Please Don't Card Me

Why do supermarkets, and other retail chains, insist on using those damn discount card programs? Personally, I can't stand them, purely as a customer. It's one more place wanting personal information. It's making me work to shop with you. It's making me less likely to shop you, knowing if I don't have the card, I won't get a sale price. I have gone into stores and walked out without buying an item I explicitly went in for because I did not have a card, and the item happened to be on sale. I could stand paying full price as expected, but not paying full price when others were paying a bargain price. That's a lost sale, not a good thing for the retailer. It's another something I have to carry around with me in case I happen to go into that store.

I've given some unresearched and unsupported thought as to why retailers so readily adopt card programs, despite the fact that most people seem to despise them. In fact, that is number one on the list of reasons not to have one of the card schemes: alienating customers current or potential. If enough chains follow suit, or you are the only game in town, naturally it becomes easier.

So there's one negative. Another might be the overhead of running such a program. Another might be that it won't accomplish what you hope to accomplish if you are soft about it. That is, if people know that a clerk will swipe a generic discount card through when they say "no, I don't" to the question of whether they have a store card, there is less incentive to be sure to get one. Another might be that people will provide false information, foiling any demographic data benefit to the card issuer.

What are the positives? I can only posit based on what I would do were I in the shoes of the retailers. The alienation factor is strong enough that the positives must be awfully strong to overcome it.

Creating a mailing list for targeted advertising and offers. Foiled if the info provided by the customer is false, but good in concept.

Controlling limits on sale price purchases. If the limit is 4, in theory the computer system knows that customer bought 4 last time they used the card, and shouldn't get the sale price this time. I have no idea whether stores actually do this.

Demographic data collection. This is not only applicable to information about who the customers are and where they live, but could go as fine as buying preferences matched with demographics.

Test marketing, using the mailing list and demographics, to see what offers or loss leaders will bring people in, and how effective different presentations might be.

Check cashing is the old and original reason for such store cards, remains a valid one with no relation to giving sale prices only to card holders, and is the one circumstance in which the retailer ensures collection of valid data rather than issuing a card to yet another customer named Mickey Mouse.

Sense of membership or previous investment. If you have a card for one store and not another, you may tend to shop preferentially at the store in which you have already made that investment of effort.

Are there other benefits to the retailer that I am overlooking? When I conceived of writing this post more than a week ago, I'd thought I might make it "scholarly" by seeking out and linking articles on the practice that would provide actual reasoning and insight, and actual data on just how much card programs turn potential customers off. Since I wanted to get it written, and was inspired by the amount of recent shopping I have done at stores with card programs, where I lacked one of their cards, I went ahead and speculated instead.

I figure there has to be a good business reason for them, perhaps some of the ones I speculated about above, or such programs wouldn't be so rampant. While I may not like it personally, I find it fascinating to put myself in the shoes of the management of those retailers and imagine how I would justify it, or use it knowing it exists.

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I think that the main reason why they use the cards is basically the same reason that the airlines have their frequent flier programs: they're essentially trying to incent customer loyalty.

I know that down this way, Winn-Dixie gives out points with every purchase. On occasion they have special offers that you can get by having "X" number of points in your account.

I'm sure that many of the stores are keeping track of sale purchases, but I seriously doubt that anyone is going to come out and start enforcing limits over multiple trips to the store. With the primary goal of the card programs being to build customer loyalty anything that takes away from that goal will be seriously frowned upon by management.

Actually, weirdly enough, the stores here do enforce the limits on sale items. Vons and Albertsons both do, anyway. It's damned annoying from time to time, too.

I could go on for a while about the damned limits, but I'll restrain myself... :)

Interesting, the Albertsons here doesn't do that. We've used our card multiple times on the same day to purchase more than the sale limit (inadvertently, of course. She goes and then I go before I find out she was already there.) We ended up buying something like 6 12-packs of Coke products one day when the limit was three. I bought the last three and gave them the phone number they have on file for us (not really ours) and they didn't say a word. Maybe they only enforce that in areas where they can get an agreement among the different stores to do so.

That would make sense.

I happen to know that part of the reason that stores try to get people to use there cards is as a means of ordering..
the computers keeps track of what has sold and bases the next months order on that. the more people that use the cards the more accurate the ordering is and the less humans have to be involved in the process.
now I know you don't need to use the card to do this. alot of stores are doing it now with there registars. they also keep track of how far people travel for some of the sales. how many people in the area of the store shop there ect ect ect...
alot of places ask for your zip code for the same reason.

I recently read an excellent paper (which, of course, I can't find now) which suggests that the motivation for these things (and for many of the privacy-violating stuff we encounter now) is to support discriminatory pricing schemes.

Ever wonder why they print coupons on the back of the sales reciept? They track my habits and know how price-sensitive I am, and what I like to buy. This influences the coupons that they give me. If they thought I was a cheap bastard, they'd offer me a better deal than if they think I'm rich and don't care.

We have a local grocery store chain (White's Fresh Foods) here in East TN that advertise heavily that they do not use affinity cards.

Discriminatory pricing is a large part of the motivation, by rewarding "loyal" shoppers with lower prices.

However, coupons printed on the *back" of sales receipts are there long before you checkout. Check the spool of blank paper next to the register the next time you go. The "bonus" coupons you getm which are printed separately, after your receipt comes out, are tailored to your purchases. Buy Heinz ketchup and get a coupon for Hunts or some such.

The two main reasons however are (1) the collection of demograpbic data and (2) the tracking of buying habits. Both of these are interrelated and probably should be treated as one. It is simply amazing how much you can learn about someone based solely on their zip code: for example, income range, cars they're likely to drive, etc. Here's the key though, you can also predict what TV shows they're likely to watch and what magaznines they're likely to read. Thus the chains can target their advertising much more precisely. Same with the manufacturers with whom the chains share the summare information. For instance, Gillette sees that far more of its Mach 3 buyers live in areas likely to be Men's Journal instead of Men's Health, and can adjust not only their advertising placement, but also their advertising campaigns to match.

Finally, it also tells chains what bundles of products their customers buy, which helps them place and price complimentary products in the store so that you can (or can't) easily find the special guacamole that you always buy with your imported, lowfat tortilla chips. Also, no reason to put both of those on sale at the same time. If they put one of them on sale for cardholders, you're likely to go to the other aisle and buy the other one at full price, which they love.

That's only the tip of the iceberg, but it gives an idea why chains and their suppliers love these accounts.

Hello People!
I could comment on this post a number of different ways but I'll try to be brief. I work for a nationally branded food products company that has dealt with retailers on this issue many times. In response to several posts, demographics are only a by-product of an attitude. It's the attitude and the action that defines you, not a particular skew toward income, ethnicity, etc. The card database (db) that a particular retailer holds shoudl be used to determine category or product growth during certain causal (or natural conditions).
For instance, how many households who purchase corn chips also purchase salsa. Does it vary by time of year like say Super Bowl? Do households who load up on Soda during a hot deal (like the example above) come back into the market just as frewquently or does this pantry loading take them out longer? Etc. You get my drift.
It should never be used for household level information (what a waste!).

Most retailers are using the information in a stupid form like offering you discounts on future purchases. Several companies, like Catalina Marketing, solicit manufacturers of Brand A to target users of Brand B for a trial purchase. They have nothing to do with the shopping card, they only trigger on the UPC (Universal Product Code, the black bars).
As for George's comments above, his last paragraph starts to get there but I think he is giving retailers way too much credit. They are not analytically oriented. The relationships between a grocery retailer and manufacturer is quite confrontational, especially as one mass retailer continues to dominate the grocery scene.
Yes, manufacturers would love to analyze the information for the wealth of buying information it could provide but only for their brands. Even then it could not pay for itself since many food purchases, in and of themselves, represent very small sums of money, even when annualized.
Retailers could leanr a great deal but I have not seen any who know what they are looking for. They are only interested in the prices at their competitors.

I started using an Albertson's card (with the ranch address and phone number) for one reason only: 3¢ off of gas at their mini-mart. I fill up twice a week, so that's some decent savings. They also have buy-one-get-one-free on briskets and steaks and roasts that I use it for, both here in Dallas and down at Cleburne.

I'd like to see what kind of sense they can make out of that. For free beef and cheap gas, they're welcome to try.

During interviews with a company which provides technologies to a large bookseller (online and brick-and-mortar) I got into a discussion over loyalty cards with one of the principals of the company. The primary motivating factor behind discount cards for booksales at least seems to be related to what Deb discussed above -- inventory management and order optimization. Most of the other benefits of the cards are a bonus, but most come at the price of apparent intrusiveness. In the mind of the bookseller the other tradeoffs are pretty much a wash.

Using Markov analysis (e.g., see http://www.ms.ic.ac.uk/jeb/or/markov.html especially the "Data" section) it is possible to determine the rates at which shoppers are switching brands for a specific type of product (this turns out, for obvious reasons, to be easier for a grocery store to carry out than for a bookseller). Knowing that a specific shopper actually did buy Tide one month and then All the next month exposes more information about brand switching than if you just know sales of Tide and All on consecutive months (otherwise every customer who switches from All to Tide obscures a customer who switched from Tide to All). Knowing the actual % of switchers for a product line makes it possible for the Markov analysis to assist in inventory management. Management can get pretty accurate answers to the fundamental question of "How much Tide and/or All should we order for next month?"

If this is the major motivation behind discount cards, it would explain why many stores have gone on record as saying they won't use customer information for targeted marketing, etc. -- many have assumed the cards are only useful for such marketing, but this may not be true and the privacy blowback from such marketing would probably make the cards a bad source of marketing data. Running discounts on selected brands may also expose how "loyal" a customer is to competing brands. I can't help but believe, though, that holding a discount card makes people more likely to shop at the same place, which carries strong benefits above inventory management.

I can't help but believe, though, that holding a discount card makes people more likely to shop at the same place, which carries strong benefits above inventory management.

I'm not so sure about this - most people I know have cards from almost every local grocery store that uses them, and it's usually location and/or selection that determines which store they shop at.

On the other hand, the cards tend to drive away infrequent customers. A few months ago, I shopped at a Pavilions, bought about $50 worth of groceries, with about $10 in "member discounts". I had signed up for a card several years earlier, but had misplaced it, and couldn't remember the phone number I had when I signed up for it. The checker told me that she couldn't just swipe a generic discount card; I would have to pay full price, then go and sign up for a card, then bring the card and the receipt back to a checker and get a refund. Had the person behind me not given me his card to swipe (which negated any demographic information just as much as having the checker swipe a card), I would have just left the groceries and walked out empty handed. I won't even consider shopping at a Pavilions now, because it's too much of a hassle.

I loathe those cards as well. But I've got a wallet full of them nevertheless. As much as hate presenting a little card that says, "Here, please track all my purchasing habits," I'm lazy by nature. Besides, I noticed that every time I go shopping, I make my purchases using the same credit card. So it doesn't take a whole lot of creativity to figure out a way to use that habit against me, sans discount card. Also, every store uses those things now, collusion laws be damned.

wow thats weird Brendan.
most places are very willing to swap a generic card if you say you forgot yours or that you just don't have one.

Loyality? Yes loyality to discount shopping. These stores are calling everyone without a card a FOOL. They clearly post the discount in large pricing tags below the item. If you are concerned about privacy lie on the application form, don't use a credit card, and never go on the internet.

Cards have changed my shopping habits.

I have all the cards and shop different stores when I am in the area. While shopping I strictly limit my impulse items to those discounted to the max by the cards. I create my weekly menu according to the items discounted. I never pay full price for meats, poultry, fish, or cereals. For fresh produce I pay the price.

At King Soopers (Kroger) whenever I purchase Silk Soymilk a special coupon printer gives me another coupon. It states on the coupon "thank you for being a loyal silk customer". I don't know if that is linked through my card or just through the register.

Wayne, Vons (same company as Pavilions, I believe) does the same thing. Which is why I don't go there anymore, either. *shrug* I'm at a loss as to the motivation.

It seems to me that you are all missing the big profit opportunity for supermarkets in issuing cards. The card creates a two-tier system--the haves and the have-nots. Check the "regular" prices for the have-nots. They are ridiculously high, and much higher than the same items in competing markets. Thus, the have-nots (read "suckers") who stumble into the market (or who are "against" cards) and purchase the "sale" items at the no-card "regular" price are increasing the profits of the supers by an extraordinary amount.

The result is that the supers win two ways: they obtain some amount of loyalty and info from the card holders, and they manage to maximize their profits from the second-class citizens (which they create) without cards who purchase the "sale" items.

The answer is simple: a method of price discrimination more elegant than coupon circulars.

in addition to being used for inventory, customer-card based point of sale data is used to help determine better pricing strategies.

Companies look to see a great range of things from this data, but largely 1) it provides the company an opportunity to test what prices produce the best sales volumes (by giving them a control sample and a sale price sample, which would not occur from just register data without the club-card savings), 2) provides an opportunity to determine if lowering the price just produces a stock-up phenomenon or if it increases the total volume bought per customer over a week/month/quarter/year (again, not easily inferrable except with customer-tracked data), 3) as stated above, helps determine brand-switching phenomenon based on price (again, with a control group for the non-club-card holders), and 4) simply know their target audience better.

Inventory can be determined without the club card simply by overall sales; these models give them a way to do all of the above in terms of customer loyalty, while giving a test bed for pricing strategies. yes, it is soft, with people sharing cards (random people in line handing you theirs, etc.) but those effects are rather just noise in the greater scheme of things.

The bottom line is, grocery stores used to price things by having someone store manager set prices based on cost + 4% margin. That was it--no science, no methodology, no notion of even inventory. And they can't compete against, e.g. Wal-Mart like that. This data allows them to determine how sophisticated pricing strategies work--whether imposed by the corp hq, or by outside consultants. simple pos data that isn't stuck to a customer id number doesn't provide a control group.