How are loyalty cards profitable for companies

Question

I literally don’t understand how it’s profitable to spend points ie free money ??
Edit : I’m partially talking about spending points earned

In: 0

Answer 1

>I literally don’t understand how it’s profitable to spend points ie free money ??

It’s a *loyalty* card. You can only use it **with that particular company**. In order to use it you will have to provide them with additional profit in the future.

You are a business. You could sell your 10$ product at a 3$ margin or you could sell your product at a 2$ margin and ensure your costumers will be unlikely to ever shop with a competitor again. If option Two yields you more profits, you’re going to choose option Two.