A popular Reddit thread recently caught our always roving eye. The thread was submitted by “IAmA”, who proclaims to be a behavioral analyst for a grocery store.
“IAmA” offers readers a supposed inside look at how the grocery business uses customer information to market to consumers, and encourages readers to asks questions.
“I know what you buy, big brother style,” writes IAmA. “I work for a consulting firm that analyzes shopper behavior to make marketing decisions. I have access to millions of people’s grocery transactions over the course of the past 8 years. I’ve been working in this role for about a year now.”
Unfortunately, “IAmA” is apparently a Walter Mitty of sorts and has also posted other similar threads:
“IamA dentist with 8 years of experience, if you have any questions shoot ‘em at me;
IAmA U.S. Border Patrol Agent;
IAmA Detective for one of the largest Police departments in the nation,” etc, etc.
Nevertheless, many of “IAmA”‘s answers led us, and hundreds of readers to conclude “IAmA” is somehow enormously acquainted, through study or experience, with the grocery store marketing subject matter.
For example, one reader asked, “What happens when the government starts letting health insurance companies get their hands on the data to start charging premium based on how ‘healthy’ their purchases are? Buying lots of ground meat and Fritos, premiums rise on your insurance because you’re more of a heart disease risk.”
“There was an incident a few years ago where a man slipped and hurt himself in a grocery store (not one I work for) and sued the store to pay medical expenses. Part of the store’s defense was pulling his data (including liquor sales) and portraying him as an alcoholic.”
Another reader asked, “How much of your data is gained using the customer loyalty cards? I understand they are used to link purchases together, but are they the crutch of your data gathering?”
“Without a good loyalty card scheme to encourage people to use their card, all you have is a load of transactions. But we really want to see how a person acts, so you need the loyalty card to link transactions together.”
IAmA’s pseudo-confessions prompted us to conduct a little research of our own.
Loyalty cards are the UK’s version of what we in the U.S. refer to as a discount card, club card, or a rewards card. These cards are structured marketing gimmicks that promise to reward loyal customers with various product discounts.
The store issuing the card requires customers to provide identifying information such as name and address. And in order to qualify for check cashing privileges, a store will ask customers to supply birth date and driver’s license information.
When presenting the card, the purchaser is entitled to either a discount or awarded points that can be used for future purchases.
In return for discounts or points, cardholders agree to allow the grocery store to track each and every one of their purchases. The store card issuer uses the aggregate customer data from the card as part of its marketing research.
Not all supermarkets have loyalty cards. Wal-mart does not have a loyalty card program, and neither does Meijer, a regional supermarket chain based in Grand Rapids, Michigan, with 196 locations in Michigan, Illinois, Indiana, Ohio, and Kentucky. (Meijer does have a Community Rewards Program).
However, a great many supermarkets do have loyalty cards. Winn-Dixie Stores have a Rewards Card; Albertson has a Preferred Savings Card; Harris Teeter has a VIC Card; Ingles has The Ingles Advantage™ Card; Giant Eagle has a Giant Eagle Advantage Card; Kroger has a Plus Card; and Safeway has a Club Card.
According to Consumers Against Supermarket Privacy Invasion (CASPIAN), a consumer advocacy group, some supermarkets are supplementing their existing “loyalty card” data with outside sources such as credit reports and government records. And all this data is being made available to corporate third parties like Gillette.
In 2005, Green Hills Farms, a NY state grocer, announced plans to launch a biometric payment system with enhanced loyalty functionality.
“The system, called SmartShop, powered by biometric solution provider Pay By Touch, San Francisco, Calif., uses a finger scan not only to pay but also to access customized coupons, promotions, and rewards from an in-store kiosk.
“To use SmartShop, Green Hills shoppers scan their fingers at kiosks throughout the store to receive customized shopping lists and specials. At the point of sale, shoppers can pay for groceries with a finger scan that automatically links to their financial accounts and SmartShop points. The quick sign up process and access to individualized rewards can also be accessed via Green Hills’ Web site”.
Consumer Information Sold to Third Parties
Even as far back as 2002, Seattle Press founder and executive director Deborah Pierce noted that consumers who use “loyalty cards” are merely trading away detailed personal information in return for a bogus promise of savings. Personal consumer information is then sold or traded to third parties.
The reason that stores introduce cards is so that they can profile and target their customers more accurately, writes Pierce, not to give you savings, but to increase their bottom line.
Pierce claims the few informal studies that have been done have shown that claims of savings by supermarkets are largely inflated.
Pierce notes that supermarkets sometimes use address information from your loyalty card application to match up your shopping history with data from other databases, and public records — even your income, and how much you paid for your house may be used to determine what kinds of “specials” to offer you, or not offer you.
Price discrimination is thus one consequence of data mining and profiling, writes Pierce.
Pierce also corroborated IAmA’s reference to the man who slipped and hurt himself in a grocery store.
“In a well-publicized ‘trip-and-fall’ case in California, a man shopping at a Southern California grocery store sued after falling in one of the aisles. It was reported (although the store has since denied it) that the store threatened to use his shopping history — which included large amounts of alcohol — against him in the proceedings”.
Cardholders Say Benefits Outweigh Personal Privacy
According to results of a Fall 2004 study by a student research team at Boston University’s College of Communication, an online survey of 515 adult supermarket shoppers revealed that most cardholders felt the benefits of using a loyalty card outweigh any infringement on personal privacy.
The study found 76 percent of cardholders reported using their grocery store loyalty card nearly every time they shop despite the fact that 52 percent also are concerned about how much of their personal information is collected by companies generally.
* Sixty-nine percent of consumers report that the card benefits them in the form of lower prices and access to special promotions.
* Seven in ten shoppers now know that grocery stores keep track of what they spend.
* Only 16 percent think about this fact each time they use it.
“The fact that consumers, even those generally concerned about privacy, are willing to use these cards is testament to the fact that personal information is a commodity people are willing to trade with the right company for the right price,” explains Professor James McQuivey, who supervised the research project.
Give Them Your Shopping History and You’ll Pay More
According to CASPIAN, industry insiders claim they use shopping histories to screw consumers out of discounts. For instance, if you’re a loyal customer of Coca Cola, when the store advertises Coca Cola to you, the discount is going to be different than if you’re somebody that’s price sensitive.
And when retailers review a consumer’s shopping history, they may not offer discounts to consumers who buy the same brands regularly, knowing the consumer won’t choose an alternative product.
“The idea used to be that you, the consumer, could shop around, compare goods and prices, and make a smart choice,” said Joseph Turow, a professor at the University of Pennsylvania’s Annenberg School for Communication. “But now the reverse is also true: The vendor looks at its consumer base, gathers information, and decides whether you are worth pleasing, or whether it can profit from your loyalty and habits.”