Study: Loyalty programs make you buy more

Photo of author

By Christopher Elliott

For years, consumer advocates like me have been warning consumers like you that loyalty programs aren’t the “win-win” propositions companies claim they are.

To which loyalty program apologists, whose judgment is too often distorted by the intoxicating Kool-Aid of points and miles, countered: Prove it!

Well, now we have that proof.

A new study of hotel frequent-guest programs suggests that, far from costing companies money, the programs increase their share of room nights by anywhere from 150 percent to 500 percent. Just over 7 of 10 guests purchased at least one additional room night with real money, according to the study by Phoenix Marketing International.


Beware of the loyalty program continuum

The researchers even came up with a clever catchphrase for the trap. They called it the loyalty program continuum. (Queue the eerie music, please.)

“As a person moves up this loyalty activity continuum, from becoming a member to being an active member to achieving elite status, the share of room nights they give to hotels in a particular loyalty program increases dramatically,” says Greg Diaz, a vice president at Phoenix.

This was no fly-by-night poll. The company surveyed more than 12,000 frequent-guest program members in 11 countries. It measured the impact that the programs have on hotel usage. Its findings reflect other studies, which suggest guests spend an average of 40 percent more on a company when they are active loyalty program members.

Maybe you stopped reading this story when you saw the headline and my name, because when it comes to loyalty programs, you won’t believe a word I write despite hard evidence that I’m right. That’s fine, by the way. I’m an unapologetic loyalty program critic, and you are not my audience, so feel free to click away now.

International Citizens Insurance helps expats, travelers and anyone far from home find the right insurance plan. Our knowledgeable agents will help you find the best plan at the right price and be your advocate for the life of your policy.

Everyone else, listen up: Loyalty programs are “win-lose” propositions. It’s made with companies in mind. Unless you are willing to not just study endless program rules, but to spend hours on end keeping up with the frequent changes, you will almost certainly lose. Here are the areas where they can stick it to you:

You’ll probably spend more than you expect

Several airline loyalty programs now require a minimum spend level per year in order to reach their coveted “elite” status. What do you get in return? Oddly, many of the “perks” you get were given to all customers just a few years ago. Those include having your bag included in the price of your ticket. (Or, as they somewhat dishonestly call it, checking a “free” bag.)

It will change the way you consume (and not necessarily for the better)

Whether you’re a member of a grocery store loyalty program or a hotel program, membership will almost certainly affect your future purchasing decisions. You’ll give your business to the company, often when it isn’t in your own best interests. This form of blind loyalty is the Holy Grail for programs. It makes consumers so fixated on earning points that they ignore the fact that they’re buying a terrible product. (Here’s why you have to ask yourself if loyalty programs are worth belonging to.)

They’ll move the goalposts without telling you

Sometimes, points and miles may expire and even when you finally get to use them, you might end up having to pay extra fees. Rules and redemption levels change. Don’t believe me? Read your program agreement. I hear from unhappy readers on an almost hourly basis. They’re trying to recover expired points or redeem miles for a ticket they’ll never get.

So what is loyalty? It’s whatever a company says it is right now, and tomorrow it may change.

I’m not saying you shouldn’t participate in any loyalty program. Obviously, if you already spend a lot of money with a gas station, bookstore or grocery store, why wouldn’t you also collect some of the perks that go along with being a frequent customer? What I am saying is: Mind the pitfalls. Companies rig their Loyalty programs in their favor. They’re designed to manipulate you into spending more and short-circuit your common sense.

And if you really drink that Kool-Aid, you’ll defend a program when it moves the goalposts and allows your points to expire. Sounds crazy, I know, but watch the comments and you’ll see the apologists line up to tell me how wrong I am.

So now you know that loyalty programs are profit centers for many companies. They’re designed to turn you into a mindless purchasing zombie.

So what are you gonna do about it?

Who benefits more from a loyalty program?

View Results

Loading ... Loading ...
Photo of author

Christopher Elliott

Christopher Elliott is the founder of Elliott Advocacy, a 501(c)(3) nonprofit organization that empowers consumers to solve their problems and helps those who can't. He's the author of numerous books on consumer advocacy and writes three nationally syndicated columns. He also publishes the Elliott Report, a news site for consumers, and Elliott Confidential, a critically acclaimed newsletter about customer service. If you have a consumer problem you can't solve, contact him directly through his advocacy website. You can also follow him on X, Facebook, and LinkedIn, or sign up for his daily newsletter.

Related Posts