How loyalty cards make you a bigger spender

• Supermarkets have more than a few tricks in pushing high-margin products.
• Smart card is giving supermarkets and other shopping outlets important information.

Forbes magazine recently reported that a retail chain put all its checkout counter data into a giant digital warehouse and set the disk drives spinning.

What popped out was a most unexpected correlation: sales of diapers and beer. Young fathers, it showed, would make a late-night run to the store to pick up pampers and get some Bud Light while they were there.

The magazine says the store, capitalising on the discovery, placed these disparate items together — and sales zoomed. Businesses have got tonnes of transactions data which, if they analyse, would give wonderful insights into shopping trends and customer preferences.

The supermarkets have more than a few tricks in pushing high-margin products. The one that irks the most is spreading products out across a wall so you have to search to find what you want.

Meanwhile, the products they want you to buy are smack in front of your face. Did you know that every time you buy something your shopping habits are tracked? Then what comes out is a report on what you like about as you shop.

Your smart card, or signing to loyalty schemes, is giving supermarkets and other shopping outlets that important information.

It sounds good — loyalty cards entitle us to freebies or cash simply for shopping. Of course, retailers get something in return: a heap of information about us we might prefer them not to know. That’s before they get started on the new tags that track you and what you buy.
Last week someone received a call from one of the banks in the country enticing him buy into their products. But one critical question is, where do banks get these contacts?

It has been said that smart cards are an avenue through which this information can be accessed. This idea is driving many banks to sign up agreements with retail chains so they can be able to accesses such information.

Every time you reach the checkout in bigger supermarket chains, it’s the same question: do you have a smart card? It can get irritating, but nonetheless we have willingly signed up to their reward schemes in droves.

Many have accepted the membership rules of these innocent-looking, points-mean-prizes clubs: you show us some loyalty, say the retailers, and we will give you nice bonuses in return.

The Chartered Institute of Marketing Kenya branch chairman Andrew Mutuma says loyalty, on the face of it, is based on how much you spend with one particular retailer. Besides, in Kenya we love bargains, and getting something for nothing even more.

But the question is: how much does the nothing really cost? It is not simply a matter of choosing to be “loyal”, now synonymous with “open your wallet”, to one supermarket over another — the cost is in having your purchases scrutinised and analysed in staggering detail by the loyalty card retailers.

“You’d be surprised what they can do with a seemingly innocent flow of till receipts, coupled with your loyalty card.

Having accepted the principles of these schemes, we have paved the way for the kind of surveillance technology that will turn your stomach once you realise that it is happening in real time and not in some implausible, futuristic film,” Mr Mutuma says.

More fool them, you might think, as you cash in points to redeem all manner of tempting handouts. There is no catch or con to the mechanics of loyalty reward schemes.

Nakumatt, for example, gives you a point worth Sh2 for every Sh100 you spend, which you receive once you hit some considerable points.

On the surface, loyalty cards get you to increase — or “consolidate”, as the marketing people say — your spend in one store. Given the choice between two stores, we are more likely to shop at the one where we earn rewards.

Behind this visible profit benefit lies the genius purpose of these schemes. Then retailers have found a way to scrutinise the shopper – not as a generic mass but as an individual.