Loyalty cards are not really about loyalty (consolidation as it's known in the business) to a particular chain, they're about surveillance, data mining and personally targeted marketing.
When you fill in the form to get your loyalty card, you provide the company with a wide range of personal information that they would find hard to obtain legally through other sources. By offering you bargains, the company induces you to part with this very valuable information.
I've had a look at a range of loyalty card brochures, and they ask for things like your employment status, your employment type, what type of housing you live in (owned outright, mortgage, private rental, public rental etc), the number of people in your household, the number under the age of 18, the number of cars you own, the amount of mileage you do in a year, whether you're pregnant (and when you expect the baby), your dietary preferences, and more.
Then, every time you use the loyalty card, your purchases and how you paid for them (cash, debit, credit, cheque, store card etc) are added to the database profile that you started by providing your details when you applied for the card.
Studying that database profile tells the company which stores you use, when you use them, how you use them, if you do your main shop on a particular day of the week and what your purchases are, when, where and how often you convenience shop, what specific menus you buy for (sot hey can pick up special occasions for instance), how many people are in your house (toilet roll consumption is a good indicator of this), if you've just had a child, if your children are starting primary or secondary school, whether you're going on holiday, and much more.
This has enormous value for the retailer as they can then target you very specifically and send direct marketing to you that is personal to you.
Say, for example, that they spot that you buy a particular type of organic back bacon and they're planning a new niche market (and more expensive) launch of honey cured, hickory smoked organic back bacon. You'll get a letter in the post, asking if you'd like to try it and offering you loyalty points if you buy it.
You think, okay, bargain! When you're next in the store, you buy the new bacon, it's not bad and discover the loyalty bonus is going to apply for several weeks. You get in the habit of buying the more expensive bacon and probably don't even notice when the loyalty points offer ends. And in a month or two, you probably won't notice the gradual hike in price either.
One of the dream customers for supermarkets is a family of four or five, mother does the shopping, father holds down a well-paid job and they have two or three teenage children (preferably girls). You're talking a weekly spend well in excess of £100 and usually around £150, faddish eating, lots of distractions for mum while she's shopping (so she doesn't notice the price of lots of things), and lots of very targeted marketing. Get her to spend an extra 2 to 5 per cent a week and she'll barely notice it, but multiply that weekly shop by all the similarly profiled people and then by 52 weeks and you have a nice little boost in sales and profits.
It's why T***o started stocking bird feeders and seed. When they analysed the data from loyalty cards, they found that a hard core of serious organic buyers would also buy feeders and seed when they were available. So green, bird-friendly people became another niche market to be exploited. If you don't see bird feeders on the shelves, then you know you're not living in an area where people buy much in the way of organic food!
Loyalty cards are also about segregation. I can't remember the exact figures but about one in five supermarket customers deliver 80% of the retailers' profits. So, like the banks that charge you fees (or reduce your interest) if you deposit less than £1500-1800 a month, the retailers reward their target customers and actively exclude the others.
We, for instance, are what is known as cherry-pickers. We're very focused, work to a tight budget, ignore most of the premium lines and tend to buy the most cost-effective staples. (I'll leave out the Free Trade and organic stuff that we do buy to keep things simple.)
To push people like us out, the retailer will increase the price of own-brand staples (yes, I've mentioned that this has happened up here), reduce their stock of staples (yes, they've done this too), or put the sort of items we buy in obscure places with minimal customer exposure (yes, done this, too).
So, the basic staple lines of lentils, rice, split peas, etc are stocked in small amounts and tucked away between other items. But, at the end of the aisles is a big display of premium packaged staples - rice, lentils, split peas etc - that are marketed as healthy, whole-food eating and at significantly more expensive prices.
The supermarkets say it's not about social exclusion. They say it's focusing on the most profitable customers. Ha!
Loyalty cards are also used for finding new markets, managing the stocking of fresh and perishable foods, testing new aisle layouts and displays, grooming customers to buy more high-profit lines, and testing price rises.
What happens with price rises is that the supermarket will hike the price up on a range and look for changes in buying patterns. If people continue buying the price-hiked item, then the price stays up.
If people shift to a different item, then either its price can go up too or the original item can be shifted to a special offer - which is actually higher than the original price. If that doesn't work and the store needs to clear stock before starting again, then you'll find a bogof offered.
Going back to the dream family I mentioned earlier, the aim for the supermarket will be to use their personal data profile to get them shopping frequently, to respond directly to offers, and to impulse buy as much as possible. In doing so, they've moved from being loyal customers to being addicted customers.
And if you think that's intrusive, then you should also be aware that while companies do not share your personal profiles with each other, they do share the analysis of your profile.
This means that by comparing your profile analysis across several loyalty cards, companies can target potential customers and target them with offers designed to draw them away from other companies.
The end result is that big business has huge amounts of data stored on vast swathes of the population - in many cases, much more information than is held by the government or its agencies. And people have volunteered it!
And it could go further if the US example is anything to go by. Police and security agencies have been accessing loyalty card databases to identify potential terrorists through profiling techniques.
As the authorities identify terrorists, they profile their entire lives including their shopping (and reading) habits. These are then cross-referenced to retailer databases (access is gained either voluntarily or via warrants) and then used to identify potential "terrorists". So, if you eat a lot of Middle Eastern food, then you can expect to come under scrutiny.
The reason I mentioned reading is that libraries also track what you've borrowed and when. So when it turns out you've been reading about the Middle East (or reading the Koran), buying Middle Eastern food, travelling through or into areas which contain potential "targets" and your phone records show you've been calling people with Middle Eastern names, then the authorities start assuming you're a potential threat.
This may appear to have taken us away from loyalty cards, but stick with me for a second or two more.
The fear of terrorism combined with the fear of crime, then assists the supermarkets in taking their loyalty card surveillance and analysis to the next level - RFID chips.
These are already being rolled out in the UK as a security measure - to stop people stealing razor blades for example. To make things safer for us, retailers plan to put these chips on everything they sell - which is convenient for them as it adds an extra level of data to mine.
The aim is to have the RFID chips not on the packaging - which could be discarded by thieves - but in the item itself (in the label on a pair of jeans for example). This would enable the companies to see what you wear and when, and even have a fair idea of where you bought it.
And even if there is pressure to have the RFID chip disabled at the checkout, they can still use them to follow you through the store as you do the shopping - to see what path you take, where you stop, what you look at, what you pick up and reject, etc.
And so it goes on and on. If you've stuck with me so far, then hopefully you've learned to be a little more wary - even if you don't want to go as far as we do and not have a single loyalty card and only ever pay in cash.
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