Fact: Loyalty programs are desperate to have you sign up as a member.
Social media feeds are littered with competitions promising gift vouchers, free phones, computers and overseas holidays. How do these companies afford all this in the first place, and how can you benefit from it?
Below are 4 of the main types of loyalty programs, with tips on how you can take advantage of them to save money.
1. Points programs
Points programs are probably the most identifiable out of all loyalty programs. Frequent customers are incentivised by earning points every time they shop. Once these points accumulate to a certain amount, a voucher, discount or freebie is awarded to thank the shopper for their continuing support.
Points programs are tailored toward more general shopping such as grocery stores, allowing ‘everyday’ shoppers to save money. By securing repeat business, the program pays off for the business and as a customer, earning points further incentivises shopping with the same business.
Tip: If you are a member of a points program, check the T&Cs to see what rules are in place around point expiration. Many programs have a 12-24 month expiration on points, specifying that additional points must be earned within a calendar year, or an entire balance can expire. Set yourself a calendar reminder to make sure your points don’t expire before you have a chance to utilise them.
2. Tiered programs
A tiered loyalty program is similar to a points program, but usually works for more expensive products/services. These programs work best when there is more of a divide between prices (such as economy vs business class airline tickets).
For members of tiered programs, being on a ‘bronze’ membership immediately makes higher levels such as 'silver' or 'gold' desirable. With airline loyalty programs, there are both points and status credits (designed to keep you flying with one airline over another) to keep members constantly coming back and continuing their spending over the year.
Tip: If you are a member of a tiered program, see what the benefits are if you want to upgrade to a higher tier. Depending on the program, a higher level will usually give you access to better value offers (just ensure you don’t overspend when reaching for a higher tier).
3. VIP programs
A VIP program usually requires a customer to pay to become a member. This instantly means you have a sunk cost and will have to spend at the retailer to get bang for your buck.
Some airlines or high-end retailers have VIP programs that cost a fixed fee each year but allow first-priority access to sales events or discounts every time you shop. This can make a VIP program attractive only if you intend to spend your money with them and not another competitor.
Tip: If you are thinking of becoming a member of a VIP program, see how much you can save every time you shop and if this outweighs the benefits of locking yourself in to the one company for most of your purchases.
4. New members
Chances are the first time you visit a new online retailer, you were offered a 10-20% discount just for signing up to their mailing list. While this seems as though it's a decent trade, you’re now more likely to buy something because it’s now instantly cheaper than the prices you’re looking at.
Mailing lists are a goldmine for companies. Each member has a value assigned to them based on how often they open emails sent to them, click on links and follow through on purchasing based on these emails.
Email lists have low overheads to maintain but can result in thousands of purchases (Amazon is famous for sending emails with suggestions based on items you have been looking at but didn’t pull the trigger on).
Tip: New members can get great deals ahead of existing customers as companies are looking to grow their customer base and generate new sources of income. See what % discount you can get by signing up to a mailing list.
Loyalty programs are a great way to save money, but be cautious of the various terms and conditions, qualifications and spending limits you may need to qualify for in order to obtain benefits. Loyalty programs have pitfalls too. As a customer, a business will almost always want you to spend with them over any competitors and can even match discounts offered elsewhere if asked nicely enough.
Final tip: With so many different loyalty programs that carry their own cards, download the app of the company or find an app that can store all your loyalty cards such as Stocard.
Good luck, collect those points and enjoy some great rewards!