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We just know you'll love this, Ms. Loyal
Grocery stores are using technology to zero in
on what products you really want, not what they want you to buy
Loyalty cards are going higher-tech.
Popularized in the 1990s and now a fixture on American keychains, the cards have for years been used by retailers as a way to gain insight into their customers' shopping habits. In return, shoppers are given discounts on store merchandise.
Now, some retailers are tapping the technology associated with the cards to increase sales and better serve shoppers.
San Francisco-based Pay By Touch says it has plans to bring loyalty card kiosks to some N.C. grocery stores in November. Similar kiosks will eventually be appearing at Charlotte-area CVS pharmacies.
The kiosks allow shoppers, as they enter the store, to receive custom coupons by scanning their loyalty card or fingerprint. Typically, customers get their coupons as they leave or in the mail, and many forget to use them, said Shannon Riordan, vice president of marketing for Pay By Touch.Riordan said the system is so good at predicting what products consumers will buy, about 40 percent to 50 percent of the kiosk coupons are redeemed, compared to about 1 percent of traditional coupons sent at random.
One reason is that the store doesn't try to get consumers to switch brands, a tactic common among loyalty programs.
Traditionally, if a store notices that a customer regularly buys one brand of orange soda, the store will offer the customer a coupon for the competitor's orange soda. That strategy frequently fails because people are loyal to brands and are reluctant to switch, Riordan said.
"What we do instead is give them a coupon for the soda they already want," she said. "The store sees an increase in sales, and the customer gets what they want."
The company, which does business with several local grocers, isn't yet saying which N.C. stores will receive kiosks. (Ed. Note: Piggly Wiggly will call the program "The Perkolator"
CVS Caremark Corp., the nation's second largest pharmacy chain, announced in July that it would be rolling out nationwide including Charlotte. But the company has not yet released details on when Charlotte will receive the devices or what company it is using.
The interactive coupon kiosks will allow customers to receive money-saving offers based on previous purchases using their ExtraCare loyalty card.
CVS customer Rusty Trout of Huntersville said he uses his loyalty card every time he shops. But he questions whether the buy-one, get-one-free offers he sometimes receives with his card are worth it.
"I guess what I would really like to see is all around generally lower prices for everyone and fewer specials and give-aways," Trout said via email. "Purchases involving multiples are not worth the savings if we cannot consume ... things before they go bad."
About two-thirds of retailers have some form of loyalty or rewards program, according to Jupiter Research. Discounters such as Wal-Mart, Target and Family Dollar keep prices low all the time and don't use loyalty cards.
Among grocery stores, about 45 percent have such a program -- a number that has remained relatively steady over the past five years, according to the Food Marketing Institute. Some grocery stores that have loyalty programs say about 85-90 percent of shoppers participate.
Stores have embraced loyalty cards because they provide detailed information about shopping habits. Every time a customer uses one, the retailer records items purchased and how much was paid.
"Some of the most innovative companies are identifying exactly which products customers want and are targeting their most loyal customers," said Bill Greer, spokesman for the Food Marketing Institute.
Critics of loyalty programs question whether stores adequately protect the information they gather from shoppers. Others don't like the idea of a grocery store keeping close track of what they're buying. But most would welcome getting discounts based on what they want, rather than what it suggested by mass mailings.
Shoppers such as Denver, N.C., resident Tom Hodge see the cards as a convenient way to save money without clipping coupons. Hodge estimated he and his wife carry about 15 to 18 store loyalty cards.
"I believe they do this in an effort to provide better service and better products," he said. "I don't see anything wrong with them knowing what I'm buying -- it's not like I'm buying in a shop full of illegal products. It's just lettuce."
Experts say many retailers have been collecting data, only to let it sit unused. Retail observers say that's why Albertsons LLC, a grocery chain based in Idaho, ditched its loyalty card program in June.
"If you have all this information and you're not really doing anything with it, then what's the point of having it?" said Brian Woolf of the Retail Strategy Center in Greenville, S.C. "These programs cost money."
In Charlotte's grocery market, Harris Teeter, Food Lion, Bi-Lo and Lowes Foods are the main stores offering loyalty programs. Harris Teeter, the leading grocer in the region, said it's evaluating loyalty card kiosks, but doesn't yet have any in stores.
Bi-Lo runs daily and weekly reports on the data it collects, said John Conroy, the company's senior card-marketing manager. The information helps the company see whether it's gaining or losing customers and gives clues on how to serve them.
"We use the data to help select the right items to stock -- stores with a higher affinity for natural or organic foods will carry more of these items than others," Conroy said via e-mail.
Besides the daily discounts on merchandise, stores also use the data to identify and reward their most loyal customers.
"They are offering free turkeys, Christmas trees, birthday cakes -- anything to make these loyal customers feel special," said Greer. "It's a strong marketing tool."
Shopper Christy Holden said she and her husband once won a free cruise by using their Harris Teeter VIC cards. Holden said she also frequently uses Lowes Foods loyalty card, which rewards points that can be used to save money on future purchase.
Woolf praised Harris Teeter, noting the company is one of the few stores using its loyalty program to target shoppers via e-mail to give them customized offers.
The e-Vic program has been in place since 2003. Harris Teeter does not disclose participation levels. Lowes Foods also offers an e-mail service associated with its rewards program.
"In our area, Harris Teeter does the best because they are using that information to provide a great service," Woolf said. "That to me is pure genius."
About Pay By Touch
Founded in 2002, San Francisco-based Pay By Touch is the leading provider of equipment that allows shoppers to pay for merchandise using their fingerprint.Pay By Touch has payment programs in Piggly Wiggly, Lowes Foods and Harris Teeter stores. It also has check cashing systems in Bi-Lo stores, and manages loyalty card programs at retailers such as Food Lion and Winn Dixie.
This year, Pay By Touch says it will roll out loyalty card kiosks that allow customers to use their fingerscan or loyalty card to get coupons as they enter the store.
Loyalty Card Programs
Stores collect personal information about individual purchases and aggregate data about their overall customer base. Bi-Lo had the most detailed privacy policy of the stores we reviewed, explaining that they collect date of purchase, items purchased and total dollar amount. Harris Teeter's policy is shortest, but asks for the most amount of information to sign up. Here's a synopsis of privacy policies at area stores.
BI-LO -- BONUSCARD
• Signup requests name, address, e-mail address and phone number.
• Does not sell or rent personally identifiable information to third parties, but may "share" personal information with companies hired to perform functions such as processing rebates, conducting research or other operational assistance. Also will release if required by a judge or to comply with a subpoena or other legal claims.
• Aggregate data, which does not include personally identifiable information, may be shared with third parties in order to allow them to evaluate the effectiveness of programs.
HARRIS TEETER -- VIC
• Signup requests name, address, daytime and home phone number, e-mail address, signature and a driver's license or state identification card. Form says the ID is used for "internal customer service use."
• Personal information "not given to anyone" outside Harris Teeter.
• Policy doesn't explain what happens to aggregate data, but says the company uses customer purchase records and "other information" to offer special promotions or coupons to customers.
LOWES FOODS -- GREENPOINTS
(S&H administers the program, which is now Pay By Touch)
• Signup requests name, address, e-mail address, phone number, date of birth and number of people in household.
• Personal information is shared only with third parties to perform services for the company or determine whether customers are eligible to receive special offers. The company takes steps to ensure the third party doesn't disclose personal information or use it for any other purpose. Information also may be released to comply with legal proceedings.
• Aggregate statistical information is shared with "participating merchants, advertisers or other third parties."
