Supermarket “Membership” Cards and Data Collection

Question

Stores more and more frequently offer better prices to customers who obtain one of their "membership" cards. Obviously such cards can be used to identify the shopper, collect data based on their purchase habits, and obviously be of great use to the company in determining prices, sales, and inventory. Even if you don't associate your real identity with the card, the company can still use the data to know what items are purchased together and with what frequency, etc.

The question is, do these stores purposely use such data to go beyond simple market research and instead use the information in ways that are detrimental to the customer?

I am skeptical of the need for these cards because most of the data they need can be simply obtained from their own cash register. The only information you gather with the card that you cannot without, is the association of separate purchasing events. In other words, if I pay cash for Armadillo Food in one shopping trip, and cash for canned tuna in another, the store has no real way to know that those two items were obtained by the same person.

So why do more companies feel that such cards are needed? I don't believe that the discounts are real, but rather prices are inflated for customers without cards, thus making the card a benefit only in allowing the customer access to the normal price.

Answer 1

Supermarkets get the following benefits from loyalty cards (that's the correct marketing name):

• Obtain much more accurate information than they can gather from the cash register (these cards aggregate data when you pay without a credit card, or across family members). This information is used to measure ROI on marketing campaigns and therefore to tailor marketing to the real household demographic of a particular supermarket.

• Obtain loyalty - they encourage the same household to always use the same supermarket chain. The biggest benefit of this is that supermarket chains feel the effects of competition much less and tend to be able to use monopolistic-like practices, like raising the price of a few items, knowing that people will still be loyal.

• Enable other in-store policies, like self-scanning trolleys.

• Differentiate the offer: it's much easier to launch a DYI store when you own a supermarket if you have direct access to your customers and can offer them points on their supermarket loyalty card.

What do they give in return?

• Around 1% discount on average, which obviously is not real money - you need to buy even more stuff at the supermarket to get it.

The above statements can be easily verified on this Maxmiles brochure. Maxmiles had 3.5M card owners in 2007:

Maximiles Group is the European leader for online loyalty programs with over 3.5 million* members.

Answer 2

Those cards don't just give discounts. Those discounts are for products companies want to boost sales. When people feel like they get special treatment - they buy things that they wouldn't buy in other case. Or collecting points system - makes people buy products, because it feels that they getting them for free (for points). But that just boost sales as people buy more to get more points and then buy more to retrieve those points. Companies don't need to inflate prices to make cards work.

Answer 3

I am skeptical of the need for these cards because most of the data they need can be simply obtained from their own cash register

The demographic information they can get just by taking a sampling of addresses is incredibly useful:

1. They can figure out how far shoppers drive to come to each store.
2. They can determine other localized information like what neighborhoods are more affluent.

This sort of research can help them decide for instance whether they need to open new locations and where.

Answer 4

Membership cards are not about data collection - they are about boosting sales. The goal of the card is to cause the person using it to buy more than usual, and they cards are incredibly effective at doing exactly that. Whatever benefits your card gives you, multiply that by 8, and be assured that the company issuing the card is seeing at least that much higher profit off of the average card user than off of a non-card holder.