Signed up for a supermarket loyalty rewards program? It’s a sham writes Brian Palmer:

• Loyalty programs were invented by an airline company and they make sense in industries where companies can’t differentiate themselves from their competitors.
• Supermarkets can though. Companies that attract customers through high quality products and exceptional service – such as Whole Foods and Trader Joe’s – don’t have rewards programs because their shopping experience speaks for itself.
• The supermarkets that do have loyalty programs thus feel that there is no reason for shoppers to shop with them and need to provide additional incentives. This should tell you something about them.
• These programs aren’t that great for supermarkets either. They should entice the most loyal customers to shop more – but the rewards are often so generous that retailers with loyalty reward programs don’t make any money from their top customers.
• Loyalty programs are also used to mine data. Tesco will look at your purchase history and try to market similar items with higher mark-ups to generate more profits from individuals. If you don’t shop with them for a while they’ll send coupons to lure you in. This kind of sounds like an abusive relationship.

The full article talks a lot more about the economics of the rewards card industry, and an experiment that everybody should consider engaging in. Read it here. Check out an earlier post on how Target uses its rewards program to manipulate you here.

Source: Slate