Why data capture is less than nectar for consumers

Loyalty cards aim to mine a rich seam of consumer information. But what will happen when people realise the true value of that data? asks Alan Mitchell

I’m really beginning to feel wanted. Every company I deal with wants to know more about me, and goes out of its way to ask.

The AA magazine recently asked me to divulge my marital status, the age of my children, facts about my home and my car and what sorts of holidays I like. And it didn’t stop there. It wanted answers to attitudinal questions such as “I think quality is more important than price”, “I value saving time more than saving money”, “I take time to find the best deal or price” and “Buying from a big brand makes me feel more confident about the product”.

The Telegraph.co.uk wants to know all my demographic details (profession, income etc), whether I have stocks and shares, an ISA or a unit trust, if I am looking for a mortgage, my holiday preferences, my car preferences and what online sporting services I use. It also wants to know when I renew my building, home contents, travel and motor insurance.

BT pays money to a children’s charity every time its customers fill in a certain data survey. First Direct wants me to become a member of its Customer Research Panel. Procter & Gamble is encouraging me, via its website, to be a “brand adviser”. And before the World Cup, Virgin One even wanted me to tell it stories about how the account has helped me “live my life differently”.

Asking customers direct is one way to gather information. Another way is to collect it from transactions. Later this month, loyalty schemes will be back in vogue with the launch of Nectar, the Sainsbury’s-Debenhams-BP-Barclaycard joint scheme, which is hoping to sign up 12 million UK users.

We’ve yet to see how Nectar performs. But the experience of a similar scheme in Germany – Payback – may provide some pointers. Payback was designed to tackle the three main consumer complaints about loyalty schemes: the proliferation of competing cards; the length of time it takes to save for rewards; and the fact that, when people finally get the rewards, they’re so small they’re not worth bothering with.

Payback signed up a number of big brands across many sectors (one for each sector) so that consumers could easily earn many more points. With 25 per cent ownership from Metro, the scheme had a big grocery name to give it critical mass. It also had the number two petrol station chain DEA, market leading hypermarket group Real, department store Kaufhof, drug store dm, Europcar, AOL, and a host of lesser players – plus, later, Visa. The scheme launched in March 2000 and by the end of 2001 there were more than 12 million active card-holders.

Member companies drew on three key benefits: the scheme’s ability to influence buying decisions; shared operating costs (claimed to be 40 per cent below running your own, bespoke scheme) ; plus – and this is the clincher – access to a much larger, much richer databank.

For obvious data protection reasons, Kaufhof could not access the purchasing records of people shopping at dm. But via the “honest broker” of the company running the scheme and its centralised database Kaufhof could find out how many customers it shared with dm, what their common characteristics were, and what other dm customers had similar characteristics. And because Payback had their names and addresses, it also had the means to reach them with tailored offers. As the Payback’s corporate selling blurb put it: “The partner is able to address target [Payback] customers as precisely as his own customer base”.

So while customer questionnaires probe ever deeper for information that could never be gleaned from our transactions with that particular company, new multi-partner loyalty-schemes-on-steroids are beginning to pool transaction data from many sectors to get a much rounder picture of each consumer’s habits and preferences.

Just one question. Who is this all for, and how will consumers react in the long term?

At one level, there are palpable consumer benefits: bigger, better rewards earned sooner. And, as the AA put it, the provision of detailed pers

onal information helps its marketers “make sure we’re doing as much for you as we can”.

But at another level, the corporate benefits are huge and the consumer benefits minuscule. What does the renewal date of my home contents insurance have to do with the Telegraph? Why should the AA magazine want to know my plans for home improvements over the next 12 months? This is not information gathered for the purposes of meeting my needs. It’s information gathered for the purposes of making a quick buck: a cost-cutting tool for the next loan or insurance policy mailshot. Even as companies try to draw me in to a relationship, they ruin it all by treating me as just another target.

Likewise (and sorry to raise this yet again), does profiling to create better targeting really cement closer relationships with consumers?

Here’s a prediction. Slowly but surely, the new corporate enthusiasm for customer questionnaires plus the inevitable debates about the new uses of loyalty data will teach consumers more about the value of information from and about themselves. Privacy pressure groups and legislation are adding to the momentum. So are other influential third parties such as Microsoft, whose “Trustworthy Computing” crusade and product launches embrace the principle that “end-user data is never collected and shared with people or organisations without the consent of the individual”.

Consumer information – information from me, about me – is becoming the black gold of the information age. But ultimately I, (along with millions of others), am the oil well. Long term, everything points to consumers “owning” and “controlling” this crucial asset for themselves.

The price at which consumers trade information, for what forms of benefit, in what circumstances, via what mechanisms, with whom, is becoming a matter of delicate negotiation – and a crucial strategic issue. Are companies really approaching it strategically, yet?