Loyalty programs are structured marketing strategies designed by merchants to encourage customers to continue to shop at or use the services of businesses associated with each program. These programs exist covering most types of commerce, each one having varying features and rewards-schemes.
In marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card, debit card, or digital card that identifies the card holder as a participant in a loyalty program. Loyalty cards (both physical and digital) relate to the loyalty business-model. Loyalty Cards typically have a barcode, magstripe or RFID chip that can be easily scanned, although some are chip cards or proximity cards. Small keyring cards (also known as keytags) which serve as key fobs bring convenience in carrying and ease of access.
By presenting such a card, purchasers typically earn the right either to a discount on the current purchase, or to an allotment of points that they can use for future purchases. Hence the card is the visible means of implementing a type of what economists call a two-part tariff. Application forms for cards usually entail agreements by the store concerning customer privacy, typically non-disclosure (by the store) of non-aggregate data about customers. The store uses aggregate data internally (and sometimes externally) as part of its marketing research. Over time the data can reveal, for example, a given customer’s favorite brand of beer, or whether he or she is a vegetarian. Where a customer has provided sufficient identifying information, the loyalty card may also be used to access such information to expedite verification during receipt of cheques or dispensing medical prescription preparations, or for other membership privileges (e.g., access to a club lounge in airports, using a frequent-flyer card).
One can regard loyalty programs as a form of centralized virtual currency, one with unidirectional cash flow, since reward points can be exchanged into a good or service but not into cash.
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