Reward Cards - Still Rewarding?

Faffing with the contents of my wallet today in the supermarket, I began wondering about reward cards - are they still worth the plastic they’re printed on? They’ve been around in the UK for over a decade, and two major supermarkets - Tesco and Sainsbury’s - still use them. I have one of each. However, I sometimes wonder why I don’t throw them away - cash rewards of approximately 1% (presumably all that the supermarkets can afford) hardly seem worth the bother of carrying them.

Safeway (now Morrisons) scrapped their loyalty scheme in 2000, citing that it wasn’t worth the money to run it. They may have been right. Nevertheless, Tesco, now the UK’s biggest grocery retailer, still retains their scheme, and as the Economist states, the information goldmine (the only reason the supermarkets run loyalty schemes) is lucrative - although they don’t say exactly how lucrative. Safeway’s decision indicates the margins can be thin. Despite the low return on hassle I mentioned above, though, there are still plenty of takers - empirical evidence would suggest that more shoppers have loyalty cards than don’t.

There have been other issues; for example, loyalty cards came under fire from David Blunkett in 2004 in a fairly obvious attempt to draw away attention away from the problems surrounding the ID card debate:

Mr Blunkett said the cards produced key details about people's shopping habits but were accepted because they were run by private firms. People should not distrust ID cards because they are a state idea, he said ... Holding up a Nectar card, he said people voluntarily signed up to allow such details to be collected through such loyalty cards by private firms. "There is a real issue about how that should be overseen and supervised," said Mr Blunkett.

Mr. Blunkett presumably ignored the fact that voluntarily signing up to handing over data about tomato-buying preferences was a more respectable practice than being forced to hand over more medical information to travel. Fortunately, his illiberal idea didn’t seem to gain much traction. In all fairness, though, it’s quite likely than many folks don’t know that their data is used in this way; for that, The Guardian deserves some praise for educating the public.

Maybe reward cards will die out eventually. It’s hard to back that up with public data, although I’m sure Tesco have a hard time quantifying the exact benefit they get from theirs (how do you measure repeat custom accurately - with and without the card?). If I’m right, though, I hope they die because they don’t make business sense - not because the government regulates a harmless practice out of existence. Interestingly, Wikipedia alleges that this has already happened in California.

It’ll be interesting to see where the reward industry is in five years time.