Reward Points, Loyalty Cards, and Lies

It often amazes me to what lengths companies will go to in order to sell me their product. Whether it is a Sham-Wow, a Toyota Prius or a mutual fund, large corporations will do everything in their power to get my money. I see this everyday, from billboards to television commercials, from product placement to “viral videos”, everybody wants a chunk of my change. The scariest form of this attempt for attention are the deceptive schemes that look like they are good for the consumer, but are actually beneficial for the company.

I think reward points, or loyalty cards, are the type of thing that companies do in order for us to give them our business while pretending like they are doing us a favor. “Shop with us” they say, “and we’ll give you back some of your money!” These systems look good on the surface. Shop at Save-On Foods, get Save-On Points, redeem for discounts on products or prizes. Shop at Costco using the American Express card, get 1% back on all your purchases. Looks good? Sounds good? Well, they can be, but they are also only in existence because the company is making a profit off of it. It the program lost the business money, then the business simply wouldn’t do it. There’s always a catch, there’s always some other reason that the company is implementing a reward program. It isn’t for your benefit, it is for theirs.

However, there are still some good rewards programs out there. The good programs are ones where both the business and the customer benefit. Take my MasterCard, for example. They give me back 1% on all my purchases, in cash. I win, because I get some of my money back, but MasterCard also wins because I used my card more often, and they make money every time I use that card. The bad programs are the ones where there is little, or no, tangible benefit to the consumer, while the evil ones are where the business waits until there are too many “points” in existence, and as such, simply makes them worth less.

But as long as you’re already going to the store, you might as well sign up for the rewards program – as long as it is free to join and participate. And over the years, you might build up a few points here and there. But what do you do with them? When I was growing up, some parents of a friend of mine managed to buy an entire home theater system with the reward points that they had earned, but it took years and years of purchases, and it took a transfer from one type of points to another in order to get them all at the same place, where they could be used more effectively. My wife, on the other hand, would much rather use a few points here and there to save a dollar or two off of our regular purchases. And why not, she argues, as we’re never going to save enough to buy anything worthwhile.

I wondered which way was better, so I decided to figure it out. I guess it would have to be context specific, as certain prizes or cash returns would be better or worse than others, so you would constantly have to keep yourself abreast of the “going rate” for cashing in on your rewards, but the general principle should be relatively easy to figure out. If I were to determine which way was the best, I would simply go through the catalogue of rewards (if your program has one), and figure out what prizes I would want to get. If there was nothing worth getting, then there’s nothing worth saving for, so you might as well trade them in for cash or discounts at the register. If there are an item or two worth saving for, then figure out its market value, and translate that into the points system. For example, if you wanted a Nintendo Wii, and it cost 420 points to redeem, or $210 in store, then you would simply have to determine in store if any discount was worth more or less than the ratio presented by the Nintendo Wii. In this easy example, the worth of the points are approximately fifty cents each, and as such, you would have to earn back fifty cents for each point you redeem. If it costs 5 points to save a dollar off ice cream, then save your points towards the Wii. If it costs 2 points to save 3 dollars, then by all means, redeem them for the discount.

For the most part, I find reward systems too complicated and not rewarding enough to be worth the time and effort required to get anything worthwhile out of them. It seems like you need to spend thousands upon thousands of dollars at a single store in order to earn something worth a couple of bucks. Unless you find cash reward programs, like at Costco or from American Express or MasterCard, then they honestly don’t seem worth it.

What rewards systems do you have? Are they worth it? How do you use your reward points?

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