With loyalty cards companies give you various rewards for shopping with them and the payback is that you give them useful information about yourself along with the repeated custom

IF YOU HAVE ever wondered why your local supermarket – which happens to be close to a university – has a plentiful supply of beer and chips on display every Thursday afternoon, ahead of a big student night out, it could be that it is using information from loyalty cards in designing its store layout.

Over the past two decades, loyalty cards have become ubiquitous with even smaller retail outlets starting up their own schemes. But for the consumer, what are the best options available and what are the worst?

And what exactly do retail chains do with the information they collect about you?

First of all, what kind of loyalty schemes are out there at the moment? Superquinn introduced the concept in Ireland in 1993 and today, some of the biggest loyalty schemes are offered by the supermarkets.

At Tesco, you earn one point (1 cent) for every €1 spent, and once you’ve collected 150 points you can convert it into a voucher worth €1.50.

So, if you spend €150 a week on your shop, in the course of a quarter you will collect 1,800 points, which will be sent out to you in the form of a money-off voucher for €18. And remember, you can also collect Tesco Clubcard points when you buy petrol at selected outlets, or sign up to Tesco Mobile.

In Dunnes Stores, you also get 1c for 1 spent, and once you have collected at least 400 points each quarter, you will receive a mailing in which your points are converted to money-off vouchers which can be used in any Dunnes Stores department.

Some of the better schemes allow you to spend your points in a variety of ways. For example in recent years Tesco has expanded what you can spend your points on. Now, in addition to getting money off your weekly shop, you can avail of offers such as travel vouchers for Irish Ferries, magazine subscriptions, activity days, and restaurants. If you go for this option, you will get four times the monetary value.

Similarly, at Superquinn, you can exchange your points for One4all gift vouchers or donate them to children’s charity Barretstown, while by signing up to Bus Éireann’s loyalty scheme, béClub, you can get a range of discounts, such as 15 per cent off the Irish Rugby range at Elvery’s or two-for-one entry at Funtasia.

If you’re a regular coffee drinker with a penchant for tall skinny lattes, you should pick up a loyalty card.

A recent survey by the Consumers’ Association of Ireland for example, showed that loyalty schemes can lead to 18 per cent savings on average.

However the savings do differ – the best loyalty scheme of seven surveyed for coffee drinkers is Bewley’s, where you only have to buy four coffees before you will get one free. The worst of those surveyed was at O’Briens sandwich cafes, where you have to buy 10 coffees before you get a free one. So, at an average of €3 a coffee, by signing up to a loyalty scheme at Bewleys you can reduce the cost of your daily coffee to just €2.40 – but at O’Briens the loyalty scheme only reduces the price to €2.72.

With the Boots Advantage card, you’ll get 4 cents worth for every €1 you spend in the store (1 cent=one point). So, a €100 purchase could turn into a gift voucher for €4. However, you can’t earn points on prescriptions, formula for babies up to six months, as well as other items such as mobile phone top-up cards. Similarly, you can’t buy these goods with points you have saved.

And, if you recycle some of your old electrical goods with Boots, you can earn a lot more points.

For example, by recycling a BlackBerry Pearl phone, you’ll earn 1,000 points, or 555 points on a Canon PowerShot camera. You can also earn 100 points by recycling old ink cartridges,

And remember, before you embarrass yourself at the till looking to use your card to reclaim €1 off your purchase, a minimum balance typically applies. So, in the case of Debenhams Beauty Club for example, you will need to save 500 points (ie spend about €500) before you can spend your €5 reward.

At Insomnia, you’ll need 100 points to redeem your purchases, while at Butlers Chocolate Cafes, when you reach 500 “Happiness Points”, you can redeem these against future purchases.

But if you really want to save money, you may be better off forgetting about loyalty card schemes altogether. While there are many positives associated with loyalty cards – and who doesn’t like something free – there are downsides too. Loyalty card schemes can be extremely expensive to put in place, which means that retailers may look to get this money back – by charging higher prices. After all, low cost retailers like Lidl and Aldi don’t run any loyalty schemes.

“People are loyal to the price rather than the company,” as Damian O’Reilly, a lecturer in retail management at Dublin Institute of Technology points out, which means that as long as such companies keep their prices low, customers will return.

Not only that but rather than use our money-back vouchers to reduce our weekly supermarket spend, how many of us simply upgrade our spend, opting for a more expensive bottle of wine for example?

And studies have shown that loyalty cards can make you spend more on impulse buying just to boost your points – after all, why do supermarkets offer incentives such as extra points back on alcohol or nappies several times a year?

The National Consumer Agency (NCA) urges consumers to tread carefully when it comes to loyalty cards, warning that you shouldn’t let a loyalty card scheme make the decision on where to shop.

But the biggest fear with loyalty cards is that the price you may pay for the service is not denominated in euro, but rather data. As O’Reilly points out, the cost involved in running loyalty schemes is a “trade-off for information”.

As the NCA warns, retail outlets use loyalty cards to collect your personal data and shopping details and may use it for marketing and research purposes.

“Customers can be paranoid about the perceived intrusion in their privacy,” notes Tara Frawley, an assistant lecturer in marketing strategy at Limerick Institute of Technology. And rightly so perhaps.

After all, when signing up to a loyalty card you give away personal information such as your address, and add to this each time you make a purchase. This information goes into a massive databank, detailing where you shop, how much you buy and how much you spend.

This information can be extremely beneficial to supermarkets, allowing them to conduct “market basket analysis” which indicates which products are typically bought together, and which should therefore be placed together in their stores.

It can also help when it comes to where a supermarket should locate its store – after all if loyalty card data shows a particularly high number of people are travelling from Thurles to a store in Kilkenny, it might suggest that Thurles should also get its own store.

And it can help retailers pinpoint their marketing strategies. “They’ll give you a discount knowing that you tend to buy this particular product,” says Frawley, adding that there’s no point in a supermarket targeting people who aren’t parents with offers on nappies and baby food.

Stores can also use loyalty cards to push you into purchases you might not normally make – for example by offering extra points on purchases in non-food items such as books and CDs at a supermarket.

But if you worry about giving out information, take O’Reilly’s advice. “You don’t have to give them the information if you don’t want to,” he says.

This point might become more pertinent as retailers move into areas such as financial services. So, if you suddenly start buying nappies with your weekly shop, they might try and sell you life insurance, or if Pedigree Chum is now on your shopping list, you might be sent a brochure for pet insurance.

While these are innocuous enough intrusions, what happens if you’re a frequent purchaser of alcohol for example? Might that company still be willing to give you car insurance?

In an increasingly competitive environment, retailers are likely to mine the data provided by loyalty cards even more in order to give them an element of a competitive advantage. For the consumer, this means that you will be watched even closer than before.