[wordup] Card Games

[Adam Shand]

And just a reminder.  I post a different cross section of stuff to my 
web site.  I hope that some motivational force will strike and I'll 
figure how to combine the two but that moment has yet to arrive.

   http://www.spack.org/

Adam.

From: http://www.citypaper.com/2003-10-01/feature.html
October  1 - October  7, 2003
Card Games

Should Buyers Beware of How Supermarkets Use "Loyalty Cards" to Collect 
Personal Data?
By Joab Jackson

Everyone gets worn down and submits, eventually.  Even the most 
resistant. Even Rob Carlson, a privacy-minded person who hated the idea 
of having a supermarket savings card.

   Living in Catonsville at the time, Web programmer Carlson usually 
foraged at the Metro Food Market on Baltimore National Pike, which he 
says had the lowest prices. Occasionally, he stopped by the Giant Food 
on Wilkens Avenue, since it was closer to where he lived. He wasn't 
happy about it, though. Once Giant offered what seemed to Carlson to be 
the lowest prices in the area, but when it introduced its Bonus Card in 
September 2000 it appeared that most of the sales quickly became 
exclusive to cardholders.

Did these people know what they were giving up by signing onto these 
programs? Carlson thought.

  "My job is to design and maintain databases, and I'm constantly amazed 
at the things that can be discovered when you have enough data and you 
know how to ask the right questions," Carlson says. "I think a lot of 
people who use a supermarket club card either don't realize what data 
is being collected about them, or don't care."

  It was during one of his trips of convenience, to purchase a 
decorative fountain, when Carlson caved. The cashier noted he could 
save $15 if he used a Giant card. It would take only a minute to fill 
in the application with a name, address, and phone number. Can't argue 
with a $15 discount.

  And so Carlson slid into the fold, as do many of us.

  Still, does anybody actually want to carry around these cards? Some 80 
percent of supermarket chains nationwide have card programs, plowing 
millions of dollars into them. They goad us into applying for cards. 
But why? What are supermarkets getting out of these cards, exactly?

  Just as card sharks read the telltale behavioral tics of their 
opponents to win more of their money, so supermarkets want to watch 
their customers' purchasing habits closely to better know how to sell 
to them. "What we get out of it is insight into the needs of our 
customers, so we can provide them better service," explains Frank 
Gallagher, a director of marketing planning and analysis for Giant. The 
information Giant keeps is basic stuff: the customer's name, address, 
and phone number (if he or she elects to submit it), along with a list 
of all the items he or she purchased with that card. In return, 
shoppers are rewarded with lower prices on certain items.

  But, if anything, the controversy of who is playing who has just 
begun. Privacy advocates worry about the data being collected and how 
it will be applied, and consumer watchdogs grumble about whether or not 
the cards actually save shoppers money. And coming down the road in a 
few years is a new technology--product-tracking tags--that will make 
shopping cards look like the ragged tricks of a small-town con artist.

How did we end up carrying around a stack of shopper cards just to get 
some good deals? It's our own fault, say retail industry observers. 
We're shopping sluts, always looking for a quick fix, hastily plucking 
whatever item is cheapest from the shelf, from whatever store is 
nearest.

Within the supermarket industry, these plastic rectangles are known as 
"loyalty cards," a term that amuses John Stanton, a professor of 
marketing at Philadelphia's St. Joseph's University and co-author of a 
book on product marketing titled Success Leaves Clues. Many consumers 
carry around thick stacks of the cards, he points out: "It's like if I 
said to my wife, 'I'll be loyal to you and four other women.'"

  On a sunny afternoon last month, I accosted about a dozen shoppers in 
the parking lots of three shopper-card-carrying local supermarkets. 
"Why do you shop here?" I asked. In almost every instance, I got the 
same response: convenience. "It was on the way home from work," said 
one patron outside the Charles Village Safeway, as he loaded parcels 
into the trunk of his car. Not one of the participants said that a 
loyalty card gave him or her the slightest motivation to go out of his 
or her way to shop at a specific store.

  Fifty or so years ago, grocery-store customers were a more predictable 
lot, says Ron Swift, a vice president of strategic customer relations 
for Teradata, a division of NCR, formerly National Cash Register Corp. 
Customers mostly shopped at their neighborhood store and bought the 
same basic items each time out. The grocer would have a pretty good 
idea of what would be in the register at the end of the day and what 
would need to be replaced on the shelves.

  Those days are gone. People got smarter. Hopping in their cars, they 
shopped around, compared prices, used coupons. So, like a spurned lover 
who turns to a private dick to learn more about a beloved's 
philandering ways, the supermarket chains turned to technology, hoping 
to find out more about what shoppers buy, and to understand why they 
buy it.

  While the local grocery market is stable, these companies feel 
competitive pressures from elsewhere, says Jeffrey Metzger, publisher 
of Food World, the Mid-Atlantic's regional supermarket trade journal. 
In the past five years or so nonsupermarkets--mostly Wal-Mart and 
drug-store chains like Rite Aid and CVS--have increasingly taken in 
more local grocery dollars. In an increasingly competitive landscape, a 
store's profits are hard won: A supermarket may make 3 cents on every 
dollar of merchandise it sells, Metzger says.

  This is where Teradata comes in. This Dayton, Ohio-based company sells 
data-mining systems, computer systems that can hold and analyze vast 
amounts of data. Ron Swift flies around the country selling supermarket 
companies on the idea that such powerful systems can easily 
characterize the purchasing habits of individual shoppers. Most of the 
companies buy into the idea, Swift says, and such a claim seems 
credible. In 2002 alone, Teradata sold about $1.1 billion of data 
warehouses across the retail sector, according to the company's public 
filings with the Securities and Exchange Commission.

  Stores have always known what they've sold, at least after a tally of 
the day's sales. And they have usually had at least a vague idea of 
what their customers want. Strong sales of Puppy Chow indicate that 
lots of dog lovers live nearby. But what data mining promises is "to 
know the customer's lifestyle and what they prefer," Swift says. 
Through sifting the data it collects, Teradata has found, for instance, 
that shoppers who buy a lot of baby supplies, such as diapers, tend to 
buy a lot of film for their cameras, too. Teradata's systems scour a 
market's records for such affinities, seeking strong bankable 
connections that supermarkets can utilize. Putting the steak sauce next 
to the steaks, so to speak.

  St. Petersburg, Fla.-based Catalina Marketing is another company that 
markets customer data-collection systems to grocery stores. Catalina 
installs systems at cash registers that spit out coupons with register 
receipts. By knowing who a shopper is through his or her use of a 
loyalty card, the company claims it can deliver a coupon tailored to 
that customer.

  If you don't know Catalina, chances are Catalina knows you. The 
company works with about 18,000 supermarkets nationwide (its Web site 
lists Giant, Safeway, Food Lion, and CVS as customers, among others), 
keeping a database of 100,000 households. Their shopping records 
stretch back "at least one year" in order to track long-term buying 
habits, says Trish Brynjolfsson, who is a Catalina vice president of 
retailer marketing. Brynjolfsson would not say how long Catalina keeps 
the records beyond one year. The company charts not only what items you 
buy but also how often you come into the store and how many items you 
buy when you do. It knows if you like to switch brands.

  While some consumers are doggedly brand-loyal, "there are certain 
customers who are promotionally sensitive--they are looking for 
savings," Brynjolfsson says. In fact, she estimates that 80 percent of 
shoppers switch brands frequently. By using the kind of data Catalina 
collects--in part through loyalty cards--manufacturers of competing 
products can pitch the switch-hitters with instant coupons for their 
own products. Turn over the back of a Catalina-generated receipt and 
you may very well find a coupon for a product you have thought of 
trying, from a secret admirer of your wandering ways.

  Companies like Catalina and Teradata use this data to spot trends and 
insist they have little use for individual information. Brynjolfsson 
says that it would be difficult--though possible--to single out and 
review one person's buying history, but that the company has no 
business interest in doing such.

  If this all sounds a little manipulative, remember these companies 
swear that a well-executed loyalty-card program can be a win-win for 
both shopper and shop. And they may have a point.

  See, it is bad marketing that offends people, Teradata's Swift says. 
People get irked at useless coupons stuffing their mailboxes, at 
telemarketing sales pitches for products they can't use. But if you 
were approached with a deal that might actually be of interest, you 
wouldn't see that as marketing, he argues. You'd see that as helpful. 
It'd also be cheaper for the stores.

  "Say a baby-food manufacturer want to target a new product," Giant's 
Gallagher says. "Instead of dropping 4 million coupons in the area, it 
may want to target customers shopping in our stores and already buying 
their products. It's more efficient for the manufacturer and for us as 
well."

  So why shouldn't we make use of data-mining technology to make our 
lives more convenient, to have our local grocery anticipate our needs 
like an attentive lover?

But Rob Carlson, for one, was not ready to let his shopping history go 
so easily. "It's only an ignorant or apathetic consumer who is willing 
to trade a very personal profile of their home life every week for 30 
cents off a gallon of milk," Carlson says. He thought about what he 
could do to raise awareness of how these loyalty-card systems worked. 
When he posted his thoughts to an Internet mailing list, someone else 
off-handedly mentioned that there was no reason that the bar-code label 
on the back of each Giant card couldn't be replaced. Reading this, 
Carlson had the flash of inspiration to set up Rob's Giant Bonus Card 
Swap Meet.

Carlson's site works like this: You enter your Giant card number on a 
form. It puts this number into a pool of numbers gathered from 
participants. Drawing from this pool, it displays for each visitor a 
bar-code replica of someone else's number, allowing the visitor to 
print it out and tape onto his or her own card. Should you actually 
take the time to do this and then visit the local Giant to use this 
card, you are, to Giant, someone else. If enough people do this, the 
argument goes, Giant's shopper profiles are rendered muddied and 
ultimately useless.

  Online since January 2001, the site has gotten thousands of hits. 
Carlson has no illusions that there will ever be enough of a 
groundswell to make any difference to Giant, however. "The intent of a 
card swap or a site like mine is less about affecting the supermarket 
and more about educating the consumer," Carlson says.

  Giant wouldn't comment on Carlson's site, though Catalina's 
Brynjolfsson says that tricks like using a fake name or swapping cards 
has no effect on its records. Such tricks only cause the customer him- 
or herself to be deprived of the "the full benefit" of the system, 
Brynjolfsson says.

  Carlson is not alone in his misgivings. Katherine Albrecht founded 
Consumers Against Supermarket Privacy Invasion and Numbering, or 
CASPIAN, to alert consumers of the potential dangers of supermarkets 
collecting extensive personal shopping histories through loyalty cards. 
"There are many, many things that nobody's got any business knowing 
about anybody else," the organization's Web Site (www.nocards.org) 
fumes.

  Although most stores say they don't sell the data to outside parties, 
they do frequently sell it to "partners" or companies that do business 
with the stores, CASPIAN claims. Giant does not sell its records to 
third parties, though it will mail coupons to Giant customers for 
third-party vendors, Gallagher says. While neither Safeway nor Super 
Fresh returned phone calls for this article, the privacy policies 
posted on Super Fresh and Safeway's Web sites look similar to Giant's.  
And with the data so freely available, it could be put to the wrong 
uses--even be used against you--CASPIAN spokeswoman Liz McIntyre says.

  When asked for past cases of supermarkets and their "partners" 
misusing data, however, McIntyre comes up short. The Web site doesn't 
offer up many specific cases of abuse, either. One supermarket chain 
turned over all its purchasing records to three federal law-enforcement 
agencies in the days after Sept. 11, 2001--without even being asked to 
do so--according to a July 2002 Village Voice article, but neither the 
supermarket nor the federal agency involved were named.

  Still, privacy concerns are worth noting. Most retail stores seem to 
have little problem in turning your records over to law-enforcement 
officials or subpoena-wielding lawyers. Remember a few years ago when 
Kramerbooks in Washington refused to hand over to special prosecutor 
Kenneth Starr's minions a list of the books Monica Lewinsky purchased 
on the grounds that it was an invasion of her privacy? Don't expect 
your supermarket to do the same for you.

  Gallagher says that if presented with the proper subpoenas, Giant 
would disclose shopper records. It even states as much on the card 
application form.

After hearing the sales pitches  of Teradata and Catalina, it's 
surprising to realize that not every store uses loyalty cards. Metro 
Food Markets, which operates 9 stores around Baltimore, eschews use of 
the cards, as does its parent company, Shoppers Food Warehouse. (Soon 
all Metros will be known as Shoppers Food Warehouses.) The company 
looked at using such systems, says Rick Rodgers, a senior vice 
president of merchandising for Shoppers, but didn't see the benefit to 
them. "We offer the same deal to all our customers. It works for us, 
and we feel our customers appreciate it," he says.

Although not primarily a vendor of groceries, Wal-Mart, widely 
considered in the industry to be the most efficiently run retail 
business, is another no-card store.

Food World publisher Jeffrey Metzger divides the grocery business into 
two general categories. Stores like Metro and Wal-Mart fall into a 
category Metzger calls "everyday low price stores." Such stores draw 
customers by cutting the prices of all items as much as possible. For 
these stores, there is little value in using in savings cards. They 
compete on price alone.

  The second category is what Metzger calls the "high-low stores." These 
are stores like Giant, Super Fresh, and Safeway that heavily discount 
selected items, hoping to entice people into the store for those 
savings. The store makes up the difference on other items the customer 
is likely to buy once inside. Consumers Against Supermarket Privacy 
Invasion and Numbering accuses such stores of jacking up their prices 
and offering items for cardholder-only sales at what would normally be 
the non-sale price, giving customers the warm, but false, feeling of 
saving money.

  So are savings cards a ruse? Do no-card everyday low price joints 
really offer lower prices every day? On the rainy night of Friday, 
Sept. 12, I visited four Baltimore supermarkets to compare some prices. 
I visited the Charles Village Safeway, the Rotunda Giant, the Super 
Fresh in Hampden, and the Metro Food in South Baltimore. I compared the 
prices of 36 items ranging from taco shells to Hamburger Helper. I 
picked eight items from each store that were on sale, and four more 
staple items.

  Admittedly, this study was unscientific, but this is what I found: 
Metro seems to be the cheapest, but just barely. If I were to buy all 
of the items on my list at Metro, it would cost me $66.52. But at 
Giant, using its Bonus Card, the total would nearly be the same, at 
$67.19. These items would cost a card-carrying Super Fresh member 
$72.71 and a Safeway loyalist $76.80.

  Keep in mind, this is a sample from sale items picked more or less at 
random. Since there's only a $10 spread between the least expensive and 
most expensive store, it could be entirely possible that with another 
36 items Safeway could have come out ahead.

  Beyond raw price comparisons, however, other factors stood out. Each 
store had its share of good deals, as well as its share of high-priced 
items. (Giant charged $3.79 for a 15-ounce box of Cheerios, while the 
other markets had the cereal on sale for around $2 a box.) Overall, one 
store's patrons don't seem to get more overcharged than any other 
store's patrons. But no one store's loyal customer will come out that 
much ahead, either.

  But contrary to CASPIAN's contention, cardholders do enjoy good 
savings from time to time. With your Giant card, you could have scored 
a 100-ounce container of Tide liquid detergent for $4.99 on Sept. 12, 
while other markets in town--including no-card Metro--charged $7.79. 
But as CASPIAN contends, those club-card-driven savings the markets are 
proud to trumpet are equivalent to regular sales at stores with no 
cards. You may have a Super Savings Card, but it isn't a Super Duper 
Savings Card. You're probably not saving more than you would be in 
no-card stores.

  One last aspect leaps out: Defiance costs. If you're not using a card 
at a place that wants you to use them, you'll get screwed. Sans cards, 
my groceries that night would have cost $82.55 at Super Fresh, $86.28 
at Safeway, and $76.77 at Giant. CASPIAN encourages consumers not to 
use cards when shopping as a way to send a message to the markets. Some 
message. Sending that message to Safeway would have cost you 
$9.48--payable directly to Safeway itself.

  So what is going on here, assuming that these stores offer groceries 
at more or less the same price? No-card stores like Metro and Mars 
Super Markets try to duke it out on price alone, hoping Wal-Mart 
doesn't come in and crush them. Meanwhile, the high-low stores offer 
similar savings but want to learn a bit more about you in return, like 
what you and people like you tend to buy. So the next time you come in 
for one item, they may better know what other items you might just 
throw another in the basket that you weren't consciously planning on 
purchasing. Especially items with high profit margins.

  In theory, anyway. The dirty little secret of data mining is that 
stores don't actually use these data mining systems very much. In many 
cases, chains install the systems at considerable expense (prices start 
at $500,000 to install Catalina's products in a small grocery chain's 
stores). Yet, after they are installed, the data they reap usually 
isn't analyzed, Professor Stanton says. Many chains have the old 
penny-pinching mentality. So they may invest in a data-collection 
system but not in the software and training needed to get full use of 
the resulting data.

Food World's Metzger agrees that the grocery stores in the Mid-Atlantic 
region don't fully use the collected data. Shoppers Food Warehouse's 
Rodgers says that part of the reason Metro doesn't use shopping cards 
is that it doesn't see a clear value in having all that data.

  Something else is needed to complete the puzzle. Enter the next 
technology that will be pitched to help supermarkets survive in their 
hypercompetitive, loyalty-starved world: tracking tags.

The tags don't look like much.  You can hardly see them, in fact--they 
are about the size of a head of a pin. They are called radio frequency 
identification tags, or RFID tags. If you don't know what they are 
today, you will in five years. They are widely expected to take the 
place of bar codes, and they also could be used to keep track of 
customers more closely than even the most wildly optimistic 
loyalty-card pitchman could dream.

The future of this technology may spring from Columbia. There, a 
technology engineering company called Matrics has developed tags, 
antennas, and readers it hopes will be adopted by grocery stores and 
other retail outlets. It is but one small 50-person company among a sea 
of similar manufacturers getting ready to ramp up sales of these tags. 
Many belong to an industry body called the Auto-ID Center.

  A windowless room in Matrics' offices is set up for demonstrations. It 
resembles a mock store. On one side of the room are shelves of typical 
consumer items: some DVDs, a small rack of shirts, some coffee mugs, 
books, cans of coffee. Each of these items bears a small, nearly 
unnoticeable RFID tag.

  Joe White, Matrics' senior director of application engineering, shows 
me a tag, and that is exactly what it looks like: a tag with sticky 
adhesive on the back, one you could stick on a package of just about 
anything. The back peels off to reveal a tiny metal chip, .012 inches 
thick, with little silver threads (its antennas) stemming from it.

  The chips are passive. In other words, they have no power source, such 
as a battery. Instead, a transmitter sends out a radio wave of a 
certain frequency, which reverberates with the tags. Each tag holds a 
unique serial number that is read by the RFID antenna.

  White turns on a computer in the corner of the room and launches some 
software that scans everything in the room through antennas built into 
the wall. The software shows a virtual representation of the "store," 
showing where each and every item is located.

   Despite--or perhaps because of--their size, RFID tags could 
revolutionize the retail industry. Customers would like these tags 
mostly because, if they were affixed to products, those products would 
no longer have to be taken out of the cart to be paid for. A cashier 
(or an automated checkout machine) could just wave a wand over a cart 
full of items and spit out a grand total within a few seconds. 
Retailers would like them even more (which is why they are all but an 
inevitability, RFID manufacturers reason with fiscal optimism). A store 
can put readers throughout the shopping area and keep tabs on each and 
every item on its shelves. If a store were running out of one item, the 
manager would know it sooner and be able to restock it faster; 
supermarket chains could spot trends more quickly as well. RFID tags 
could also make shoplifting pretty much impossible: If an item is 
tagged, a manager will know if it is leaving the store without being 
paid for.

  Industry analysts predict that RFID tags may become widespread on 
consumer shelves by 2007 or so. Naturally, RFID tags have consumer 
advocacy groups spooked. The week of Sept. 15, CASPIAN staged a protest 
outside Chicago's McCormick Place Convention Center, where an RFID 
trade show was taking place, with companies such as Gillette and 
Procter and Gamble showing off how they could tag their products with 
the devices.

  Privacy advocates have called these RFID tags spy chips. While helpful 
inside the store, the potential problem is that these tags could be 
used outside the store, after the sale. Each tag is individually 
numbered and, in conjunction with the kind of records a loyalty-card 
system compiles, could theoretically be tracked back to the person who 
bought a particular item.

  CASPIAN's McIntyre paints a picture of a consumer-friendly Orwellian 
nightmare in an RFID world. For instance, she postulates, it would be 
possible, if not probable, for some fiendish corporation or government 
agency to collect a list of every item you own, using the tag numbers 
of the items you purchased. Then it could track you down, merely by 
scanning the landscape for those tag numbers. With such tags sprinkled 
about your person, a retail store could identify you the moment you 
enter the front door, identifying you from previous purchases you're 
wearing or carrying. "Immediately you can be tracked," McIntyre says. 
"They will know where you're going and how long you linger. How much 
comparison shopping you do."

  Earlier this year, the Auto-ID Center, recognizing a growing backlash 
against the technology, set forth specifications for ways that the tags 
could be turned off at the checkout counter, not unlike the way 
anti-shoplifting devices are neutralized--it's called a killtag 
function. McIntyre doubts companies would go for this, however. After 
all, there are plenty of good reasons for enticing customers to leave 
RFID tags active. An active tag could be used to identify products 
still under warranty, for instance.

  Kevin Ashton, executive director of the Auto-ID Center, pooh-pooh's 
CASPIAN's dystopian vision. First of all, he notes, it's highly 
doubtful retailers would ever voluntarily give away any information 
about who bought their products to other businesses: "Retailers are 
very unlikely to share this kind of information with their 
competition," Ashton says. Secondly, there are very real physical 
limits to how far away these tags can be identified. Tags without their 
own power supplies--which is to say most tags currently proposed--can 
only be read from a few feet away at most. Everyday barriers like water 
and metal block the signals. "While the technology is likely to improve 
over time, there are some fundamental limits that make things like 
reading RFID from outer space seem unlikely," Ashton says.

  Lastly, and most importantly for Ashton, the problem with this 
all-seeing RFID scenario "is that most customers would hate it, so it 
wouldn't be very effective," he says.

  Or maybe they just won't care.

  Outside the Charles Village Safeway, a woman pulls her plastic bags of 
groceries from her cart. "Doesn't it disturb you that the supermarkets 
are keeping records of what you buy?" I ask.

  "It doesn't bother me, " she says, shrugging. "It's only food."

© 2003 Baltimore City Paper. All Rights Reserved.