Supermarket : Loyalty Cards

Supermarket : Loyalty Cards

In most areas of the country customers can choose to shop at several different supermarkets. Therefore the supermarkets must compete with each other to attract new customers and to keep their existing customers.

Many supermarkets use a loyalty card scheme to encourage their customers to always shop with them. Under a loyalty card scheme :

A customer enters his or her personal details onto a form and is issued with a loyalty card.
The card looks like a debit card and contains a unique customer identity number which is stored on a magnetic stripe.
Every time the customer shops at the supermarket he presents his card to the checkout operator who swipes it through the till.
For every pound the customer spends he or she earns a number of points.
The number of points a customer has is stored on a database. This is updated autmatically by the till every time the card is used.
The customer can exchange the points for a discount on future purchases or other items.

Using Loyalty Card Information For Advertising

Whenever a customer uses his loyalty card to shop the supermarket will collect information about how much he spends, where he shops and what products he buys. This information will be used to send targetted advertisements to customers. For example a customer who buys baby food regularly might be sent an advert for childrens clothes or toys.

Sending adverts and offers to only those people who are likely to be interested can significantly reduce the amount of money that a company has to spend on advertising its products. Therefore information about customers' shopping habits is very valuable.

The supermarket could send targetted advertisements out itself or sell information about its customers to other companies. The Data Protection Act controls what use companies can make of this information.

Advantages and Disadvantages of Loyalty Cards

	Advantages of Loyalty Cards	Disadvantages of Loyalty Cards
For Customers	Customers can earn a discount by using a loyalty card when shopping.	Some customers object to supermarkets collecting information about them and using or selling this. They believe it is an invasion of their privacy.
For Supermarkets	Supermarkets believe that customers with loyalty cards will shop at their stores more frequently and are less likely to try another supermarket.	A supermarket must set up new computer systems and employ staff to run its loyalty card scheme. The supermarket will have to pay for this.

GCSE ICT Companion 04 - (C) P Meakin 2004