Featured on Loyalty360: The Future of Loyalty Rewards Programs as Customers Grow Increasingly Concerned about Privacy and Security

Published on Loyalty360.com.

By Ray Clopton, CEO and President of Wilbur


Consumer privacy and security are becoming increasingly serious issues when it comes to loyalty rewards programs. More customers are worried that loyalty cards could compromise their cyber security by opening them up to identity theft or a data breach, or that their personal information could be used without their consent.

As recent events in the social media and retail industries have shown, companies are too often mishandling customers’ personal information. The cumulative effects of everything ranging from data breaches to careless sharing of customer profiles is creating a climate of distrust and disdain for traditional, big data loyalty programs. And the problem will get worse.

While it’s true that people are not in the streets with pitchforks and torches, merchants of all sizes need to take stock and evaluate the true value of collecting massive amounts of information on their customers. The belief that building customer loyalty is about giving the customer what they want has gotten lost in most conventional loyalty programs. If seeing multiple pop-up ads for the same product you just purchased online doesn’t make you a little squeamish, then you are in the minority.

A new survey of 1,023 Americans representing the online shopping and purchase habits of the U.S. population underscores how consumers’ concerns around data privacy are directly at odds with the prevailing approach that most marketers today use to deliver them personalized offers and promotions. Consumers, by a 2:1 margin, want brands to require consent before using personal data for targeted marketing, according to the report “Privacy, Personalization and Promotions,” published by Kelton Research and SheerID.

The study found 73% of shoppers believe when they’re redeeming an offer, brands are using their personal information without their consent. Just because they know what’s going on doesn’t mean they don’t care: 92% said it’s important to them to know their personal information won’t be shared if they redeem an exclusive offer.

Every business should benefit every customer it serves, whether directly or indirectly. So, what truly benefits customers when it comes to loyalty rewards programs?

Over the past two decades, research and experience have shown that customers want rewards programs that are easy to join and easy to use, which don’t require them to carry a card or download an app and have a clear structure without any tricks or expiring rewards. It’s that simple.
Using big data to sell more to consumers is often framed as benefiting customers as much as businesses because “they get more personalized rewards or engagements.” But consumers are also more vulnerable to cybercriminal activity when their data is floating around in shared databases.

Sure, they may get a slightly more customized experience by handing over their personal information. But is it really worth the increased risk of identity theft from data breaches and their overall invasion of privacy by brands who could use their personal information without their consent?

So, what are the main consumer concerns around data privacy? There are two primary issues: data collection and data breaches.

1. Data collection concerns center on the collection and storage of information about customers and their shopping habits while they earn rewards points and coupons. In rare instances, these records can be used against consumers. In one lawsuit, for example, a gentleman who sued a supermarket after he slipped on yogurt while shopping, shattering his knee, was accused of being an alcoholic based on his recorded alcohol purchases. In another case, a Washington firefighter was accused of arson based on purchase records that showed he had bought a fire starter.

2. Data Breach concerns center on third-party companies maintaining databases that store customer information and, if they go through a data breach, the privacy of that customer information is at risk. The real concern here is identity theft, as most rewards cards are linked to customer names, addresses and telephone numbers as well as partial credit and debit card information. Identity thieves use this information and combine it with other pieces of personal information from other sources. When they gain enough of the puzzle pieces, cybercriminals can easily create a synthetic identity and go on a shopping spree.

However, big data doesn’t only put customers at risk. It also puts brands at risk. How? It can jeopardize their integrity.

If there is little integrity or truth behind a brand today, consumers will know it—or soon find out. In this new world of radical transparency, media complexity and perpetual connectivity, where only 25 percent of Americans trust big business, according to a new Gallup poll, earning the trust of target audiences is critical for brands.