Overheard: Word of the Day

Apr 23 2009   5:03PM GMT

Loyalty cards – a way for retailers to get into their customer’s heads

Margaret Rouse Margaret Rouse Profile: Margaret Rouse

Attention, grocers: Get rid of the cards and just put stuff ‘on sale’ again. Then you’ll get my loyalty.

Justin McHenry, Not a Fan of Supermarket Loyalty Cards

Today’s WhatIs.com word of the day is loyalty card program. Justin McHenry says:

“The only point of the card is to hold me hostage, in the sense that I don’t get the “savings” unless I’m willing to let them track my every purchase and willing to take on the extra hassle of carrying the card on my keychain or shoving it into my overflowing wallet.”

Justin is annoyed at having to carry the card to get the discount — but a lot of people are more focused on how opting in to use a loyalty card gives the retailer way too much personal data.

After all, the data that’s collected from those cards could be shared with “partner” companies.  Or the cops in Arizona might come knocking at your door because you’ve been identified as someone who purchases a large number of sandwich baggies — a sign you might be a drug dealer. (True story)

I have to remember that the plastic loyalty card from my big-chain grocery store is not the same as my local farm store’s loyalty punch card.  My farm store issues a  little paper card that I hand in when the card is filled with “X”s to get a $10 gift certificate.  Punch cards reward the faithful.

Today’s loyalty card programs are not designed to reward the faithful — they are designed to help retailers gather incredible amounts of data about their customers.  They use the data for supply chain management, for marketing and to figure out ways to change customer behavior.  A loyalty card program is expensive to run.  It requires a lot of storage for all that data and sophisticated data mining tools to pour through the raw data and turn it into useful information.

The next step will be adding RFID to the cards. Some stores are already testing it out.

Here’s a scenario from Information Week:

The RFID-enabled loyalty card can identify a customer as he or she walks through a store. The chip in the loyalty card transmits to a nearby reader when the customer is within 8 feet of the reader, triggering an avatar to appear on a nearby computer screen. The RFID reader identifies the information in the loyalty card and feeds the data to the avatar, which welcomes the customer to the store in an animated fashion. Based on the customer’s historical purchases, the computer will send a Short Message Service message with store coupons to the customer’s phone.

It kind of boggles my mind how much information I’ll be giving away freely in exchange for seeing “-$4.25″ on my grocery receipt.

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