Frequently Asked Questions

Q: How are "loyalty" programs funded?

Stores are not exactly volunteering information about the cost and funding of their "loyalty" programs. However, it stands to reason that printing up cards and application forms, entering shoppers' identifying data, storing all those individual records, advertising the scheme, and coordinating data transmissions from the cash registers to the database each day is a very expensive undertaking.

It seems the only supermarkets willing to talk about funding are the ones that have decided not to implement a "loyalty" program. In a recent trade article, Mark Price, marketing director for Waitrose (a United Kingdom Supermarket which has opted out of the surveillance business), offered the following:

  • Those supermarkets committed to loyalty schemes... must be increasingly concerned with the long term opportunity the schemes provide, and how to make significant return on the vast amounts invested. "Loyalty schemes are not gestures made by philanthropic superstores," [explained] Price. "Loyalty schemes have to be paid for as well as being profit centres in their own right. The average loyalty scheme is both front and back loaded. In the former the promotion is possibly funded out of product price mark-up and detailed consumer information." -- Customer Loyalty Today, 4/1/99
  • Stores must pay for these programs either by raising prices or by finding a way to make money from the data they've collected.

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