Should You Buy into Paid Loyalty Programs? It May Not Be Worth It

Restaurants and retailers are rewarding repeat customers and trying to bring in new ones with paid loyalty programs. Businesses such as Target, Walmart and even Chuck E. Cheese promise exclusive benefits and an elevated customer experience with these programs. But is the minimum $7.99 monthly fee for Chuck E. Cheese really worth the discounts on food and other perks? Maybe, maybe not.

Are Paid Loyalty Programs Worth It?

From faster shipping to access to special discounts and sales, these memberships aim to create repeat customers and more personalized shopping. But the question of whether or not these memberships truly add value or merely make you spend more is a big one. To help you answer that question, we’ve put together some steps to follow to find out if you should get in on paid loyalty programs.

Step 1: Understand the Cost of Paid Loyalty Programs

The first crucial step in evaluating the worth of a paid membership is to understand what you’ll actually pay. This goes beyond just the upfront membership fee. Some additional expenses that hide in the fine print pop up later.

Memberships often come with a mix of direct and indirect costs. That includes annual or monthly fees, charges for premium services and potential hidden fees that could accumulate over time.

Carefully scrutinize these costs in detail. That means reading the fine print, asking questions and considering the total expenditure over the membership period. For instance, an annual fee might seem nominal when broken down monthly, but when added up, it should offer value proportional to or exceeding the cost. Free shipping may only come with the deal if you spend a certain amount. You also should look over the cancellation policy and any associated fees.

Does it offer a wide range of payment options? Is it known for having beefed up cybersecurity? Does the business have a free trial period? These all are part of the cost analysis. The new Target Circle 360 paid membership, for example, costs $99 a year. But if you already have a Target Circle Card, that shrinks down to $49 annually.

The more informed you are about the costs ahead of you, the easier it is to decide if paid loyalty programs line up with your financial goals.

Step 2: Make a List of the Perks it Offers

After going over the cost, the next imperative step is to evaluate what benefits come with the fees. Make a detailed list of every perk.

These perks could range from free shipping, to exclusive access to products or sales, priority service, and special discounts or rewards points. It’s important not just to note these perks, but to understand their real-world utility and value to you personally.

To know the value of each perk, consider your own shopping habits and lifestyle. For instance, if a membership offers free shipping but you seldom order online, this perk may hold less value for you. And many memberships, including Target Circle 360, force you to spend a minimum amount of money to get free shipping. If your shopping trips there rarely are more than $35, that’s not much of a perk.

Conversely, if you frequently make purchases where shipping costs are high, free shipping could offer substantial savings.

Quantifying the value of these benefits can sometimes be straightforward, as in the case of shipping costs. But other times, it might be more subjective, like evaluating the convenience of early access to sales. If you’re the type of person who buys stuff you don’t need because of tempting sales, that may not be the perk you think it is.

Step 3: Analyze Your Spending Habits

Now, take a deep dive into your past spending habits at the business in question.

Take a look at what you bought at that business over a significant period, such as the past year. You can do this by looking through bank statements, credit card transactions or the business’s customer account details, if they’re available.

For a more nuanced analysis, categorize your purchases by potential perk. Online purchases go under free shipping, how often you bought from the store goes under faster shipping, etc. Also think about changes in your shopping behavior. Will you likely go to Walmart more because you’re committed to cooking at home more often? That makes paid loyalty programs become more valuable over time. The same goes for a decline in interest or need for the business’s offerings.

Finally, consider using budgeting tools or apps that can help you visualize your spending and savings. These tools can offer insights into your financial habits and help you make a data-driven decision regarding the membership.

Step 4: Compare with Non-Member Experiences

To paint the full picture, you need to compare the member experience to that of a non-member. This comparison should extend beyond money and look at the quality and exclusivity of the benefits.

First, compare the cost savings a member would enjoy against the expenses of a non-member. As an example, you could calculate the annual shipping costs you would pay without the membership and compare this with the membership fee plus any member-exclusive savings on shipping.

Similarly, look at the discounts and special offers and quantify how much a member might save during exclusive sales compared to the standard discounts available to non-members.

Consider any other benefits that have nothing to do with money. Members often enjoy priority service, which could mean faster shipping, early access to products or dedicated customer support. Assess how much value these conveniences add to your shopping experience.

If the membership grants access to premium products or services you love, this could justify the membership cost.

An important part of this step is to be realistic in what you’ll actually use or enjoy. If the perks of membership align closely with your shopping habits and values, the membership could offer a worthwhile enhancement to your retail experience.

But if your research shows that the benefits don’t offer you a whole lot, the non-member experience could work just fine.

Are Paid Loyalty Programs Right For You?

Deciding whether or not to invest in paid loyalty programs depends both on you and the program. They aren’t right for everyone.

You can tell if it’s right for you by understanding the full scope of the fees, cataloging each perk, analyzing personal spending habits and contrasting these with the non-member experience.

Also, be sure to do your own research and compare the paid memberships head-to-head. Don’t trust glowing reviews or influencers mentioning the program — it’s often all just a result of a cleverly crafted digital PR campaign, a mere means to help boost visibility.

Often, hefty promises and strange changes in the terms and conditions of the membership program can be a sign of an exit strategy. This is especially true in the case of cash-strapped startups effectively chained by their own unwise decisions. Not to mention that everyone can just make a website nowadays and have an online store up and running with little time or effort at all.

Whether you’re pondering a new membership or reevaluating an existing one, this systematic approach can empower you to make an informed, confident decision.

New York contributor Kiara Taylor specializes in financial literacy and financial technology subjects. She is a corporate financial analyst.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.