HOW DOES IT WORK?

 

Each discount card includes a unique bar code. When you signed up for the program, you gave your name and probably your address and phone number as well. That information is mated to your card in the store’s computer.

Throughout the market are discounts you only receive if you scan your card at the check stand. The savings on these items often seem extreme, with buy-one-get-one offers and discounts of 50 percent and more being common. The sensation of savings is palpable.

How does the store afford to give you such great deals? For large chains, a program like this costs as much as $30 million to start, with annual maintenance costing $5–$10 million. Safeway in the United Kingdom spent up to $70 million a year on their program. Such a vast amount of money exceeds by far the scope of thanking customers for their loyalty. So why do it?

The answer, of course, is that the store jacks up its prices across the board. Those consumers not taking part in the discount program foot the bulk of the bill. Even if you have the discount card, the store inflates the nondiscounted items you inevitably buy. You’re spending about as much now as you would have before the store implemented the program.

From prescriptions to pumpernickel, the check stand logs every purchase you make and associates it with the bar code on the back of your card. You would think that the store would use this information to target you for direct-mail marketing in the same way that websites use similar information for ad targeting, but that’s not the case. Most stores have privacy policies that don’t allow them to use your information in that manner.

The real reason the store tracks your shopping is that it allows the company to identify who their highest value shoppers are—the 20 percent or so of people who spend the most. Stores use that information to modify their product selection. If the top 20 percent of shoppers buy a lot of chips and not much chili, look for the chips section to expand and the chili selection to decrease, even if the other 80 percent of consumers love chili. Over time, product selection in general will narrow. You will find yourself shopping in a store with whole aisles you never enter, full of deeply discounted items targeted at the big spenders. Even with the discount card, the prices you pay are slightly higher than the prices paid by that upper tier of shoppers. Those poor bastards who don’t take part in the program pay through the nose to support the chip-obsessed moneybags in the top fifth.

You can already see this in effect. Keep an eye out around Thanksgiving. Does your supermarket offer free turkeys to people who spend enough money? Did you get one? If so, congratulations! You’re in the top 20 percent. If you ended up buying your own turkey, chances are it was marked up a few cents to pay for the free bird next door. Happy Thanksgiving.