Loyalty programmes that motivate new members to join by promising benefits, savings, or other perks are rapidly evolving to extract more data about our personal lives and charge us the maximum that we are willing to pay, according to an October report authored by former U.S. Federal Trade Commission (FTC) executives.
‘The Loyalty Trap: How Loyalty Programs Hook Us with Deals, Hack our Brains, and Hike Our Prices,’ was authored by Samuel A.A. Levine, who was the Director of the FTC’s Bureau of Consumer Protection, and Stephanie T. Nguyen, who was the Chief Technologist at the FTC.
In their report, the authors describe a three-part process called ‘hook,’ ‘hack,’ and ‘hike.’ Here, well-known companies use myriad tactics to hook customers into joining their loyalty programmes across industries including food, entertainment, travel/hospitality, etc., before then digitally profiling these “loyal” customers to learn more about them, and finally changing the very nature of their previous agreement by hiking prices or reducing benefits.
“In short, these programs are designed to feel irresistible. But too often, they operate like a Trojan horse — the programs look generous at the gate, but once inside, they unload hidden fees, intrusive data extraction, and traps that surface only later,” the report noted.
One prominent example was Amazon, which charged users for its Prime experience, before then introducing advertisements and then launching a more expensive, ad-free tier. In addition to this, Prime fees have been hiked and the company is set to pay $2.5 billion to resolve FTC allegations over the complexity of its Prime cancellation process.
Other companies named in the report included Uber, Netflix, Marriot, McDonald’s, Starbucks, Delta, and Mastercard.
The authors also raised concerns that loyalty programmes could keep customers anchored to specific service providers, giving these companies more freedom to uniquely raise prices for different customers after profiling them and analysing their most personal data. This is known as surveillance pricing.
“At stake is more than the future of loyalty programs — it’s the future of pricing and affordability across our economy. Increasingly, firms are moving away from mass pricing to micro-targeted pricing, where vast stores of personal data are used to extract the maximum a consumer will tolerate,” noted the authors in their study.
“Loyalty programs are the ground zero for this shift: they generate rich data, allow firms to track individual behavior over time, and give companies the tools to test and refine surveillance pricing.”
Published – October 23, 2025 07:59 am IST
