Friday, April 11, 2008

Big Brother is watching, but he doesn't seem to care

I was interviewed some time ago for a feature article in the Toronto Star on privacy issues associated with loyalty cards. These products are very popular in Canada, with Air Miles and Shopper's Drug Mart's Optimum card leading the way. Many of these programs have the potential to collect a vast amount of shopping data, but most of the companies interviewed by Paul Brent didn't really seem to care about collecting the sort of detailed individual data that most assume is being collected. - Travel - Big Brother is watching, but he doesn't seem to care

If you've ever hesitated when handing over that loyalty card at the liquor store or the pharmacy wondering, "just who is looking at what I'm buying?" you might take some comfort in the answer: Likely nobody.

In theory, marketers have the power to drill down into the digital minefield of a consumer's spending and determine their buying preferences for everything from their favourite wine to their brand of shampoo.

However, the reality is that retailers and service companies are too busy to care what we do, except in large numbers.

"It is not as if you are getting mail from a glasswares manufacturer saying: `We notice that you drink a lot of beer,'" says Ed Strapagiel, executive vice-president of Kubas Consultants. "For the most part, retailers have not over-exploited this data. The power is there to use, but they haven't really gone after it."

The reluctance of merchants to dig deeper into the consumer treasure trove of information makes some sense, however, he adds. "Many of these retailers that we are talking about – Loblaws, Canadian Tire, Shoppers Drug Mart ... they are not direct marketers. If the whole basis of your business is driving business to your store, you are not going to use direct marketing."

Consumers, for their part, realize they are giving up some of their privacy but appear willing to pay that price for the benefits that come from loyalty programs.

"It's actually never bothered me," says Tracy, waiting outside a Shoppers Drug Mart with her dog while her husband shops inside. She has been a devoted Air Miles collector for a decade and flew her mother from Sault Ste. Marie to Toronto on points.

A buyer for a local theatre company, she regularly uses the Internet for private and work purchases, and says she keeps a "close eye" on her credit cards and bank accounts electronically. Her husband agrees the benefits of collecting reward miles outweigh any privacy fears – "even though they are probably tracking our every move," he jokes.

But consumers should be aware they are entering into an agreement with loyalty companies when they take a membership card. The price for those "free" perks, such as travel rewards or discounts on purchases, is that you agree to allow marketers to take an electronic peek into your shopping basket.

"There are a whole bunch of programs where people choose to give up some privacy for convenience," says David Fraser, a privacy lawyer with the Halifax firm of McInnes Cooper.

"It doesn't bother me," says Zan Harriott, who had just purchased a greeting card and lottery tickets at Shoppers and swiped her Optimum points card.

A member of the loyalty program since it started, she says she regularly collects rewards from the card.

Launched in 2000, the Optimum program has 8.2 million members, making it one of the country's largest.

Fraser has not heard of any Canadian marketers abusing the data they obtain from loyalty programs. "In my experience, the companies that run loyalty programs are really quite diligent about privacy issues."

When it comes to privacy and loyalty programs, many consumers are surprised that information is being collected for marketing purposes, while others expect someone in a nameless data centre is noting every last tube of toothpaste.

The reality is somewhere in the middle.

Fraser notes that Air Miles was the subject of a consumer complaint a few years ago, but the federal Privacy Commissioner found the marketer was not amassing the detailed shopping information "a lot of people would have expected them to be collecting."

That fear of just how much information is being gathered acts as a brake on the expansion of loyalty plans. "If you don't tell customers what is going on, they assume the worst," Fraser says.

As the country's biggest loyalty marketer, reaching two-thirds of Canadian households (there are 9 million "collector" households), Air Miles is sensitive to the issue of privacy.

"Not just for us but across the Canadian marketplace, privacy is a pretty significant public policy issue," says Mitchell Merowitz, vice-president of corporate affairs and chief privacy officer for the Air Miles reward program.

The fact that Air Miles has been the most popular loyalty program in the country since 2001 shows that most Canadians are not too worried about leaving a digital record of their purchasing habits.

Information collected by Air Miles is gathered on a household basis and is not product-specific. A successful swipe of the card tells the company the date, value and store a purchase was made.

"The information that you see on your summary statement is the information that we collect," Merowitz says.

Related stuff: Canadian Privacy Law Blog: Air Miles should be about data mining, not mass appeal, Canadian Privacy Law Blog: Article: Loyalty cards plus legwork can track beef buying, and the finding of the Privacy Commissioner of Canada referred to is on the PIAC website at

No comments: