Posted: 7:00 p.m. Monday, March 18, 2013
By Scott Gamm
NEW YORK (MainStreet) — Membership rewards programs from retail, department and grocery stores are standard tactics used to lure consumers. Lately, some stores have been revamping their rewards programs to include more discounts and free shipping, which is becoming a trending concept in the industry.
“Staples and ShoeDazzle have just announced new programs, which offer discounts on all items and free shipping for members, providing valuable incentives to join,” said Jon Lal, founder of BeFrugal.com.
The Staples program is free, while ShoeDazzle charges a monthly fee of $9.95. Depending on how frequently you shop, the discounts and free shipping are likely to cover the fees.
This model aligns with the shopping website ShopRunner, which for a monthly fee provides unlimited two-day shipping to more than 70 online retailers. Amazon started its Amazon Prime program in 2005, which offers free two-day shipping for a $79 annual fee.
“These types of offerings are becoming more prevalent," Lal said. "This is a trend we’ll see more of well into the future, as stores are competing for customer loyalty. Rewards and perks are an incentive for consumers to shop with them exclusively.”
The exclusivity is the heart of the issue. Competition is formidable, and rewards programs allow stores to stand out from the crowd.
While some rewards programs can net some extra cash or expedited free shipping, these programs have their downsides. First, some stores may sell the information you provide when signing up for the program to third parties. Also, the retailers will have more data about what you buy and when you make your purchases.
“Joining rewards programs puts consumers in more regular contact with the store, which could mean additional emails sent to an already full inbox,” Lal warned.
A major source of impulse spending is store emails. The moment you get an email from your favorite store, you’re reminded instantly of a sale or a new line of clothing — even if you had no plans of visiting the store any time soon.
Lal also suggests thinking of rewards programs as an investment, especially if the program you’re joining involves paying membership fees. “Consider the value of the cost," he said. "Do you see it as an investment to get valuable perks you believe are worth paying for?”
Before you start any rewards programs with fees, check to see if a free trial is available; this way you can test the program to get a sense of the potential upsides.
Keeping track of your rewards programs is another obstacle. “Consumers should consider setting up one email address just for rewards communications or create a folder in their existing email account for rewards related emails,” Lal advised.
Additionally, consider websites such as AwardWallet.com, which helps organize travel rewards programs, as well as the Cardstar iPhone and Android app, which allows users to scan and keep track of the rewards cards to free up space in wallets or key chains.