurry!”  The fear of loss is a powerful motivator.  Recognize it for what it is.
• Balance the cost of your time with the savings.  If you're offered a special coupon for a particular event, see if it's worth going in to the store to redeem it.  If it takes you too far out of your way, it may not be worth the time.
• Don't be pressured into buying something you don't want.  This is generally good advice, but since the data you've provided to the store through the loyalty program makes the ads served to you more targeted, the ads will be more appealing.  Forewarned is forearmed.

What other tips do you have for making best use of loyalty programs?  Share them in the comments!