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Loyalty Programs: Invasion of Privacy or Saving Money

Posted on January 22, 2019January 22, 2019 by Tom Meeker

Being loyal has its privileges. Many stores offer some sort of money savings if you sign up for their store loyalty card. It could be points that turn into cash, gas rewards, or future money off or other types of discounts. Is it worth the hassle?

Stores do not offer these discounts without getting something in return. By using the card, you are giving the store a vast amount of information about you and your shopping habits. For those who fear giving up privacy, this is a big disadvantage. This is the one biggest reason not to use a loyalty card. I hate to burst the bubble of those who are trying to protect their privacy, however, you really have very little privacy anymore. Every time you search the web, shop, online or visit any website, you are giving out some personal information. If you shop using a credit card, a debit card, or a check, you give out information about what you buy and who you are. What do stores do with the information that they gather from your use of the loyalty cards?

Most stores gather this information in order to market to their customers. They can tell what products their customers are buying and they can market coupons for similar items to the customer. The other side is they can add and delete products by the usage of their customers. For example, they can tell if you have a preference toward name brand or store brand products. With this information, they can gear their sales to catch the attention of the majority of the customers.

Consumer panels to test new products can cost companies millions a year. With the loyalty card, if you buy a new product for the first time and you continue to buy the product, they know it is a favorable product. If say a new cereal was released and it sold out, this would seem to mean that it was a success. So, the next time the store will take valuable space to add additional stock to meet the demand. But low and behold, the next time, many of the new stock do not sell and even expire on the shelf. This is a loss in time, space, and product. The obvious reason was that when the cereal was released, everyone wanted to try it but did not continue to buy it.

With the loyalty card, the store can track who is buying the cereal. If the majority of customers bought the product only once, it was not a huge success and there’s no need to overstock, However, if the majority of those customers who tried it bought it multiple times, it is worth the investment to add additional stock and take the space to display it. This one little tidbit of information saves the store and the companies a lot of money on research.

The loyalty card also informs the stores on what point you will buy or not buy a certain product. This helps the store set a price point at which they will make the largest profit while still selling a huge amount of the product. Henry Ford was one of the first to figure out that  the largest amount of money can be earned by selling  more product with a small bit of profit than selling a small amount of product with a large profit per product. Setting the correct price to earn a profit while maintaining a large amount of sales is one of the hardest thing for a company to do. By having readily available information at their finger tips, stores can adjust quickly to meet the supply and demand of the customers. By doing this the money savings to the company will trickle down to the customers. Let’s face it, most of us want every opportunity to save money.

The store also receives the benefit of loyal customers. If you have their card, you are more inclined to shop that store or company over a competitor. It is just a human instinct to be loyal. Companies know this and play on this. They use to use your information to target you for special sales, coupons, or deals.  The more they do this, the more it reminds you that this is your store.

For the customer, you get the advantage of saving a little extra money every time you go in the store. For my family, we use a grocery card that gives us money off gas when we buy from that store. Over time, this savings adds up. We also watch for special deals available only with the loyalty card to save additional money. Often time, the store runs a special where you can get double, triple, or quadruple the point for a certain period of time. This saves even more money off gas.

Some stores use digital savings instead of a card. For example, Dollar General uses digital coupons if you sign up for their program. You go on their website, sign in and add all the coupons you think you might use. Some of them are great like $5 of $25 and you can stack the coupons so you get money off the item plus the $5 coupon. My family does most of our toiletries and household cleaning products at Dollar General and we save quite a bit each week with their digital coupons.

More and more stores and companies are offering loyalty programs. The question to ask yourself is whether giving up your information or privacy is worth the possible money savings. For my family, we find that it is. Most loyalty programs have saved us tons of money over the course of a year. Often times we get coupons or dollars off on stuff we would have bought either way. Again I stress, privacy is very important but if a company wants your information, they can find it by other means. Why not receive some benefit by them using that information?

Please feel free to share your experience and or opinions on using loyalty programs.

Peace Out!

Tom

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