So I signed up for yet another Customer Loyalty Card. And unlike my Best Buy Reward Zone card that actually does something for me, my brand new PetSmart loyalty card doesn’t actually do anything for me.

“But wait”, you may ask. “Doesn’t it get you a discount on things you purchased?” Let me let you in on a little secret. If they didn’t have those loyalty cards, they would find some other way of giving you the discount. Think back to the days before Loyalty Cards became popular. You would just get the discount for doing nothing more than shopping there. But today you have to carry around a whole handful of cards for whatever stores you may go into. I kid you not, I one saw a woman who had more loyalty cards on her key chain than actual keys…

I am less bothered about the loss of privacy aspects of having a loyalty card. Really, the retailer doesn’t need to know that information about me except to mail targeted ads to my homee. Most retailers allow you to opt-out of getting those mailings (which is what I usually select). Otherwise, they just get to figure out what food I like, which I don’t think is really that bad a thing.

So why do retailers want you to sign up and use these loyalty cards? Easy, because information is power (or money). Retailers have always tracked inventory so they would know how popular things are and because to keep them in stock and be able to drop un-popular items. As computers became more prevalent, this whole process became computerized. The computerized cash register systems keeps track of how much people are buying. No more counting things on the shelf to see what your inventory is, you can know up to the second!

Retailers who track this information over time were able to analyze their data to find out information about their customers purchasing habits. This lead to the infamous Beer and Diapers phenomenon (Some of my research indicates that this may be an urban legend, but it sounds good…). Stores found out that they would get a lot of people purchasing those two items at the same time. The theory behind this off linking of items is that Dads would have to go out to the market to get diapers instead of heading off to the pub. So they would pick up a six-pack for the road. Retailers can then use this information to make sure to locate the two items together, and also put a jar of peanuts for purchase near-by.

Loyalty cards take this kind of data analysis to a higher level, as they are now able to do more than just track information on a single visit to the store. They are able to track purchasing habits across multiple visits. Who knows what kind of information they will be able to mine with this additional information.