Customer specific marketers reduce their advertising costs because they know the low profitability and low loyalty of the promiscuous shoppers who are attracted to their stores by heavy advertising. The result can be significant profit increases. Converted 1,000 of their 3,000 temporary price reductions to cardholder specials. When the customer presents her card at the checkout counter, she gets cardholder priced items at a lower price than other shoppers. When she buys multiple units, she also gets additional discounts not available to non-cardholders.
Many retailers adopt straddle pricing.
This is a system in which regular shelf prices are higher than the competition, but cardholder prices for the same items are below those of the competition. In this way, the non-cardholders subsidize the cardholders. As computer power is further enhanced, total customer profitability can make it possible to provide even better treatment for large annual purchase customers than that extended to regular cardholders. In some cases, rather than have deep price reductions on advertised merchandise, upscale retailers can offer heavy bonus points instead. This keeps from destroying the retailer's price image.