grocery store
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Grocery discount cards are very useful on many levels. For consumers, they offer savings savings on grocery items and this attracts many people to apply for a card. However, for grocery stores, the value is potentially so much more.

Those convenient and simple scannable cards are very helpful to grocery stores to gain insight and information about both their customers and their buying habits. In fact, these attributes are considered so valuable that other kinds of stores have followed suit and  developed their own discount programs using cards or other similar approaches. The information gleaned from customers far pays for itself in terms of a return on investment.

While it is true businesses give customers a lower rate than they advertise which can cut in on their profits, the analysis and level of information that these cards provide are a tangible way to increase profitability and this outweighs the potential revenue lost from the discounts offered.

Here are some of the ways grocery stores use discount cards for more than just discounts:

Collect Personal Information

Many grocery stores have detailed applications where they ask for sensitive information. In years’ past they collected data such as social security numbers (especially if they offer check cashing privileges – probably far less used these days), name, address, bank account information, and phone numbers. Today the applications look a lot different, one I filled out earlier this year basically asked for name, address and email address. Anyone could easily fake their name. Still, applications are likely to vary from store to store in the type of information they ask consumers to share.

Gather Information about Customer Buying Habits

With every swipe of a discount card a grocery store can ultimately see what consumers are buying, how often they purchase it, when they tend to buy and how much of each item they put in their carts per visit. The analysis reports generated from those discount cards offer a full scope of everything a grocery store wants to know about their customers and their buying habits.

Grocery cart
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Grocery discount cards give companies the ability to carefully track every purchase made, logging these details into a database where reports can be generated so managers can analyze data and use this to market, advertise, target customers or set pricing.

Track Consumer Purchases

In addition to each purchase in a given time frame, or other designated criteria, grocery discount cards enable the store to also  track purchases over long periods of time. This helps them identify trends and gives them a birds' eye view of which products are successful, which ones are undesirable, and any other kind of tendencies and behaviors shoppers exhibit. The ability to track purchases is a very powerful tool for both the short-term and the long-term.

Through the use of discount or valued customer cards, grocery stores can reasonably predict the times of year people are more willing to buy an item, or how often they'll make a purchase. While this may not bother some people because they don't mind giving up some privacy in exchange for some savings, a thought to consider is how companies can use the information gleaned to set prices.

In the long run, those "low" prices may not be as low as you'd think because the prices are carefully calculated and set based on consumer buying habits. Consumer buying habits are very useful to marketers who are highly interested in shopper preferences.

Notice Trends and Set Prices

The aforementioned trends are carefully compiled and this helps grocery stores to decide who to target with special promotions, coupons or simply see how much people are willing to pay for any given kind of item. Noting what type of quantity of demand is extremely useful to grocery stores.

Being able to see an overall analysis of how much/often customers are willing to buy items helps the grocery set prices. Those great savings you see may actually be more aligned with manufacturer's suggested retail price with the card than the inflated price charged without a card.

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Evaluate Products

Watching consumer buying habits and trends also help grocery stores evaluate products. For instance, if a specific product sits upon the shelf gathering dust, it is likely this item will be discontinued or ordered in far less quantity. The grocery store may also determine which products are highly successful and then increase the amounts of these items ordered to attract more customers.

Use Data for Marketing/Advertising

All of the information taken from swipes of grocery discount cards can also be used towards marketing and advertising efforts. By knowing who buys which kinds of items, those coupons you get at the register are printed and the kinds of coupons you get are often no accident. These are carefully targeted by groceries and manufacturers in an effort to get you to either continue to buy a product or try a similar one if the discounts are attractive enough.

What About Privacy?

Clearly, the value of discount (or loyalty) cards are important to grocery stores. Consumers have to decide whether the tradeoff of sharing so much personal information is worth the savings. Statistics seem to show most shoppers do indeed feel this tradeoff is worth the benefits.

Back in 2004, a U.S. survey showed 86 percent of Americans used a reward card and felt the benefits outweighed the tradeoffs. Similarly, in 2005, CBC reported 76 percent of consumers in Canada belonged to a loyalty program. In this time frame in the U.K. it was reported these card programs "achieved 85 percent consumer penetration" by March 2005. 1 Fast-forward to 2015 and it seems people are a little more concerned about privacy and the practice of selling personal information to third parties. A Pew Internet survey presented the following:

"A grocery store has offered you a free loyalty card that will save you money on your purchases. In exchange, the store will keep track of your shopping habits and sell this data to third parties."

Results found 47 percent of respondents were OK with that scenario, 32 percent said they were not and 20 percent said "it would depend on the circumstances of the offer."  2

While this survey didn't focus on what percentage of shoppers carried a card, it does perhaps suggest, with all the data breaches occurring these days, people are paying more attention than a decade ago. The Pew Internet article went on to share the various statements people gave with their response, in which many pointed to their primary issue being with the selling of data to third parties aspect of loyalty cards.

[ Related Reading: Do Businesses Put Too Much Risk on Your Personal Data? ]

Grocery receipt
Credit: Steve Buissinne via Pixabay

Grocery stores have developed a great business tactic to attract customers to give up information they wouldn't otherwise share. Plus, if they are sharing and/or selling to third parties, they are benefiting in this way too. Customers have to decide for themselves whether or not the privacy issues are important enough for them to gain the benefit of savings.

While it may be true some savings are realized, if privacy is a concern, it might be worth your while to look at the prices at stores that do not offer discount cards but stick to traditional buy and sell relationships with no information exchanged. The results you find in terms of price may be surprising as sometimes it's found there is little to no noticeable differences in savings at all. In other cases, there is a solid financial benefit. Grocery loyalty cards can be a win-win relationship, but with some businesses the benefits are more of a one-way street.