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Loyalty cards : Providing rewards or threats?

“Frozen caramel, no whip for Suuuubbaa” – Manager of the Panera Bread I usually go to on Monday told the person who makes the drinks. The thing is I hadn’t ordered it yet, there were 5 people before me in line. I smiled and said “yes”. He gave me a quick one hand hug and went about delivering the food to someone. The person before me was surprised and asked if he was a friend of mine. Before I could answer saying that I came there every Monday, her companion, an older lady answered her – you know all these cards they make you sign up… they are recording what people buy… that is why I never give them my information. I was taken aback because as I said, that is not how he found out what I usually order. But at the same time, I could not deny the truth in her statement. We talk about privacy in so many different shapes and sizes, but when it comes to discounts we are willing give it away.

After I got back from lunch I did a quick check on how many loyalty cards I carry – more than 10! And I know I have, may be another 10 cards, that I don’t carry around because I don’t use those stores frequently. If they can be pooled together with a little bit of data mining, they can figure out almost everything about me – name, age, where I graduated from (there was only one grocery store near my school and with the time period I shopped there they can figure out I was there for school), where I work (approx. as I do shop in stores that are either close to work or home), what route I take to work (remember the Shell rewards that combines the Ralphs grocery points?), whether I have kids, what kind of wine I like… Yes, we are getting the discounts but what are we giving up in terms of privacy?

Loyalty cards : What do they know?

Loyalty card programs collect and store different types of data. It includes direct information that we give (name, address), data collected during the transaction (name of the product) and some inferred (frequency of purchase).

  • Customer demographics : When we sign up for loyalty cards, we willingly give them certain information including – name, address, age/birthday, gender, email & telephone number.
  • Customer location : Even if you move and don’t change the address, they can figure that out (approx) by the most commonly visited stores.
  • Products purchased : Information about what we buy (name & type of product, price, location of the retail store, coupons used)
  • Frequency of purchase : How frequently we buy a product – whether you buy singles or by carton.
  • Value of your purchases : By category or by visits.
  • Customer responsiveness : How each customer responds to the mailers they get (by tracking the coupon that was targeted to you), how responsive they are to surveys conducted.
  • Redemption information : How you redeem you loyalty rewards (product, gift cards, to which store or product)
  • Segment/basket analysis : This is the marketing gold mine. This is not individually attached to you but more like if people in this demographic (gender/age/mother) bought “X” what other products did they also buy, so that those products can be cross promoted to you if you are not already buying them.
  • Credit card information : Yes, they do store information about the credit card you use.
The only thing they don’t have is your Social Security Number. Oh no, wait, if you have a credit card that is doubling as a loyalty card or a club card that will let you “attach” your checking account or credit card, they have that too! So there really is nothing that they don’t know about us.

Rewards vs threats

  • How a consumer sees the loyalty card : Discounts!
  • How the company sees the loyalty card : Marketing/Information gold mine. The information can be converted into commercially valuable insights for generating more revenue.

Collecting the information alone doesn’t matter as much as the company that is handling the information. Lot of the store rewards card systems are outsourced.  So even if you trust CVS or Kroger or whatever-store-you-frequent, you have no idea who is actually handling the information. If this outsourced company is hacked, you information goes along with it.

DSCF5589

And the next potential threat is sharing of information. Honestly, how many of us actually read the privacy notice before signing anything starting from the free rewards card to a $20000 limit credit card? I would guess very few people do that. Just in case you didn’t know, your information is shared with a lot of people “other” than the company itself.

For example  -

  • The company may share your name/address/shopping activity to other companies they “believe in”.
  • The company may disclose your information to law enforcement, court or other fraud investigation units.
  • They can share the information among their other brands and partner companies.
  • If the company merges or was bought out they transfer the information among other business assets.
  • They can sell the information[after removing the name & address]

So if you start buying from one clothing store and started receiving offers for a shoe company or accessories you know how your information got there.

From privacy to shopping carts

And coming back to the discount part… The whole point for us, the consumers, willing to share this information is for one purpose – getting the discounts. But without realizing it we might be paying more. How?

  • They will send coupons for related products. This is very convenient but if it is an item we wouldn’t have bought if we didn’t have a coupon, that is not saving. It is just spending more. Simple. And they will make sure the related product would be a tempting product. You might not have studied your habits, but they have.
  • NOT sending coupons for products you buy anyway. People think signing up for loyalty cards might get them coupons for products they generally shop for. But this is not always true. If you buy a certain name brand product all the time, you might not get a coupon for that product. You are going to buy that anyway, why waste a coupon on you? At that same time, they would have sent that coupon to someone who never tried that product before. So you are going to be paying more than that guy.

Everything is studied. Mostly it is not studied on a micro/individual basis, but you are going to be categorized in a bucket and you are going to be studied.

Should I willingly give up discounts and pay a higher price?

That makes me look like a moron compared to the next customer who bought the exact same thing for $2 less because of “club pricing”. This is not a scare tactic post. All I wanted to convey here is – being aware of what you are giving up goes a long way. If you are aware of how your information is used and how you are being studied you can -

  • Choose not to give your information. Yes, this is possible. You can sign up for cards without giving your name, address, birthday, favorite color and the number of teeth… when I signed up for my first card, I was in a hurry. And I was not buying a huge amount of stuff so I told the cashier that I will sign up later. She gave me the card saying I can fill out the information and mail it out. Life happened and 8 yrs later, I still have not done that. That card works perfectly well. The only thing I can’t do is use my phone number if I forget my card. I am ok with that. Ever since then I have asked the cashiers if I “have” to fill out everything. Most often they just ask for email. If they insist on the name and address, I don’t know what they will do if you write “Mickey Mouse”, 1000 Imaginary street, Middle of nowhere, CA :) .
  • Create a separate email for this purpose : And give that when you sign up. Just one note of warning here – if their database is breached the only way they have to notify is through this email. So you might want to create a filter with “security, breach” as keywords and forward just those emails to your regular email account.
  • Opt out of the communication sharing : There is always a check box that says if you don’t want to share information or receive communications from us, check this box. They know that people won’t notice or even if they do, they won’t do anything. Because we are good at not doing something. If the box said “click here to receive communication” they know that no one will click that either.
  • Shop elsewhere : There are plenty of stores that don’t have a rewards program. Rewards programs cost money and it is built into the prices. For groceries check if your farmers market or local grocers have cheaper prices. A lot of mom and pop stores have better pricing and customer service.

Be an informed shopper and know what you are buying and its worth.

 

{ 38 comments… read them below or add one }

20's Finances

Great post! Very interesting and I especially liked the tips to protect yourself and still take advantage of discounts. I have an email designated for spam. I rarely check it and it saves me money. What better relationship could I ask for!

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Suba

The email designated for spam helps me with coupons as well. I sign up for the coupons/freebies but have to search only when I need something.

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First Gen American

Actually, that’s one of the things I like about Walmart and Target. I don’t have to have a loyalty card to get their low prices. I think the loyalty card thing has gotten out of hand. I use my grocery store and cvs ones, but hardly any others.

You are SO right about loyalty cards NOT giving coupons to predictable and loyal customers. I have 3 grocery stores in my area and I swap around depending on sales. I definitely notice that if I haven’t gone to one particular store in a while but then pop in for milk (it’s on my way home), I’ll often get the $10 off $50 purchase coupon…but as I start going there regularly again, it stops. I’ll also get coupons for competing brands, but not the brand I buy.

I would love a single loyalty card that works at all chains. That would be awesome. I would be willing to give up some personal information in exchange for the convenience. I hope someone comes up with the technology and the organization skills to put that business plan together.

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Suba

I am planning to scan all the bar codes, paste them in one sheet and print it out. They just need the bar code, right? something like this – http://www.justoneclubcard.com/ but DIY

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Jeffrey Trull

I hate loyalty cards, and I only use them when it’s more or less required to get the discount on the spot. This seems to be the case at a few supermarkets, although I’m not sure if the card is really required or not. I don’t care coupons or other discounts I may get in the future. Those things really aren’t worth it to me. All in all, I much prefer to shop at stores that don’t even offer a loyalty card (like Trader Joe’s).

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Suba

I used to get coupons for the previous resident of the apartment I used to live in, but none of them were really useful. After I moved, I signed up for a new card and didn’t give them my address. So I never get them now.

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Jenna, Adaptu Community Manager

I think it’s a fair trade off. I get discounts they get information on shoppers. However, it gets tricky because they don’t know the reasons behind the purchases. For example, I still use my mom’s loyalty number but my purchases are a lot different than hers. Or if you a shopping for a party or gift those would be outside my norms.

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Suba

It is a good thing they are not asking for the reason behind the purchases :) if they ask that, that would make people think and curb a lot of impulse purchases as well I suppose :)

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Hunter @ Financially Consumed

It’s frightening how much personal information that is available for anyone that really wants to find out more about us. I do see some benefits. It prevents me from being exposed to irrelevant advertising and promotions, to a degree. Like Jeff, I don’t like loyalty programs. They are designed to learn more about you so they can make more money.

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Suba

Very true Hunter. With as little as name and rough location it is possible to get quite a bit of personal information already.

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Eric J. Nisall

I don’t mind those programs most of the time. It worked really well for me when Borders was still around and I would get 30-40% off coupons only for members. My local Publix supermarket doesn’t require any kind of loyalty card to get any savings which is cool, but for the most part I just give them a Gmail address and only what info I feel like putting down. I mean, it’s not real hard to find information on people these days (other than really secure stuff) and if you place an order online for any of these places you pretty much give them the same info so to me it’s no big deal. But that’s just me.

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Suba

Oh I loved Borders coupons. Sad to see them go. I like Publix in that sense, we don’t have one near where we live now. We used to have a Publix and a Kroger near by, the Publix prices would always be better even without any card.

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MoneyCone

Even online your shopping habits are tracked. Google does it too unless you opt out. Great post Suba!

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Suba

And the Amazon tracking and recommendations are scary accurate…

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Squirrelers

Really good post, Suba. Just today, speaking of giving out information, I was asked several times for my phone number and email address when making regular brick-and-mortar store purchases. I declined, as per usual. I mean, they weren’t even paying me in terms of the discounts:)

It’s really something how trackable we are, and how “profilable” we are. More importantly, how identifiable we are from disparate, minor sources of information patched together.

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Suba

Agreed, combining with the social media, we pretty much put everything out there..

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krantcents

I have three loyalty cards for restaurants. I did not provide any information to get them. Each of them gives me either money or a free item after X number of purchases. It works for me.

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Suba

I don’t have any loyalty cards for restaurants. I would get them for the restaurants I frequent.

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Untemplater

I actively use 3 reward programs which isn’t too bad. I’ve noticed recently that paying by credit card at certain retailers is like an auto opt-in to their junk mailings and related brands/stores which is so annoying. It’s definitely getting harder to protect our information these days! -Sydney

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Suba

I didn’t realize paying via CC might opt me in for something. I use CC for everything. I have to pay attention to that.

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Tushar@EverythingFinance

I personally don’t mind giving away that kind of info. If it helps serve me better, why not!
Although, the only loyalty card I have is Starbucks.

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Suba

I like my starbucks black card. But sadly plenty more… You don’t have grocery stores that gives discounts for a club member?

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Ashley @ Money Talks

I don’t shop at many stores that have loyalty cards, but I almost all my shopping at Costco which is the mother of all loyalty cards, so I guess that evens out.

It is trippy when you stop and think about how much info they have on you.

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Suba

We shop at Costco too. But the data they can get from there would be pretty funny for us. We buy Quinoa, Fruits and Veggies from Costco. Nothing more :)

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Monica Clark

Your article really gave me pause about how easily we give out personal information, and to strangers no less! I resisted loyalty cards for so long, and then I got sucked in and now have a couple. If you add social media information to the mix, it really isn’t that difficult to find out most of what you want to know about someone. Excellent read.

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Suba

Yeah professionals information from Linked in, personal from facebook and add in the hobbies from twitter, the entire history can be reconstructed.

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Donna Freedman

My favorite example of loyalty card info coming back to bite: Years ago when I was living in Alaska some guy was protesting the amount of support he’d been asked to pay. (I think it was child support but I can’t remember with 100% accuracy.) He claimed he could barely afford to feed himself and thus he shouldn’t have to pay so much.
You guessed it: Ex-wife’s lawyer subpoenaed his store loyalty card and saw things on it like steak and wine.
Ahem.
I usually unpack my wallet before a trip, and sometimes forget to put the cards back in. When I’ve been in a store and didn’t have my card the employee always seems to have a card available to scan for me so I can get the discount. This might work for those of you who don’t want to sign up for a card. They’ll likely ask for your phone number, so be prepared to say, “I can’t remember which number I signed up under and I’ve moved a couple of times, sorry.”

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Market Maker

Its really not that big of a deal. If you want the rewards then they have to have some information about you. It’s not like someone is sitting there searching for your name and then saying “wow, John buys ‘x’ and ‘y’ so he must be ‘z’.” They don’t do that. If you want the rewards then deal with it.

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Andrea

IN the last year orso I’m evaluating every loyalty-thing that’s offered to me and if I’ll actually use it. They can be worth it, I collect quite a few airmiles by being loyal to a grocery store here but meh, most times I don’t find the offers that great.

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SB @ One Cent At A Time

Very informative post. I carry only one card of this type, that is CVS. I am too cautious to give out my details. I agree with other commenters, anyone can have all your information easily by paying the data mining companies. Our information is sold in the market for money every day. Did you ever noticed your spam folders? It happens all the time, you buy product X , which is of high value, you start receiving mails on product Y which is a competitor to X..

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First Gen American

There’s got to be an app for that. Too bad my blackberry isn’t that smart yet.

Good idea. I’ve gotten that I now store the loyalty and punch cards I don’t use all the time in my coupon binder. Works okay if I remember I put it there.

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Tushar@EverythingFinance

Costco. But haven’t joined yet. But soon will, once our second baby arrives :)

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retirebyforty

I only have Safeway and Petco. I think we’ll have less and less privacy in the years to come. It’s going to be difficult to fight the trend. I heard a show on NPR where you can take a photo of someone on a phone and run it through a program. The program will try to match your picture on social media and internet then give the result. Pretty amazing.

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Ben @ BankAim

Starbucks has a great card! Free drink after 15 purchases.. but then again you have to look at how much their drinks are.. kind of a rip off.. for 1 free drink

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SherryH

I have cards for the local grocery stores. I know they get my personal information, but I figured I get discounts, so, meh. Now I’m rethinking that.

Last month I got a mailer from Harris Teeter. “Here are some coupons for you,” it said. “And also a survey because we’ve noticed you haven’t been shopping here so much lately and we’d really like to find out why.” So I told them. I’d been getting great deals there with coupons, but it was time-consuming and the products often weren’t food we normally ate. Food Lion has better regular prices on the staples we normally buy, and I can get everything in one stop. I also told them that it was weird and creepy to be nagged about my shopping habits that way. No response, but I wasn’t expecting one.

First Gen American, that’s interesting that the stores are more likely to give you the register coupons when you’ve been shopping around. Maybe I’ll have to try to shop around a little more!

Squirreler, our local KMart has their card reader set up so you have to type in your zip code before you pay. Now, I could hit Cancel to skip the question, but where’s the fun in that? I type in a random zip code – 90210 is a favorite, because I can remember it easily, but I’ve also used an old one from Massachusetts and one from Michigan that I have memorized. I’ll have to see if I can’t commit a few more random zip codes to memory…

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Jen @ Master the Art of Saving

FABULOUS post! I always knew that I was giving them my information but never thought much about it. It’s crazy how much they can know about us from those little cards. I have like 20 or so.

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IWPCHI

“Choose not to give your information. Yes, this is possible. You can sign up for cards without giving your name, address, birthday, favorite color and the number of teeth… when I signed up for my first card, I was in a hurry. And I was not buying a huge amount of stuff so I told the cashier that I will sign up later. She gave me the card saying I can fill out the information and mail it out. Life happened and 8 yrs later, I still have not done that. That card works perfectly well.” Ha ha ha! Very good security you have there, friend!
So you use those “anonymous” rewards cards thinking that the corporation that issued it has no info on your identity? LOL! How do you PAY for your purchases, dear friend? Do you ALWAYS use cash?
Those stores know that, sooner or later, you’re going to leave the greenbacks at home and, after whipping out your “anonymous” rewards card, you’ll be forced to pay with a debit or credit card… and guess what? Now they’ll be able to add a true identity not just to that one purchase that occurred the day you left your cash at home, but to all PREVIOUS and FUTURE purchases made with your “anonymous” rewards card!
And this is precious, too: “Ever since then I have asked the cashiers if I ‘have’ to fill out everything. Most often they just ask for email.” So you “just” give them your email… which links your rewards card to another wealth of information that resides on the Internet that could easily identify you. And you’d better not give the “wrong” email addy… you know – the one you use for all your “adult” activities? And when these stores begin using facial recognition technology? Then all these shabby ruses you suggest to your readers will become so much silly wishful thinking.
Using rewards cards or credit cards to purchase anything should be avoided like the plague. If you’re going to set up an anonymous identity to sign up for those cards, be aware that a single screwup on your or your spouse or significant other’s part will strip away your “anonymity” with the swipe of any credit or debit card.

And remember: all of that information you’re giving away in order to save a few dollars can – and will, perhaps – be used against you some day in a court of law… like say, in divorce court? All that expensive wine, champagne and flowers you bought for that person (or persons) who is (or are) not your lawfully wedded spouse? And that rewards card the liquor store so generously offered you? Silly you, creating a database of all your purchases of alcoholic beverages! Won’t the judge at your next DUI hearing be amused when the prosecutor shows documentary proof – derived from your and your spouses’ liquor store rewards cards – that you have not exactly been “on the wagon” since your first DUI…

We are wage and debt slaves living in a capitalist police state! Wake up folks!

Independent Workers Party of Chicago

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