Shortly after the news broke about National Security Agency surveillance programs, Shaw's and Jewel-Osco supermarkets announced they were halting their loyalty card programs in favor of "card free savings," or everyday low prices.
William Emmons, president at Jewel-Osco in the Chicago area, said the move was part of the company's decision to lower prices throughout the store. "We know it may seem like we’re taking away something that you’ve come to enjoy and has given you a reason to shop with us, but in the long run, we want you to know that we think you’ll see it’s worth it," Emmons said in a statement to customers on the company's website.
"Here’s the inside track on our decision: We want to save you money on the groceries that you buy the most, and investing in the Fuel Rewards program would not help lower your grocery bill," Emmons said, referring to a loyalty program that provided fuel discounts at select gas stations as a reward for grocery purchases.
The company's decision to halt the rewards programs has the added benefit of eliminating sensitive questions about how retailers collect data on an individual consumer's purchases through loyalty card programs, although the company has not made that connection in its statements.
What's In It For Consumers?
A new report by Infosys suggests most Americans are willing to let companies access their personal data when provided with an incentive, such as additional savings or better service. "There's a strong correlation between how consumers feel they will benefit and what privacy they're willing to concede," said Kishor Gummaraju, associate vice president for Infosys, who heads up the consulting firm's insights practice for retail and consumer goods.
But the research also indicates consumers are discerning about how they share personal information and are skeptical about how companies will use their data. Infosys commissioned the study, which was conducted by research firms KRC and Vanson Bourne, because many of the leading retailers it works with had questions about what consumers are looking for, including "privacy concerns and what could be a tradeoff," Gummaraju said.
Evaluating the Tradeoff
The research suggests consumers like personalized promotions based on their location and context. "Eighty-one percent said they would be more likely to participate if promotions were based on where they were located and [were] taking into account their wants and needs," he said.
But three-quarters of respondents said retailers are missing the mark with ads on mobile apps, and 72 percent said online promotions and emails don't resonate with their personal interests and needs, Infosys said.
At the same time, many consumers weren't comfortable disclosing personal information that could help retailers provide more relevant promotions. About 39 percent of 5,000 respondents globally said data mining was invasive, while just 35 percent said it was helpful.
The dichotomy also surfaced when 78 percent of respondents said they would likely purchase from a retailer again if the merchant offered a promotion targeted to their specific interests, yet far fewer—16 percent—said they were willing to share social media profile information with retailers for marketing purposes.
Most consumers don't know exactly how retailers collect information about them and many assume it is anonymous. But Scientific Reports published a study in February indicating researchers who reviewed location data on 1.5 million people were able to uniquely identify 95 percent of them based on four hours of tracking, the Los Angeles Times reported in a recent article.
Nordstrom recently discontinued a program that used Wi-Fi to track shoppers with smartphones as they traveled through the store but without their explicit knowledge of the program. The retailer reversed course and pulled the plug on the program after a Dallas TV station reported on it, according to the Los Angeles Times.
But consumers are willing to reveal personal information when they understand the value they receive in doing so. For example, smartphone location information is routinely used for Yelp and other location-based apps with little complaint from most consumers.
"We're seeing CPGs and grocery retailers looking at this very seriously in terms of what type of data do we have access to and how can we use it," Gummaraju said.
Some retailers, however, are coming to the conclusion that overall point-of-sale data provides sufficient information without sparking the debate over individual consumers' privacy. At West Bridgewater, Mass.-based Shaw's and Star Market, a division of New Albertson's Inc., which recently announced it was halting its 13-year-old loyalty card program, a spokesman told the Boston Herald the company could learn enough about what was selling at the store level to make appropriate purchasing and marketing decisions. The decision also means the retailer has less reason to worry about a consumer backlash over privacy concerns.