The data mining behind loyalty cards shows just how devious they can be

Flybuys cards, whether you wanted them or notThis interesting article about data mining shows just how devious they can be. For example, a casino:

The system collects data each time a gambler uses their casino loyalty card – be it for gambling, purchasing food in the restaurant or paying for snacks from their room minibar – to create a pattern of their behaviour.

The system can see, for example, that the last few times Gambler X visited the casino, they stayed for two days and lost between $200 and $300, then promptly left the gaming floor, spent no more money and went home the next day.

”As a casino operator you don’t want that, you want to make people happy and spend more money,” Quinn says.

Enter Tibco’s event processing software. When the system detects the customer is falling into a particular pattern, such as the consistent losing streak that caused them to leave during their last visit, it sends an automatic note to a gaming floor attendant to offer the person a free meal, or ticket to a show.

The idea is to distract the gambler long enough that they’ll come back later and continue to play and lose money, albeit in more palatable amounts.

Ingenious. For the cost of a meal (and installing the computer tracking in the first place) the Casino gets heaps more money. No wonder gamblers get sucked into losing lots of money.

IMAG0462The same type of logic is the real reason behind loyalty cards like Flybuys, and why Coles would like nothing more than for absolutely everybody to have one.

They apparently want this so much that last week they sent me two cards “to the householder” even though I’ve never been a member — and I hear I’m not the only one.

I do have a Woolworths loyalty card, because I more often shop there. It earns me Frequent Flyer points which sometime in the next couple of decades might add up to enough to take a flight somewhere (or more likely will earn me a small discount using Points+Pay… or a thing such as the barbecue I got via the Qantas FF shop a few years ago).

But I happen to know that you don’t earn any points for transactions less than $30, so I deliberately don’t present the card for those, ‘cos really, they don’t need to know too much about my spending patterns.

You can call me paranoid if you wish, but note the comments in this article the other day:

But analysts said that the programs took from customers as much as they “gave back”, in terms of valuable information on their shopping habits. “This is essentially just a new form of marketing,” Citigroup equities analyst Craig Woolford said. “There are two globally perceived benefits – one is retaining your customer, and the other is developing insights into your customers’ shopping behaviours.”

Oh, I also love this quote from someone at Coles:

“Australian customers tell us they want discounts on the products they buy the most,” Coles finance director Tony Buffin told BusinessDay.

Well duh.

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5 Replies to “The data mining behind loyalty cards shows just how devious they can be”

  1. You notice how none of the market research ever tells them “How about discounting prices instead of spending millions on wasteful marketing, advertising and “celebrity” endorsements”. Naturally the marketing department won’t want to hear that!

  2. Ah yes, good old Fly Buys. When it was launched way, waaaaay back in 1994, I eagerly signed on for one.

    I’m not miserly, nor am I the most profligate shopper by any means, but I would have assumed that I’d get some kind of reward eventually. It took SIXTEEN YEARS to finally accrue enough points for a mixed dozen wine selection.

    And now they know everything about me because, unlike you, I gullibly handed over my card for every purchase, even the small ones.

  3. I would hardly ever spend $50 or more at Coles, so I’d very rarely get the benefits of the flybuys. I can’t be bothered with the card.

    If Woolworths are advertising two prices for an item (as seems to be the case above) I will avoid shopping there! (Why be treated like a second-class shopper just because I don’t want the hassle and the intrusiveness of a loyalty card?)

    Likewise I avoid those supermarket-branded petrol stations on those majority of occasions when I don’t have a discount voucher with me.

    These schemes *decrease* my loyalty!

  4. I’ve never had one of those cards, but they must be watching me. The store manager told me the other day that I am one of the biggest cheapskates using their store.

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