Washington Post Gift Article: “Scanning a loyalty card might be costing you money. Companies say they’re rewarding your devotion with points, discounts and perks. But behind the scenes, many are using these programs to monitor your behavior and build a profile — then charge you what they think you’ll pay. “Companies say they’re rewarding your devotion with points, discounts and perks. But behind the scenes, many are using these programs to monitor your behavior and build a profile — then charge you what they think you’ll pay.”  “Starbucks tracked my every purchase — then gave me fewer deals. It’s called surveillance pricing.”…

• In a report published today with the Vanderbilt Policy Accelerator, [authors Samuel Levine and Stephanie Nguyen] argue loyalty programs have inverted the concept of loyalty: Instead of rewarding frequent customers, companies may actually be charging their loyal customers more…”

In recent years, regulators around the world have been sounding the alarm that firms can use loyalty programs to rip off their most loyal customers. This paper builds on that work by examining the devolution of loyalty programs — from simple coupon programs to major lines of business transforming the retail experience. This devolution is happening in three stages. In the first stage — the hook — companies entice consumers by promising generous upfront benefits if consumers enroll. In the second stage — the hack — companies use loyalty programs to extract deep insights into our spending habits and willingness to pay, effectively hacking our brains. And in the third stage — the hike — companies make these programs worse for consumers — raising fees, devaluing points, limiting redemption options, and curtailing benefits. The result of these three stages is a wholesale transfer of wealth from consumers to corporations, with companies collecting ever-more data while offering ever-diminishing savings.