Customer Loyalty Programs and Privacy Concerns

In recent years, loyalty programs have been established allowing the creation of detailed consumer profiles by collecting and processing purchase information. Collecting this information, however, raises privacy concerns of customers. In this work, we provide the results of an empirical study which reveal that privacy concerns have an impact on the probability of participating in loyalty programs. We identify a privacy-sensitive segment of customers using demographic and psychographic data that, in principle, would participate in a loyalty program, however, refrains from doing so because of privacy concerns. Moreover, we found that people participating in customer loyalty programs are more concerned about their privacy than non-participants, which is an interesting though counterintuitive result.