Loyalty programs were once designed to thank customers for sticking around. This could include perks like free coffee, airline miles, or grocery discounts in exchange for repeat business. But that long-standing model of mutual benefit is rapidly disappearing.
According to The Washington Post (1), these programs increasingly rely on a disturbing pattern called “surveillance pricing” where they collect data to create “individualized prices” — a tactic that may punish rather than reward consumer loyalty.
The Post’s technology columnist, Geoffrey A. Fowler, reports that the more frequently he visited Starbucks, the fewer promotions he received through its app.
After requesting his data under California’s privacy law, Fowler discovered that the company had tracked every purchase, offer, and even 93 clicks in a single day. Two former Federal Trade Commission (FTC) officials who reviewed the data called it evidence of surveillance pricing.
According to the FTC’s Surveillance Pricing Market Study (2), details like a person’s location or browser history can be used to offer consumers different prices for the same products and services.
“Are Starbucks’ most loyal customers actually getting the fewest coupons?” asked Samuel Levine, the FTC’s former director of the Bureau of Consumer Protection. “That’s certainly what this report suggests.”
Starbucks told the Post it doesn’t set individual prices based on behaviour, but confirmed it uses “inferences” — judgments based on a customer’s purchase history — to decide who gets discounts.
Fowler reports that the company’s AI tool, Deep Brew, analyzes data to “identify and incentivize specific Rewards members cohorts,” according to its 2024 earnings call.
Frequent customers may get fewer deals because the system assumes they’ll pay full price anyway. That means two people could walk into the same Starbucks and pay different prices for the same latte because of data-driven assumptions about what price they’ll put up with.
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In the Post article, Levine and Stephanie Nguyen, former chief technologist at the FTC, warn that loyalty programs have evolved into “backdoor laboratories for pricing.” Using vast datasets, companies can infer a shopper’s income, price sensitivity, and even intelligence — and use that information to tailor discounts.
