Grocery Store Loyalty Card Use is Strong Despite Privacy Concerns

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New research from Boston University finds that 86% of adults carry a grocery store loyalty card and use it, even though cards give stores the right to track consumer purchases.

Grocery story loyalty cards are more widespread than the Internet or the home computer: 86% of adults have at least one, most have more than one. Yet nearly half of the people who carry them didn’t know about the sophisticated web of tracking and marketing they were getting stuck in when they signed up. Is this a privacy bomb waiting to go off? No, according to results of a Fall 2004 study by a student research team at Boston University’s College of Communication. In an online survey of 515 adult supermarket shoppers the students found that even though privacy concerns are high, most cardholders agree that the benefits of using a loyalty card outweigh any infringement on personal privacy.

Grocery store loyalty cards are the credit card or keychain-sized cards with a barcode or magnetic stripe offered by most large supermarket chains. Chances are good you have at least one in your wallet or purse. When scanned at the cash register, the card unlocks special discounts offered to “loyal” members. In return for the savings, cardholders agree to allow the grocery store to track their purchases each time they shop. Grocery stores use this information to decide which products to carry, what prices to charge, and in some cases, to target consumers with specific coupons and promotions on behalf of grocery manufacturers.

Actual grocery store uses vary by store – some find the data analysis so time consuming they have chosen to abandon the cards altogether as PW Supermarkets, a small chain in Northern California, recently did. Still others have sophisticated systems for matching publicly available information about consumer households with the data collected at the cash register, a practice that infuriates privacy advocacy groups.

Does this tracking influence the consumer’s choice to use a discount card? A clear majority – 76% – of cardholders report that they use their grocery store loyalty card nearly every time they shop despite the fact that 52% also are concerned about how much of their personal information is collected by companies generally. Why do it, then? Sixty-nine percent of consumers report that the card benefits them in the form of lower prices and access to special promotions. And while seven in ten shoppers now know that grocery stores keep track of what they spend, only 16% think about this fact each time they use it.

“The fact that consumers – even those generally concerned about privacy – are willing to use these cards is testament to the fact that personal information is a commodity people are willing to trade with the right company for the right price,” explains Professor James McQuivey, who supervised the research project. No doubt this will only embolden supermarkets as they try to squeeze ever more dollars from a thin-margin retailing environment. What’s next? McQuivey offers, “Expect radio frequency identification embedded in the loyalty card of the future, an electronic tag that will identify you when you walk through the door, when you’re standing in front of the Pampers, and when you arrive at checkout. All with your permission, of course, and in exchange for a benefit grocery stores have yet to identify.”

About the survey

An online survey of 515 people 18 years of age and older was conducted during the last week of October 2004. As such it can only represent the two-thirds of households with Internet access. Sample was randomly drawn from a representative subgroup of participants in Survey Sampling International’s US online panel. The margin of error for a randomly drawn sample this size is +/-5%.

About the College of Communication at Boston University

The College of Communication at Boston University is home to the Communication Research Center where professors train undergraduate and graduate students in the science of consumer research and analysis. This project was designed by students under the supervision of Professor James McQuivey.

Contact Information:

James McQuivey

Assistant Professor

College of Communication

Boston University

640 Commonwealth Ave

Boston, MA 02215

617.803.6209 p

617.507.7892 f

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