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“The more you buy, the more you earn” – this is the logic each company sells to customers when introducing their loyalty programmes. Loyalty programmes offer gift redemptions, cash backs, discounts and privileges to customers who make frequent purchases. What is less known is that for every purchase, the data is recorded and used for unknown purposes, leading to privacy related issues. The benefits of loyalty programmes versus the related privacy issues have always been an item of debate. Benefits including customer satisfaction brought by customization, higher earnings for the company and savings for customers bring about higher welfare to both the company and the consumer, and therefore outweigh the privacy issues of data manipulation and information leak which will rarely happen.

People often complain about receiving promotions and discounts on items that are worthless to them. Reward programmes address this issue by providing product customization thereby increasing customer satisfaction. Through in-depth analysis of consumer data and customer preferences, spending patterns that signal changes in shopping trends and customer behavior allow companies to customize products for their customers. The United Kingdom based retailer, Tesco PLC, employs this strategy by sending their members tailor-made coupons. This leads to 5 million different versions of mail promotions being sent to 12 million customers. Though customer habits are exposed in the process of determining suitable products to offer to customers, this trade-off is actually worth it because customers can gain access to their products of interests in a quick and easy way instead of receiving unnecessary promotions.

Reward programmes bring about higher profits for the company through customer retention. Research has shown that customers under a loyalty programme patronage twice as often and spend

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