Ken Murphy, CEO of the British multinational supermarket chain Tesco, recently said at a conference that Tesco “could use Clubcard data to nudge customers towards healthier choices”.
So how would this work, and do we want it? Our recent study, published in the Scientific Journal of Research and Reviews, provides an answer.
Loyalty schemes have been around as far back as the 1980s, with the introduction of airlines’ frequent flyer programmes.
Advancements in loyalty schemes have been huge, with some even using gamified approaches, such as leaderboards, trophies and treasure hunts, to keep us engaged. The loyalty principle relies on a form of social exchange, namely reciprocity.
The ongoing reciprocal relationship means that we use a good or service regularly because we trust the service provider, we are satisfied with the service, and we deem the rewards we get as reasonable – be they discounts, vouchers or gifts.
In exchange, we accept that, in many cases, loyalty schemes collect data on us. Our purchasing history, often tied to our demographics, generates improvements in the delivery of the service.
If we accept this, then we continue to benefit from reward schemes, such as promotional offers or other discounts. The effectiveness depends not only on making attractive offers to us for things we are interested in purchasing, but also other discounted items that we hadn’t considered buying.
Does it work?
So is this the future? The first issue is whether we’re happy to have data collected on us. There is a trade-off between the level of personalisation we want, and the amount of data we are willing to give. Research has shown that the more personalised the schemes are, the more alarmed we are about the crossing of privacy boundaries. For example, many of us dislike tailored communication about services through the use of chatbots.
The second, related point is that loyalty scheme data is, and will continue to be, of enormous value to third-party organisations. For instance, market research can use loyalty scheme data to track consumer trends more accurately. Researchers can use the data to make inferences about health-related behaviour.
As valuable as the data from loyalty schemes is for scientific purposes, not all shoppers are happy with having their data shared in this way. In one 2023 survey conducted by Yasemin Hirst from Lancaster University and colleagues of 1,539 people, 39% said they were unwilling to share their personal data with academic institutions, while 56.9% didn’t want to share with private organisations.
What data people were willing to share also varied: for example, people were happier sharing loyalty card data (51.8%) than social media data (30.4%) for research purposes. In general, people worried about privacy as well as misuses of their data.
All of this points to data privacy and permission being needed for sharing personal data with third-party advertisers and data brokers for people shopping online.
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The final aspect is what the data reveals. Data from loyalty schemes does not present a complete picture of a shopper. We mix and match where we buy our food because of our budget and our geographical location. And some retailers have greater coverage and delivery in rural areas than others – further influencing our behaviour.
This also means that our degree of loyalty provides only a partial picture of what we end up buying, and how healthy our habits are.
New research
In our recent research, Sarah Jenkins and I conducted a study to look at issues related to what Murphy had in mind. We asked 389 people to evaluate ways their grocery shopping behaviour could be influenced.
We looked at three categories. One included financial incentives and discount offers. The second was classic “nudging” methods, such as labelling healthy or green options, campaigns or education schemes.
Finally, we looked at technological incentives that could be implemented via smart phones or laptops when making online purchases. For example, there could be suggestions as to nutritional choices, or an automated system that would select only healthy food choices. Alternatively, the system could score your shopping choice according to how healthy they were.
People assessed all of these options in terms of whether they could help boost healthy and green choices. Generally, participants preferred the financial methods overall, specifically discounts on healthy food options (44.7%). They also judged taxes on unhealthy food items as effective.
Campaigns for sustainability (6.3%) and automated choices for sustainability (6.5%), such as online shopping algorithms only offering us sustainable options, were least preferred. One possible reason for this might be a lack of understanding of what sustainability actually means.
Behavioural and financial methods were judged to be slightly more ethical than technological methods, though most people found all options fairly ethical.
That said, techniques to nudge people’s behaviour in the right direction don’t always work. People like or dislike them depending on a mix of factors, including whether it seems effective, whether it is ethical and whether they actually have a desire to change their behaviour.
Future options
Across the different ways market researchers study our shopping trends, the same pattern emerges: about 25% of the time, we buy our groceries online. The precise percentage varies by country and by foodstuffs we buy, but in general the forecasts is that it will increase to about 45% in the next 5-10 years.
This will mean further innovations in loyalty schemes, designed both to attract new customers as well as maintain the current base. Retailers therefore need to be aware of the shortcomings of such approaches, including that they don’t work on people who don’t want to change their behaviour, that they only provide limited information, and that there may be a point where services are so personalised that many people become unwilling to share their data.
Some of us will continue to enjoy the benefits of these schemes, so long as we have the chance to exercise choice. Indeed, some want to have suggestions made that ease the selection of healthy or sustainable options, but others don’t. What matters is having a choice.
