Trading Secrets For Savings: How Concerned Are Consumers About Club Cards As a Privacy Threat?

ABSTRACT - Media reports and legislative drafts suggest that shoppers fear privacy invasion from the use of supermarket club cards. In the absence of marketing research on the subject, this paper presents the results of two qualitative studies conducted to explore the nature and degree of concern shoppers have about the collection of their purchase information by grocery stores. Findings are contrary to current reports on the subject, revealing instead the willingness of shoppers to trade information for savings on grocery purchases.


Shay Sayre and David Horne (2000) ,"Trading Secrets For Savings: How Concerned Are Consumers About Club Cards As a Privacy Threat?", in NA - Advances in Consumer Research Volume 27, eds. Stephen J. Hoch and Robert J. Meyer, Provo, UT : Association for Consumer Research, Pages: 151-155.

Advances in Consumer Research Volume 27, 2000      Pages 151-155


Shay Sayre, California State University, Fullerton

David Horne, California State University, Long Beach


Media reports and legislative drafts suggest that shoppers fear privacy invasion from the use of supermarket club cards. In the absence of marketing research on the subject, this paper presents the results of two qualitative studies conducted to explore the nature and degree of concern shoppers have about the collection of their purchase information by grocery stores. Findings are contrary to current reports on the subject, revealing instead the willingness of shoppers to trade information for savings on grocery purchases.


Warning: Club cards may be hazardous to your privacy. That’s the situation currently portrayed in the media of tabloid television and the press. Recent articles in the popular press suggest that frequent shopper cards have a high price (Sloane 1998), that reders of The Seattle Times value their privacy more than savings from club cards (Gilje 1988), and question the price of loyalty for shoppers with club card programs (Silverstein 1999; Ward 1998). ABC News "disclosed" that corporate America is starting to collect all kinds of information on what customers buy and how much they spend. Those discount cards many grocery stores now offer could be used to compile a wealth of information about anyone. Some foresee a time in the near future where health or life insurance companies might be interested in accessing these grocery store databases to access the dietary habits of somebody. (Smith 1998)

In February, 1999, lawmakers in California introduced a dozen bills aimed at curtailing the threat that high technology poses to personal privacy, one of which is intended to curb the gathering of personal consumer information from supermarket shoppers who use "club cards" to gain special discounts (Lifsher 1999). According to a lobbyist for the American Civil Liberties Union, "Society is getting nervous and legislators are responding to that (p. A1)." Citing the ability of companies to collect information on everything from sexual habits to the food we buy, some public interest groups declare that the popular club card system potentially is a major privacy invasion (p. C4).

Given all the media fuss, one would suppose there would be a solid basis for this concern. However, little evidence exists addressing this specific issue. There is no evidence in any of the marketing literature. The aforementioned article in the Seattle Times (Gilje 1998) offers only anecdotal comments about a few people’s concerns. Interestingly, the article cited followed a previous story that sensationalized one individual’s "battle" with a grocery chain. The first article then asked for comments and reported those as general sentiment. The question remains then, do consumers feel that their privacy is being compromised by frequent shopper cards now distributed nationwide? Using a supermarket ethnography and a phenomenological study as research techniques, we set out to determine just how threatened shoppers feel about using club cards.

The essence of privacy

Americans place a high value on privacy. Privacy has two general components. The first is the "right" to be left alone and not bothered by intruders, be they in person or some other means. Second is the ability to control how one’s personal data is used by others. Both of these concerns are heightened by today’s technological capabilities. An unsustainable myth is that our computers, phones, faxes, electronic mail and voice mail can all be accessed by outsiders who are plotting against us for their own gain. But does such paranoia translate down to club cards? Is it really necessary to prohibit the collection of shopping behavior information because of a perceived feeling of uneasiness among privacy advocates?

Study after study does confirm that, in general, Americans feel they have less and less privacy (Harris-Equifax Consumer Privacy Survey, 1991, 1993, 1994). However, when one looks beyond the overall impressions, a slightly different picture emerges. Recent research suggests that, based on demographic and usage behavior, consumer segments emerge with distinctly different levels of concern about privacy (Horne & Horne 1997a; Nowak & Phelps 1993; Wang & Petrison 1993). In addition, not all privacy issues are equal to most consumers; consumer are more likely to protest when they feel their privacy in certain domains is violated than incursions into other domains which they feel are less critical to the protection of self-image (Horne & Horne 1997b, 1998). For instance, because of FCC regulations and cable franchise agreements, there are more safeguards in place to keep someone’s cable movie choices private than a recent stay they had in a local hospital. Yet fear of medical record disclosure heads the list of perceived dangers faced by consumers (Harris-Equifax Consumer Privacy Survey 1994).

Some regulation of harmul or mischievous information disclosures may be warranted, especially as it relates to individual’s medical and financial conditions. But is grocery store shopping behavior information among the areas of concern for consumers? Without such investigations into the attitudes and beliefs of consumers, opinions about all types of information collection and disclosure will be restricted to the limited views of consumerists, privacy advocates, elected and appointed government officials, judges and special interest groups. Efforts to learn more about consumers’ concerns with regard to frequent shopper club cards outside the official realm should help clarify the need for legislation in that area.

Operant Conditioning

The theory of operant conditioning, a learned response or operation to perform in order to receive a reward or avoid a punishment, is applicable to the club card phenomenon. The behavior of card usage is instrumental in determining whether one gets a reward (savings) or avoids a punishment (higher prices) (Perloff 1993). Club card holders, who become conditioned to use the card when shopping, receive free turkeys and other bonuses for consistent usage. Airline frequent flier programs operate on the same principle of operant conditioning, providing free flights to loyal users. Ward (1998) found that many customers willingly share information with their favorite stores, provided they receive something in return and assurances that their information will be used only by that store. Lewis (1998) calls card users "privacy pragmatists" who are willing to have information on them gathered and possibly used if they see the benefits and some safeguards. We wondered just how accurately Lewis characterized card users and geared our study to investigate the pragmatism of male and female shoppers.


We approached our research using two types of qualitative methods to obtain a depth of analysis from different perspectives. Phenomenological methods are ideal for investigating club card usage and shoppers’ awareness levels of information usage through depth interviews. Ethnographic methods go further into motivation levels by probing the grocery store culture through observations, interviews and insider validation techniques over an extended period of time. Used together, these qualitative research traditions provide rich detail by incorporating the complete shopping experience with feelings about club card usage and information-gathering.

Phenomenological Study

In the first study, researchers followed the phenomenological tradition by conducting in-depth interviews with a convenience sample of twelve subjects, ages 23 to 79 years, (six males and six females) who own and use club cards. Subjects were specifically questioned about their club card usage experiences and attitudes. We wanted to find out how much people know about what stores do with the information collected from the cards, and if they consider the discounts and other services associated with club cards as an equitable trade-off for the disclosure of their purchase information. Subjects matched the demographics of the surrounding region: eight Anglo, two Hispanic, one African-American and one Asian participated. Shoppers were asked about the advantages and disadvantages of using club cards as well as their feelings about data exchange. If subjects did not raise the issue of privacy, they were asked if they were aware that information about their purchases was being used and traded, and how they felt about that. Interviews, which ranged in length from 20 to 50 minutes, were recorded and then transcribed for analysis. Transcriptions were subsequently reviewed by respondents for accuracy and then analyzed by clusters of thematic statements identified with Nudistsoftware. These "meaning statements" formed the basis of meaning units, which were coded and discussed by the researchers to yield a consensus of their significance.

Phenomenology Results

Reported advantages for the club cards were either service or customer oriented. Saving money, faster check-outs, better product selection and return of lost car keys with card key-chains were noted most often. Two subjects appreciated the cashier calling them by name when they use the club card. Another respondent commented:

"If they know that I buy Diet Coke and they’re thinking of canceling Diet Coke, but there’s a lot of customers who buy Diet Coke, then they might not cancel it"

Another believed that:

"Products can be tracked to change marketing away from unhealthy stuff like cigarettes and beer and promote good products like milk and salad."

Disadvantages cited by respondents pointed to a possible lack of privacy and an unwillingness to let grocers sell their information. A few also included decreasing competition by locking card users into one store and reducing options for non-card holders. "I think it’s unfair in some respects because everybody doesn’t get the same deal," said a male respondent. Another man believed that the trade-off of discount for information was not balanced: "You’re giving them information for free or for a dollar discount." Slight gender differences emergedCmen were more aware of tracking and somewhat more critical of the motives for data gathering than their female counterparts. (For a description of advantage and disadvantage theme clusters by gender, see App. A.)

The overall feelings about supermarkets having their individual purchase information ranged from annoyance to skepticism, but no one felt threatened. "It’s not like medical information, so who cares?" asked one woman. Some were peeved that their names could be sold to telemarketers who "bothered them at home." None of the respondents wanted to get "junk mail or phone calls" as a result of their card usage. Most felt that by surrendering buying preferences they were actually enhancing their purchasing power with comments like, "as long as the card save me money, it’s OK." A few respondents had uncomfortable feelings because "stores don’t make it very clear what they are using the cards for." One man felt that "If they want to, they can probably find out all the information anyway, legally or illegally."

Nine of the twelve respondents made unsolicited mention of the card’s information gathering capabilities, and three acknowledge their awareness when further probed, revealing a high awareness level among shoppers. All were aware that a portion of their privacy was being compromised and seemed resigned to the equity of the privacy for savings trade off. Many subjects equated the use of this information with general, vague, global concepts like "the internet" and "the government," possibly emanating from media hype and popular culture films like "The Net."

Ethnographic Study

In the second study, researchers selected the ethnographic tradition to discover how grocery store patrons incorporate club card usage into the shopping experience. The grocery chain examined proclaimed to be the region’s oldest and largest supermarket and was cooperative enough to allow the research to take place on their store grounds. The target store was visited at different times of the day each day for one month. Observations ranged in length from 30 minutes to two and one half hours in four time-blocks: early morning (7:00 a.m. to 10:00 a.m.), early aternoon (12:00 to 3:00), early evening (4:00 to 6:00) and late night (10:00 p.m. to midnight). Total observation time was 42 hours. Short interviews were conducted in each segment with a total of 114 patrons and 11 checkers. During the last week, a five-question survey was administered to 200 patrons as they exited the supermarket. Field notes, artifacts (advertisements, applications, price tags), survey data and interview transcripts were used to produce a detailed ethnography of the supermarket culture.

Ethnographic Results

Shopper demographics during the month of November, 1998, included male and female patrons from teenagers to seniors. Demographics changed considerably in accordance with the time of day observers visited the store. Seniors shopped early; mothers with their children came in the afternoons; and commuters and other hurried shoppers dominated early evenings. Men seemed to prefer late evenings, and on weekends every demographic made an appearance.

Employees observed include checkers, box people, deli and meat counter workers, florist shop workers, managers and assistants between 20 and 40 years old. After a few visits as complete observers around the store and at the check-out counters, researchers became participant observers and acted as shoppers to enable noting specific patterns and themes. They wondered if patrons shopped with card specials in mind, whether checkers asked for the card or shoppers surrendered it first, and what kinds of conversations transpired from the interaction.

After a few weeks of visits, researchers began having short conversations with store patrons and checkers using an informal contextual interview to emulate casual exchanges. Transcripts and analyses of these data are not included here because of space considerations, but are available from the authors.

A thematic analysis of field notes yielded the following assertions:

* more women than men use club cards

* 72% of those observed used the card

* patrons with purchases over $25 used the card more often than those in the express lane or will smaller purchases

* 73% of the patrons who used the cards had them out of their wallets or offered a key-ring card to the checker

* over 80% of checkers asked patrons who did not volunteer cards if they had one

* 20% of the patrons were seen shopping with specific club savings in mind

Checkers revealed that most people used cards and only a few shoppers made derogatory comments about the card concept. One cashier had a story about an angry patron:

One time I offered a man a card application and he said, "No thanks, I don’t want anyone to sell me something I don’t want." I told him that {chain name} did not give out information like that and he said, "Sure they do. To the highest bidder and I’m not for sale!" Other than him, I haven’t found many people who are paranoid about the cards (F40).

One researcher heard this conversation while waiting to check out:

Two men were in line late Friday night, when a checker asked the younger man buying wine and snacks if he had his card. When he admitted to leaving it in his car, the man behind him volunteered his card. The younger man who was credited over $2.00 in savings, said "Thanks man, I appreciate it," and the other replied, "No problem, just goes toward my bonus buys."

During the fourth week of observation, a survey of five close-ended questions was completed by 200 patrons, equally divided among the various time blocks. The survey reported that nearly 80% of the respondents had club cards and 100% of them used cards because of the savings at the store as opposed to winning a contest or special discounts at other partnership businesses. When asked about their feelings with regards to the information gathered on their purchases, only 16% were concerned, 21% were somewhat concerned, 30% were unconcerned and 33% said it was irrelevant.


Phenomenology researchers concluded that customer concerns about the use of supermarket club cards as tools for tracking personal purchases and/or developing marketing plans do not appear to be overwhelming. Consumers expressed an appreciation for the advantages and conveniences of the club cards ranging from saving money to saving time, revealing that consumers use the card as a "tool" to their advantage.

More skeptical consumers suspect that "they use the system to know better how to get more money from you," but continue to use the card anyhow. It is interesting to note that more negative impressions about disadvantages were expressed than positive ones about advantages, perhaps a cause for a certain amount of concern for supermarkets since the club cards provided a valuable source of consumer information.

This sample of card users was a savvy lot: of the twelve respondents, only two expressed a lack of awareness about the fact that supermarket companies track and use the information they collect from card usage. Other respondents’ reactions ranged from a laissez-faire attitude to the opinion that the gathering of information from club card purchases amounts to a minor invasion of privacy, "They know a little bit more about me than I’d like them to know." The majority seemed resigned to trading information for savings. The overall reaction to the use of supermarket club card as a method for collecting information about consumer buying habits is an ambivalent love-hate relationship. Consumers like the savings but tend to be uncertain about exactly what the supermarkets do with the information collected. One respondent summed it up with a question: "Who cares if they know what kind of toilet paper I buy?"

Similar findings resulted from the ethnography of the supermarket. The shopping culture revealed that shoppers are not concerned or even thinking about the club cards and how their collective information about the products they purchased might be tallied and sold. They act as if the savings and other advantages far outweigh the disadvantages and threats of invasion of privacy. If the issue is of concern to the 28% of shoppers who do not use cards, they are not vocal about it.

Observers reported that shoppers using the card simply take it out, swipe it in the scanner and put it awayCa true form of operant conditioning. Consumers are conditioned to have a favorable feeling toward using their club cards because they know they are getting some type of savings as their reward.

The same percentage of card users, 72%, was reported by our researchers as by other research data (Silverstein 1999). In spite of horror stories reported in the media about privacy breaches, both of our studies reflect card user apathy about the product information dissemination. Perhaps conditioned by frequent flier programs, consumers show less concern for privacy invasion than for telemarketing solicitations resulting from the release of their buying preferences. In fact, frequent shopper programs ranked third among seven top reasons for choosing a store in a survey of nearly 41,000 shoppers completed early last year by market research firm AC Nielsen Corp. (Silverstein 1999).

Club card popularity has caused more and more chains to adopt such programs to snare more promotion dollars from food companies and consumer product manufacturers. Supermarket suppliers realize it is better to am discounts at their most likely customers through a frequent shopper program than rely on newspaper or broadcast advertising (Silverstein 1999). Chains claim that they can use card data to target services and additional discounts to their loyal customers, the 30% who account for 70% of their overall revenue. The cards are here to stay and will likely become commonplace across all regions. The competitiveness of the industry often leads one chain to closely follow any perceived advantage offered by another.


Both of these groups of respondents proved to be privacy pragmatists as described by Lewis (1998) and seemingly willing to trade lower prices for certain aspects of their privacy. They knew what they were doing and made some sort of trade-off that satisfied their personal utility function. Trading personally, immaterial information about grocery items purchased for a lower register total made economic sense to them. While men were more aware of tracking motives, more women used club cards while shopping; this anomaly suggests that tracking practices may curtail usage in some cases.

However, grocery stores or any other retailer that offers some form of frequent shopper program must not believe that all purchase information is up for sale so cheaply. Grocery stores must be especially careful that, as they evolve into retailers that sell more sensitive items such as prescription drugs, they keep abreast of their customers’ changing feelings about privacy in different product categories. The privacy domain of medical issues does usually cause more concern among consumers. Many feel the recording and sharing of prescription purchases is tantamount to revealing the results of a physician visit. Thus stores must be careful about expanding their club cards into any shopping behavior that might not seem so benign by consumers.

Another issue that these subjects mentioned had to do with the use of the compiled data of each individual. There was an implicit understanding that it would be okay for the store to use the data, but that selling these valuable profiles of real buyer behavior would not be seen as consumer friendly. No one expected additional direct marketing contacts as a result of their grocery purchases. The discounts given were not viewed as substantial enough to warrant additional intrusions into one’s home. Thus when patrons register for the programs, retailers must clearly disclose the intended use of the subsequent data profiles. Any policy changes from that initial agreement would likely be met with resistance since the rules were changed in the middle of the program. Worse yet would be the notification chore to all current card members. Mailed notices and store signage would likely miss significant numbers of patrons who then might become quite indignant.

Overall, the grocery store club card programs have the appearance of a win-win situation. However, the retailers must recognize that they have only limited permission to collect and profile certain types of grocery buying behavior. Expanding this data collection franchise without the specific permission of their patrons could result in a backlash that could jeopardize the entire operation.

Stores offering card programs also need to make it clear at the offset and give regular reminders to customers that they are under no obligation to use the card if they feel uncomfortable about any particular purchase. The feeling of control must remain with the customers if they are to continue to share their grocery shopping habits with the stores.


A concept as delicate as privacy represents a research challenge. In effect, anyone studying privacy has to violate the privacy of each respondent. Therefore a pair of limited sample studies using as non-obtrusive techniques as possible may well miss issues and concerns held by the larger population. However, the intent of this exploratory work was to get some sense of apprehension if it eisted or nonchalance if that was the case that real consumers exhibited with regard to their use of supermarket club cards. Even with the limited sample, these were active purchasers who shared their shopping behavior, not the inflammatory comments of privacy advocates or the press.

Future Research

Future research could be useful if it extend the area of study into regions with different club card penetration rates. There may be regional differences as to the level of privacy concern. Another subject for future study would be to examine other types of frequent shopper programs that exist for gift shops, department stores, and other retailers (brick and mortar or Internet) to see if the same general attitudes hold. One retailer category that probably would merit special attention is drug stores, at least with regard to their pharmacy departments. While pharmacies do keep track of what consumers buy to educate users about the side effects of different prescriptions, compiling and using buyer behavior data in that setting may be perceived quite differently than typical grocery purchases.


Two qualitative studies examined the typical consumer’s reaction to their own use of supermarket club cards. The evidence clearly indicated that these shoppers were willing to trade information about their grocery purchases for cost savings at the cash register. They allowed the store the use of data they viewed as non-consequential in order to stretch their food budget. Through the use of classical conditioning, marketers are able to train shoppers to use club cards in exchange for monetary and grocery rewards, and to avoid the pain of higher prices. Giving up a portion of their privacy for a better price on any number of items made perfect sense to these shoppers. As long as the stores maintain the transaction on those terms, there is little reason to believe the typical shopper would suddenly cry foul in spite of legislative proclamations to the contrary.




Gilje, S. (1998), "Readers Value Privacy More Thank Savings from Club Cards," The Seattle Times (Sept. 8): C1.

Harris-Equifax Consumer Privacy Survey (1991), Atlanta: Equifax.

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Harris-Equifax Consumer Privacy Survey (1994), Atlanta: Equifax.

Horne, Daniel and David Horne (1997a), Privacy, A Paranoid’s View," Advances in Consumer Research XXIV: 351-354.

Horne, David and Daniel Horne (1997b), "Domains of Privacy," 1997 Educators’ Conference of the Direct Marketing Association, Chicago, IL, October 1997.

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Lifsher, Marc (1999), "Law makers to Consider Privacy Bills," The Wall Street Journal (Feb. 24): A1.

Nowack, Glen and Joseph Phelps (1993), Understanding Privacy Concerns," Journal of Direct Marketing 6 (Autumn), 28-39.

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Silverstein, Stuart (1999), "What Price Loyalty?" Los Angeles Times, Orange County Edition (Feb. 7): C1.

Sloane, M. (1998), "Frequent-Shopper Card Can Have a High Price," San Francisco Chronicle (April 4): C4.

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Ward, C. (1998), "Grocery Store Shopper Cards Save Money but Cost Privacy", The Houston Chronicle (May 3), B7.



Shay Sayre, California State University, Fullerton
David Horne, California State University, Long Beach


NA - Advances in Consumer Research Volume 27 | 2000

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