Loyalty cards – a gain for the customer, right?
Customer cards, loyalty or bonus cards, they come in all shapes and sizes. But they all have one thing in common: they collect data and in return the customer receives an often negligible discount. Points are collected with every purchase, which can then be used to make a purchase once a certain number of points have been reached or, with some providers, can also be paid out as a reward. Exactly how many points are awarded for which purchase amount can usually be found in the provider’s terms and conditions. Two different systems have become established for loyalty cards: The simple customer card, which is issued by individual companies, or the collective customer card such as Payback. Several strong companies from different sectors have joined in and all benefit from this.
Is a customer card worthwhile?
There is no general yes or no answer to this question. There are many different models and offers on the market. Certainly, there are also reputable providers that give customers a real advantage. As a rule, however, loyalty cards tend to discourage customers from negotiating higher discounts or comparing prices with the competition. Experience has shown that, according to research by the consumer advice center, customer cards are only worthwhile in conjunction with special promotions, such as a voucher for 5-10%.
Companies often also entice customers with birthday or Christmas vouchers. The disadvantage, however, is that these vouchers are usually only valid for a short period of time and therefore actually tempt the customer to make a purchase that they might not otherwise have made. In addition, this customer is unlikely to compare prices with the competition in order to redeem their voucher.
Anyone who shops at companies that work with loyalty cards must be aware that the companies are not really “giving away” the discounts. As a non-user of a customer card, you also pay for the discounts of those who use the customer card.
What does the company gain from issuing customer cards?
Quite simply: data, data and more data! Nowadays, collecting data can be compared to mining gold, because data is the new currency for companies. The discounts that companies grant in exchange for customer data are so negligible and do not actually represent any loss at all for the company, as the value of the data will be significantly higher. If you look at companies like Facebook or Google, it quickly becomes clear that the value of data has long since overtaken the value of things.
As soon as the customer presents their card when making a purchase, they are no longer anonymous. The information voluntarily provided in the application form, together with the sales data, enables the company to create a detailed usage or even customer profile. The more often the card is used, the more accurate the profile and possible future predictions. This makes it much easier to target customers with advertising. In addition, the data helps to tailor advertising campaigns even more precisely to the needs of customers.
What data may be requested for customer cards?
The absolute basic prerequisite for the collection of customer data is, of course, voluntariness. Under no circumstances may the purchase be made dependent on the completion of a customer card application form.
In addition, a distinction must be made with regard to the collection, processing and use of the data according to purpose. If the data is required to establish and implement the discount agreement and to determine the bonuses, collection, processing and use is perfectly acceptable. These data categories include, for example, name, address, date of birth, telephone number and e-mail address. In order to be able to calculate the rebates correctly, data on the individual purchase transactions is also collected.
For market analyses and for advertising purposes, companies often want to know other data, such as marital status, household size, income, profession or hobbies. Of course, the customer does not have to provide this data in order to use the customer card. The company needs the customer’s consent to collect and use this data. In case of doubt, the customer must also be able to prove this.
For what purposes may customer card data be used?
As already mentioned, the data required to calculate the discounts may be processed and used without further ado. This is what the customer wants, otherwise they would never have filled out the application form.
The question of whether the data may be passed on to third parties, such as advertising companies, without consent is another interesting one. A distinction must be made here. The name, address and year of birth (not the entire date) may be transmitted to third parties without the customer’s consent on the basis of legitimate interest. However, it is important that the customer has been informed of this and has the opportunity to object to this transfer of data. If the company wishes to pass on the telephone number, e-mail address or other data to third parties, this requires the express consent of the customer. This transfer may not be based on a legitimate interest.
The company’s own use for advertising purposes is also only possible to a limited extent. The company can use the address data for advertising purposes even without consent, provided that the advertising is sent by post. This is permitted under German competition law. What is not permitted, however, is advertising by e-mail, which is unfortunately all too often sent unsolicited after applying for a customer card. Such advertising is not permitted under either competition law or data protection law. If a company also wishes to send advertising by e-mail, express consent must be obtained for this.
What requirements must the consent fulfill?
Consent to the use of the data for purposes that do not correspond to the purpose of collection must be expressly given. This means that the customer must actively give their consent to the use of the data. Unfortunately, the opt-out version, which is widely used in practice, is not an option. With this variant, a box is often placed on the application form where the customer can consent to advertising by email. However, this box is already ticked in the case of an opt-out. This means that the customer is not given the opportunity to actively agree to the advertising. The company has already done this for the customer. The customer would now first have to object in writing to the use of the data for advertising purposes, which would mean a considerable amount of extra work for them. Such consent is therefore ineffective from a data protection point of view.
Almost the same but different – the opt-in variant. Here, too, a box is printed on the application form which the customer can use to agree to receive e-mail advertising. However, unlike an opt-out, the box is empty and the customer must explicitly check it if they wish to receive advertising and bonus promotions. Such consent meets the criteria of active consent and is fully effective.
What else do companies need to consider with loyalty cards?
It is also important to know that when data is collected on the application form, the customer must be informed of their rights. This is comparable to the privacy policy on the website. If you do not want to print all the information from Art. 13 GDPR on the small form sheet, the option of a QR code or link is also fine, as long as the most important information can be viewed on the application form itself.
Summary
Customer cards are a good way for companies to tap into much sought-after customer data. Many customers welcome the small discounts and special offers, as well as the personal approach when shopping. There are also many customers who like to receive advertising by e-mail to keep them up to date with new products. However, it is important not to lose sight of data protection in all of this. If implemented correctly, loyalty cards can be a win-win situation for both sides, provided the customer is adequately informed about data collection and any data transfer.
