Risks and Rewards of Loyalty Programs

Shoppers' keychains and wallets are flush with "loyalty" passes that offer discounts and deals from all kinds of places -- department stores, airlines, grocery stores, pharmacies and gas stations.

But before signing up for yet another shopping pass, you might want to consider the risks and rewards.

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In this time of high food and fuel prices, debt burdens, declining home values and stagnant income, consumers are undoubtedly looking for bargains. If you can save a few bucks on cosmetics at CVS(CVS Quote - Cramer on CVS - Stock Picks) or get a second box of macaroni at Kroger(KR Quote - Cramer on KR - Stock Picks) for half price by simply swiping a card, it's hard to justify resistance.

A company called Chockstone has even developed a technology called SingleSwipe to make rewards programs more convenient by linking them all up to one credit card, thus avoiding the need for dozens of plastic doodads.

Firms such as Chockstone collect, store and analyze all the details on what, when and where you buy. Such information allows companies to gain a competitive edge by identifying items you might want to buy. Stores offer coupons on their receipts to keep you coming back and spending more. Product makers offer discounts on those coupons to hook you onto their brands.

"Based on historical frequency and the kinds of things you purchase, we make an offer for you to make another purchase," says Chockstone CEO Jeff Lipp. Retailers and restaurants have had to "get really smart about how they make offers ... so they can make the right offer to the right customer at the right time."

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