Card Loyalty

The California State Senate is considering a bill that would restrict how supermarkets collect and use shopper card data.

The Supermarket Club Card Disclosure Act of 1999 would let cardholders forbid retailers from collecting their personal information, including purchase history, or sell marketing information that identifies them as individuals. The act requires retailers to put two opt-out clauses on card applications.

Grocers’ biggest worry with the bill is how much it will cost them to notify 30 million existing cardholders of changes. Supermarkets expect so few consumers to opt out that it shouldn’t diminish their databases. “We’re not sure a lot of people will want to go back and opt out,” says David Heylen, communications director for the Sacramento-based California Grocers Association (CGA). “It won’t be that big a concern.”

Although grocers aren’t worried, loyalty marketing execs are, and packaged goods companies should be: The act would restrict co-marketing and hamstring packaged goods marketers from using grocer data.

The provision in Senate Bill 417 that would hurt packaged goods marketers most is a restriction against “sale or transfer of marketing data. . . that discloses the cardholder’s identity.” Depending on how the final bill is worded, it could prohibit joint mailings with manufacturers, says Ann Raider, vp of Consumer Card Marketing Inc., Braintree, MA.

Supermarkets already analyze and use cardholder data without identifying individuals or households. “If we can’t do that, it would destroy the marketing effort in this industry,” says Raider, whose company manages loyalty programs for retailers across the U.S. The bill still allows grocers to collect and aggregate purchase information that is not linked to cardholders’ names or other personal information.

Most grocers handle co-op mailings in-house or via companies like CCMI, so packaged goods partners never get a list of customers’ names and addresses. But marketers handling their own direct mail wouldn’t be allowed to access grocers’ files.

Most loyalty card programs already carry an opt-out clause: Shoppers can sign up to get discounts without sharing personal data. But few, if any, print that option on card applications, contends the bill’s sponsor, Sen. Debra Bowen (D-Redondo Beach). The new law would make it clear to card applicants (and cardholders) that they can prohibit the store from collecting purchase data, and from selling or transferring marketing information that identifies them. Grocers also would have to make clear on applications that personal phone, driver’s license, and Social Security numbers are optional, and would have 60 days to contact current cardholders in writing to let them opt out.

Sen. Bowen is working with industry groups including CGA to set guidelines for notifying existing cardholders via in-store signs and a small notice on the back of receipts. CGA and the California Retailers Association objected to requiring notification by mail (too expensive) or by handing out brochures to every shopper for two months (too annoying to frequent customers).

The bill is modeled on current California law restricting data collection and transfer from credit card companies. The new bill applies only to supermarket cards, despite the widespread use of loyalty cards among other retailers. Sen. Bowen targeted “any store that sells food” because such stores also sell prescription drugs, alcohol, and other products that make sales information “more sensitive than what suit you bought at Macy’s,” says a legislative aide in her Sacramento office. If the bill passes, Sen. Bowen will next target stand-alone pharmacies, the aide said.

On June 29, the Consumer Protection, Governmental Efficiency & Economic Development Committee voted unanimously to pass the bill, and referred it back to the Judiciary Committee. The bill could go into effect as early as Jan. 1, 2000. Violation would be a misdemeanor, with a $500 fine for each transgression.

“The percentage of customers who opt out of data collection is insignificant,” Raider contends. “There may be 50 people in a database of two million – it’s not even enough to affect rounding. But those 50 people are very vocal.”

An estimated 80 million to 90 million consumers use loyalty cards distributed by approximately 9,000 supermarkets nationally. There are about 30 million cardholders in California.

“Consumers want to be in these programs because they get better offers when they’re well-targeted,” Raider says. “Supermarkets are highly ethical in running their programs. They’re very respectful of their shoppers.”

As long as they don’t have to break the bank to reach them.

California’s Supermarket Club Card Disclosure Act of 1999 would require grocers to:

– give card applicants the explicit option to prohibit the store from collecting purchase data;

– give applicants the explicit option to prohibit the supermarket from selling or transferring marketing information that identifies the cardholder;

– print “optional” on applications next to all blanks for personal phone, driver’s license, and social security numbers;

– contact all current cardholders within 60 days to let them opt out of data collection.

The Direct Marketing Association kicked off its “Privacy Promise to American Consumers” on July 1, with guidelines for DMA members and other direct marketers. The promise applies to consumer campaigns, not business-to-business efforts. Here are some highlights:

– Business-to-consumer marketers that rent, sell, or exchange lists of customers must notify customers that they can opt out of having their contact information shared.

– The first opt-out notice must be given when or soon after a prospect becomes a customer. DMA defines “customer” as a person who bought or donated something, has inquired about products or services, or has entered a sweepstakes (with or without purchase).

– Marketers should give follow-up notice at least once a year. This can be part of a routine communication, but must be easy for customers to find and understand.

– Marketers must honor all individual opt-out requests.

– List owners and users must honor customer and prospect requests for no future contact.

– Marketers that contact consumers must use DMA’s Mail and/or Telephone Preference Service on all consumer campaigns.