Customer loyalty programs are everywhere these days.
Fast food restaurants, gas stations, and even state lotteries.
On the surface, they offer something we all love: free stuff. But what’s the real cost of those rewards?
Why Customers Love Them
For customers, it feels like a win: spend money like you normally would, and eventually get something for free.
- A free burrito after a few Chipotle runs
- A free coffee from Starbucks after racking up stars
- A free sub from Jersey Mike’s with Shore Points
You’re spending money, but at least there’s a little something on the back end. Occasionally, that feels like a treat, even though it’s just a planned reward.
Why Businesses Love Loyalty Programs
From a business standpoint, rewards programs are money, plain and simple.
They encourage you to:
- Spend more per visit
- Visit more often
- Keep coming back to them
It’s about creating habits and emotional connections. If you’ve racked up points at one store, you’re less likely to go somewhere else, even if the prices are better.
And that thing about the rewards feeling like a win? That's 100% engineered and intentional. It's carefully designed to be as appealing and as fun as possible so you focus on it more.
An Unusual Example: The Lottery?
One loyalty program that surprised me was from the Virginia Lottery.
That’s right: the lottery has a rewards program.
Buy tickets, scratchers, or other games, and you earn points. Redeem those points for (you guessed it!) more lottery tickets and games. It’s a fascinating example of how deeply the rewards mentality has penetrated corporate and consumer behavior alike.
The Hidden Cost: Spending Without Thinking
The main thing to be careful about is this:
Rewards programs make it easy to forget how much you’re actually spending.
I’ll admit it. I’m in the McDonald’s and Chipotle rewards programs. My wife is a fan of Starbucks and gets genuinely excited about their “Triple Star” days. And yes, I’ve gotten more than a few free subs from Jersey Mike’s.
These programs feed the habits we already have — and sometimes encourage us to spend more than we otherwise would.
Tips to Stay Smart with Loyalty Programs
If you're in a few of these programs (and most of us are), here are a few ways to make sure you’re getting real value and not just spending more for the illusion of a deal:
1. Audit Your Spending
Look at a recent credit card or bank statement and add up what you spent at one place in a month.
Was it $100 at Starbucks? More?
Now think about the rewards you earned from that $100. Was it worth it?
2. Calculate the Real Discount
If you buy 9 subs at $10 each and get the 10th one free, that’s $90 for 10 subs, or $9 each.
This works out to a 10% savings, spread out over the purchases.
It’s something, but it may not be as much as it feels like in the moment.
3. Time Your Purchases for Bonus Days
Some programs have “double points” days.
I mentioned the Starbucks Triple Stars day. As another example, Jersey Mike’s occasionally runs promotions where you earn twice the points. If you hit those days regularly (and exclusively!), you can get your free item in half the time.
4. Ask Yourself If You’re Still Enjoying It
Rewards aside, do you actually enjoy what you’re buying?
If not, the easiest way to save money is to stop spending it—even if there’s a reward at the end. The value of a “free” tenth item isn’t much if you didn’t enjoy the first nine.
Bottom Line
Rewards programs can be great, but only if you’re aware of your spending.
They’re designed to make you feel good while spending more.
That doesn’t mean you have to avoid them, but it does mean you should go in with your eyes open.
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header photo by George Pagan III
In my opinion, I have found most of the loyalty programs are another cheap tactic to get consumer to spend more than providing a truly personalized experience. none of the brands are trying to understand the consumer better so as to serve them well, but always tries to upsell their products by making them signup for their exclusive credit cards, which are so hard to cancel their membership.
Some do I suppose but the better ones do look to serve the customer better.
Customers leave if they feel they’ve been skinned or taken for granted.