Tuesday, 28 February 2012

Disadvantages of customer loyalty programs

So far we have considered only one side of customer loyalty programs, which are their benefits. However, there are some disadvantages of these programs too. Most of the these programs are managed by third party companies, which keep track of customer’s points, their private information such as date of birth, social insurance number, address, etc. Somehow I feel that our privacy is not being given the proper importance as these companies are tracking all of our movements such as where we shop, what we shop, and other spending habits. Our information is shared with third parties to do surveys, to promote their products and for various other reasons. Today we are living in an age of cyber crime, which is a very important factor when it comes to our privacy. If a hacker hacks these companies loyalty program systems, all of our information might go into wrong hands and can have drastic consequences.
The other disadvantage of such programs is to lure people to spend more money in the store by making them collect extra loyalty points or rewards. In this scenario, consumers are actually spending most of their disposable income just to collect few extra reward points. Loyalty cards are like a temptation for consumers to spend their disposable income. The fact is that they increase the price of a product and then give portion of that towards reward points. Ultimately it is the consumer who is paying more from his/her pocket. Once you get into such schemes, it’s never easy to get out of them. It is like a trap where one gets caught just because of few extra dollars they earn. The decision of enrolling into these loyalty programs is not easy as we have to see our needs and desires. It depends upon what type of card or programs we are looking at such as travel rewards, cash backs or air miles.


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