Loyalty cards are — and for some time to come will likely remain — the main way retailers identify named customers who are shopping in any channel. As retailers focus more attention on improving their in-store CRM capabilities, understanding consumer concerns about the use of loyalty data in an increasingly real-time-offer environment is critical, particularly as the roles of Web 2.0 technologies and social retailing continue to evolve.

• Receiving targeted spam based on purchase history is of extreme concern to 39.8% of U.S. consumer respondents. Women (46%) and older shoppers (41% of whom are 55 and older) were the segments most concerned by these practices.
• Tracking shopper movements also raised concerns for some consumers. Of all consumers surveyed, 36.5% said they were extremely concerned that they might be tracked after leaving the store, while 27.1% and 24.9% of respondents, respectively, expressed concern about receiving targeted advertising on a shopping cart based on location, or having their movements tracked in the store.
• Loyalty cards that might use radio frequency (RF) as their means of transmitting data weren't seen as a health concern to most respondents. Only 17.5% of consumers said they were extremely concerned that RF might be an issue.

• Use offer engines to optimize and tune your marketing efforts to customers, because the technology is becoming more capable of creating real-time offers to improve marketing effectiveness.
• Keep your customers informed about how you may be using technology to improve their in-store experience. Being proactive will help you minimize any privacy concerns as well as the "big brother is watching" factor.

Loyalty cards are and will likely remain the main way retailers identify customers who are shopping in any channel. Many retailers are "trialing" the use of different applications in the store that, when tied to loyalty cards, could provide real-time information and alerts to consumers while they're shopping. These applications could appear on a kiosk, shopping cart computer, wireless handheld device used in self-check-out, or even a consumer's mobile device, and will typically require customers to swipe or scan their loyalty cards to enable a location-aware alerting process.

From this latest research, it appears that, although consumers are concerned in varying degrees about how loyalty information may be used to trigger real-time information and subsequent marketing activities that target them in-store, they don't seem worried about any health risks from the use of RF in loyalty cards. The capability of retailers to deliver real-time, personalized, and relevant offers to consumers while they're shopping anywhere, and in a particular store, exists today, but its effectiveness must still be proved. The main challenge for retailers is determining the most-effective delivery vehicle to drive desired customer activity. Retailers can use our latest findings to inform their strategies for measuring consumer sentiment and awareness of loyalty program usage, particularly as Web 2.0 and social retailing continue to evolve. The key take-aways from these results are explored in Figure 1, Table 1, and subsequent sections.

During October and November 2008, Gartner surveyed 1,661 U.S. consumers, age 18 and older. The exact questions we used appear below. All responses were weighted and projected to be representative of the population.

"Retailers are trialing the use of shopping cart computers and other portable devices in their stores to provide real-time information and alerts to customers while they're shopping in a store. These technologies require customers to swipe or scan their loyalty cards to activate and use the device in-store. How concerned would you personally be about how the technology is used by the retailer." Consumers were limited to one choice for each possibility. Responses ranged from "Extremely Concerned" to "Not at All Concerned":

• "That a retailer or another company might send shoppers targeted marketing materials or junk mail because they know what products they have bought"
• "That a retailer might use the program to track shoppers' movements after they've left the store"
• "That a retailer or another company might send shoppers advertising on the cart because they know where they are located in the store"
• "That a retailer might use the program to track shoppers' movements while they are in the store"
• "Loyalty cards, because they might use radio frequencies that might affect people's health"

According to the Direct Marketing Association , approximately one-third of U.S. Postal Service (USPS) revenue comes from advertising. In 1980, U.S. companies sent 35 billion pieces of direct mail, 64 billion pieces in 1990, 90 billion pieces in 2000, and 100 billion pieces in 2005 (source: USPS). These figures translate to more than 300 pieces of bulk mail for every U.S. man, woman, and child.

Many leading retailers are moving from store-only loyalty programs to enabling cross-channel loyalty and campaign management, which represents a more-seamless experience for their most-valued customers. However, this also means that the potential for spam also increases, multiplied by the number of potential channels or touchpoints. Of all consumers surveyed, 39.8% said they were extremely concerned that a retailer or another company might send them targeted marketing materials or junk mail because of past purchases. However, the percentage was higher for women (41.4%) and older shoppers (46.8% of whom were 55 and older) who said they were extremely concerned about these practices.

Technology exists to enable retailers to monitor, and, in some cases, track shoppers' movements in-store. Vendors such as Brickstream, ShopperTrak, and Irisys use technologies such as RF, proprietary applications, surveillance cameras, and thermal imaging to monitor customer movement patterns in the store.

The possibility that a retailer might use loyalty data to track shoppers' movements was of moderate concern to a fair number of customers. Of those surveyed, 24.9% were extremely concerned that their in-store movements would be tracked, while 36.5% were extremely concerned that their movements might be tracked after leaving the store.

The delivery and effectiveness of in-store advertising is still in its infancy. However, as predictive analytics, Web 2.0 technologies, and social retailing evolve in the retail environment, the ability to deliver highly targeted messages to consumers, based on where they are in or near a store, may soon cause increased concern or privacy issues for some customers. Of those surveyed, 27.1% were extremely concerned that advertisers could send them targeted advertising via in-store shopping carts, based on their location in a store.

When RF identification (RFID) technology was launched several years ago, consumer groups, including Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), made a big deal about the privacy implications and health risks that RFID tags could pose to consumers. Absent any definitive study that supports the potential threat of RFID, and because RF is already used in a number of consumer devices, it doesn't appear that consumers are worried about RF in loyalty cards. Only 17.5% of consumers said they were extremely concerned, while nearly 50% of consumers in each key segment said they weren't at all concerned. In this case, 54% of respondents age 65 and older said they weren't at all concerned.

• Use offer engines to optimize and tune your marketing efforts to customers. Many consumers are concerned about targeted spam, and today's offer engines are becoming more capable of creating real-time offers to improve marketing effectiveness.
• Keep your customers informed about how you may be using technology to improve their in-store experience. For example, several years ago, when Marks & Spencer trialed RFID technology on apparel items in dozens of its stores, it handed out leaflets to customers explaining RFID technology and its use in those stores. Being proactive in similar ways with customers will help retailers minimize the privacy issues that are certain to emerge. Using tracking technologies in the store to develop and deliver targeted messages on a shopping cart while a consumer is in a store aisle, or to deliver customized advertising on a digital signage display near a customer, can be done today. Retailers need to maintain meaningful dialogue and messaging with customers to minimize the impact down the line.

"Retail CRM Vendor Landscape and Capabilities"

"Retailers Must Work Harder to Prove the Value of Loyalty Programs"

"Exploding Customer Touchpoints Reframe Retail CRM Opportunity"

"Retail Consumer Survey: In-Store Customer Basics Update"

"Benchmark Your Customer-Centric Retail Practices"