I literally don’t understand how it’s profitable to spend points ie free money ??
Edit : I’m partially talking about spending points earned
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They don’t profit when you spend points, but that’s ok for them because they profited when you earned the points.
The data they collect on spending habits is worth much more then the 2-3% back in a loyalty card provides the customer.
you think companies sell you things at no profit?
holy shit youre so smart, you might be the next steve jobs!
jk wtf you smokin bro? pass me some, smart guy
There are ten restaurants in a row. Each has an identical pricing scale and an identical thirty percent profit margin. (You spend ten they profit three basically). You have a customer who eats at each restaurant in a row. So for every ten meals you profit three dollars because said customer eats at your store once.
You introduce a loyalty program that grants a free ten dollar meal for ten meals purchased. So your thirty percent margin drops to twenty if and ONLY if they eat at your store ten times. So your customer, who is pinching pennies, stops eating at each store once every ten days as eats at your store all ten days. In the previous ten meals, you profited three dollars. Your loyalty program, however, has ensured you profit twenty dollars off that sale customer’s same ten meals.
I worked for a major hotel company and 75% of the profits came from the most dedicated guests. In order to be the most profitable, it is worth investing in those guests. By giving them “play money” via a points system, the guest becomes more entrenched in the company and less likely to go to a competitor.
Also, those points spend like retail price but actually only have to cover the cost of the goods. A room may cost $350 a night, but it’s overhead is closer to $70. Guests think they are getting $350 in value but it only really costs the company $70 or less.
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