Loyal Customers Pay a High Price: The Hidden Truth About Loyalty Programs

It happens every time: you give your number at the checkout, scan a code on your phone, and rack up points with every visit. In return, you get some discounts, free products, and exclusive invites. However, these loyalty cards do more than just reward. They track everything: what you buy, when, at what price, and even how often you take advantage of promotions.

Thus, every purchase becomes a piece of information. Retailers can tell if you are impulsive or thoughtful, if you buy at full price or only when there’s a sale, if you are loyal to a brand or ready to switch for a slight discount. These profiles then help predict your behavior and tailor offers accordingly. This leads to a phenomenon still relatively unknown: “surveillance-based pricing.” Privacy expert Mark Weinstein explains it as, “the practice by companies of using your personal data to determine the price of a product or service.”

In plain terms, instead of offering the same price to everyone, brands calculate what you might be willing to pay. There are numerous examples. A member of the Starbucks program noticed that his app offered fewer promotions in months when he drank more coffee. Airlines are already adjusting prices based on customer profiles. “Two people sitting next to each other [on a plane] often pay very different prices, not only because they booked at different times, but also because the algorithm, empowered by artificial intelligence, has assessed their willingness to pay differently,” says Mark Weinstein.

In retail, the same logic applies. Amazon changes the average price of a product every ten minutes. These price variations are not mistakes: they are continuous tests to see how far customers can go without giving up on a purchase. There is nothing illegal here. It’s “price discrimination,” an old business practice that has been refined by technology. “What has changed,” states Mark Weinstein, “is the tools they now use to gather your data and how they utilize it.” Loyalty cards, now turned into connected apps, are central to this scheme. The system does not create loyalty: it identifies, measures, and capitalizes on it.

Clearly, the loyal customer is not always rewarded. Sometimes, they become the price reference—the one the company relies on, even without discounts. While newcomers enjoy promotions, regulars often pay the full price, convinced they are getting a good deal. It’s up to them to compare prices and open their eyes to see if the offer is truly worthwhile…