Certus Stone

Before we get too into this, allow me to be clear about one thing: stores do not have reward programs for the consumer’s benefit. They would not give you discounted or free stuff if they weren’t trying to extract your money in some other way.

Walmart does not send out coupons to make your day better. They do it because they think that if they can get you into the store with the coupon, you’re more likely to spend money than if you did not have that coupon.

Even if you’re the person that they talk about in the “Extreme Couponing” TV show, where a $500 grocery purchase turns into -$2.30, Walmart doesn’t hate you. (The cashier who has to input all those coupons does.) Walmart loves you, and that TV show, because it makes the people who watch it want to do something similar. But of course, 99% of the people watching that show are not dedicated enough to become extreme couponers and will end up putting money in the pocket of Walmart, just like everybody else.

Coupons are a simple technology. They say, to save x amount of money, you have to go to that store before the expiration date. The store is where the psychology of big colorful signs, milk and bread placement, and “deals” come in. When you’re in the store, they decide what you to look at.

Punchcards are a logical next step to this. They are very common in coffee shops. You buy a coffee and get a hole punched in a card that you bring to the store. After 10 punches, you receive a free coffee. Essentially, you receive 10% off your coffee every time you get a hole punch. This adds a new way for that coffee shop to get you into their store. To have the punch card be useful, you have to keep it in your wallet or otherwise on your person. If you don’t, you may want to visit that coffee shop and not get your discount that you deserve for being a loyal customer. Having a branded card in your wallet all the time is great advertising for the store; a gentle reminder that you need a caffeine hit every time your pay for something. It’s also a gentle reminder that you could have gotten 10% off of the coffee that you’re paying full price for in a different store.

Membership programs are an interesting adaption to the punchcard. You’ll give the store your email or phone number and they’ll give you discounts on your purchases. This makes the store money in two ways. The first is similar to the punchcard, but instead of seeing an advertisement in your pocket, you’ll receive an email from them every 3 days telling you about the new deals; in essence, a coupon that the consumer doesn’t need to seek out. The second way is that, having that data will increase your value to them as a customer. They’ve always been able to see what people, in aggregate, are buying, but now they can keep track of what you, as an individual, are buying. They can use that data to adjust prices, inventory, and their advertising strategy.

In the worst case, your email address, phone number, etc. can be sold as an asset to some other entity that you did not give it to. cough Radio Shack in 2015 cough (https://money.cnn.com/2015/03/25/news/companies/radioshack-customer-data/index.html)

People don’t value their information as much as a large company does, so a majority will give this type of information for a 2-week free trial of the gold plan or whatever.

I have plenty of memberships and punchcards; I don’t want you to think I’m totally against this type of business practice. I do have a cynical take on it, though. I’m very selective about who I give my phone number to and I carry only one punchcard at the moment. For most people, just knowing that membership programs are using their psychology against them is enough to mitigate the effects of such manipulation. One has to be aware of the downsides of something before they can factor it into their cost/benefit mental calculation, which will be different for everyone and depend on your personal values.