Conclusion

Businesses today are in a more competitive environment than ever and are always looking for more insight into their customers and trying to find a competitive advantage over competitors. They have found that insight through data mining in loyalty programs. Data mining shows customers buying patterns, preferences, and often insights into their own lives such as a baby on the way. Businesses use data mining is used to target offers specifically to customers to retain or renew their business. Amazon and Costco use fee based programs to create a perception of value and drive increased repeat sales. Target and Starbucks use free membership programs and use the data from transactions to target customers with specified offers. These programs have benefited businesses greatly but consumers and privacy advocates are concerned about the amount and use of data that businesses and often the third party’s administering the loyalty programs have from their customers. These fears have caused 25% of customers to pass on loyalty programs due to privacy concerns. These fears have merit. Consumer fraud increased to 5.3% in 2013 from 4.9% in 2012. While some companies have taken steps to mitigate concerns, there is still much work to be done. While the ECPA, FCRA, and FERPA laws all intersect with data mining in loyalty programs at times, comprehensive laws and more regulation governing data mining in loyalty programs is needed.