Authors: C.Banks and V.Tran
What do you actually get when you sign up to become a “member” of a loyalty program, the largest of which includes the likes of the well-established FlyBuys program or those introduced in more recent times such as Woolworths’ Everyday Rewards scheme?
Loyalty programs are based on a simple premise: the lure of ‘rewards’ (in the form of discounts, special deals and offers) in exchange for loyalty, in particular, regular and sustained purchasing behaviour. Customers join such programs with the expectation that, as a regular consumer, they will receive priority access to services and/or products (more accurately described in marketing terms as ‘incentives’) that are both matched to their needs and not ordinarily available to the general public.
As many of us would be well aware, when signing up to a loyalty program, one is usually required to provide basic personal identification details such as name, address, age, sex and preferred communication channel e.g. email or postal address. We can also be asked to provide information relating to our buying habits, such as preferences associated with products/brands and purchasing methods.
Many consumers may, however, not be aware that, by signing up to such programs, every purchase interaction that they are involved in is tracked and interrogated by the business as a means of building detailed customer profiles, information which is of significant commercial value to the business as a key driver in helping to refine its customer relationship marketing (‘CRM’) strategy.
The products you buy, the price you pay, how regularly you shop, where and when you purchase are key data metrics that feed directly into your customer profile each and every time you spend. The data collected is not only used to track (and ultimately predict) your spending habits but also features heavily in helping the business to entice you (and others within your customer segment) to purchase more regularly through the use of incentive-based tools e.g. targeted offers and promotions.
More critically, consumers are also generally unaware as to the nature and extent of how their personal information is being used by the business when it decides to on-sell such information (in de-identified form, often labelled as “customer insights”) to third parties. A recent survey by Monash University (Worthington and Fear 2009) identified that only 28% of respondents were aware that such a practice was occurring and that, when made aware, 71% were concerned about it.
The practice itself can include the sale of consumer information to: (i) the business’ manufacturers and suppliers to better inform product design, supply and advertising; (ii) private market research companies for inclusion in broader industry-specific research and development activities; and/or (iii) businesses with shared or mutually beneficial interest in the consumer behaviour such as ‘upstream’ or ‘downstream’ retailers/service providers.
As the business is not passing on your personal information to third parties in identifiable form, it is not in breach of Australian privacy legislation, which ordinarily limits the collection and subsequent distribution of personal information in such circumstances.
So, the next time you are confronted with the “opportunity” to become a member of a loyalty program, take a moment (indeed several moments!) to clearly appreciate what it is that you are actually signing up for.
A good start is to read the fine print (in particular, the associated terms and conditions) as you may discover that, by signing up, you are giving the business permission to not only track (and ultimately influence) your purchasing habits but, more importantly, to on-sell your personal information to third parties for a wide range of purposes.
Matters such as how will my purchasing information be captured and used and who will it be on-sold to and for what purpose(s) are important questions to ask yourself and should rank alongside those “what’s in it for me” questions that you regularly ask yourself as a consumer.