Loyalty Programs: From Punch Cards to Panopticon
Loyalty programs used to be simple and mostly private. You might have carried a punch card from your favorite coffee shop or sandwich place. Ten punches and your next item was free. Or maybe you collected something bigger, like Canadian Tire Money from a chain of stores, or S&H Green Stamps that worked across many businesses. These programs stayed on paper, stayed straightforward, and rewarded your repeat business without asking for much personal information.
That started to change in the mid-1990s. Paper rewards gave way to plastic "club cards" at grocery stores and other chains. Those cards soon connected to apps, and eventually the programs themselves became stand-alone profit centers for big companies. Along the way, the personal data they collected went from almost nothing to deeply invasive. That data could be combined with information from other sources to build rich profiles of individual shoppers.
In this post, we will look at how that shift happened and what it means for us today.
Simple, Easy, and Private
We are showing our age when we talk about the old paper programs we grew up with. Most of us remember punch cards from all kinds of places. They worked the same way everywhere: the store or shop gave you a card, and the cashier punched it at the end of each visit. Fill the card and you earned a free item or service.
A local chain of hair salons did this well. After ten punches, your eleventh haircut was free. That system created real loyalty. Even if we sometimes forgot the card at home, we would bring in a stack of half-used cards from other visits just to get the free one. Forgetting a card could be annoying, but the program still did its job. It kept us coming back to the same place.
One of the biggest and most famous programs was S&H Green Stamps. Launched in 1896 by the Sperry & Hutchinson Company, it let shoppers earn green stamps with almost any purchase (typically one stamp per ten cents spent). You could get the stamps at thousands of participating retailers across the country, including supermarkets, gas stations, department stores, pharmacies, and many small local shops. People licked the stamps and pasted them into booklets. Once a booklet was full, you could redeem it for household items, appliances, toys, or other goods at S&H catalogs or redemption centers.
At its peak in the 1960s, about 80% of American households collected Green Stamps. The company printed more stamps than the U.S. Postal Service and mailed out millions of catalogs each year. It was a true national hobby. Families spent evenings sorting stamps, kids got involved, and shoppers chose stores based on who gave the most stamps. The program felt fun, tangible, and private. No apps, no accounts, no tracking. Just stamps, books, and rewards.
How It Worked
- At the store: Cashiers handed out stamps based solely on the purchase amount (for example, 1 stamp per 10 cents spent). No name or account was needed.
- Collecting: Families pasted stamps into booklets at home.
- Redemption:
- Most people took filled booklets to local S&H redemption centers (showrooms) and simply exchanged them for merchandise.
- You could also order from the catalog by mail, usually giving just enough information for shipping (name and address at most).
Just about every step in the program stayed anonymous. S&H did not keep customer databases, loyalty accounts, or purchase histories tied to individuals. The stamps themselves were the only "account."
The program was especially fun for children. Kids loved flipping through the catalogs and dreaming about which prize they might get next. A similar type of program appeared in a famous episode of the TV series The Brady Bunch.
This made S&H Green Stamps feel truly private compared to modern apps that log every transaction, location, and preference.
Other programs, like Canadian Tire Money, worked in a similar way. They gave customers paper notes they could collect and spend like cash right at the store.
These old systems had their frustrations. Forgotten cards, lost stamps, or licking hundreds of tiny squares were not always convenient. But they delivered what they promised: simple rewards that encouraged loyalty without collecting deep personal data.
Customer Loyalty Cards
Then in the mid-1990s a big change arrived in the form of plastic customer loyalty cards. We remember these from nearly every grocery store we shopped at. At first it felt simple and helpful. The clerk would ask if you had a loyalty card at checkout. If you did, they scanned it and the register instantly applied the discounts for that week. These were often "buy one, get one" deals or special prices on items the store wanted to promote. As young families, we appreciated every discount we could get.
If you did not have a card, the clerk would hand you one attached to an application form. They would scan the blank card right away and promise you could bring the completed form back later. We still have a couple of those cards sitting in a drawer with the applications still waiting to be completed.
Over time, stores made filling out the application mandatory before issuing the card. A new convenience appeared: if you forgot your card at home, you could simply enter your phone number at the checkout terminal to get your discounts. Of course, "867-5309" got a surprising number of loyalty redemptions for Jenny.
Before long, it seemed like every store had its own card. Our wallets grew so thick we could barely close them. Even George Costanza would be envious! To this day we still have desk drawers full of unused loyalty cards.
Stores then introduced keyring versions. These mini cards fit neatly on a keychain, but soon there were more loyalty cards than actual keys.
At this point, stores began collecting far more useful information about shoppers than ever before. They could see exactly what each customer bought, how often they visited, which days and times they shopped, and much more. This data helped stores improve their offerings, but it also revealed something bigger. The information had become extremely valuable to data brokers.
From Big Data to Data Brokers
Stores quickly realized they had something far more valuable than just a way to offer discounts. Every time a loyalty card was scanned, the register recorded exactly what was bought, when, how often, and at what price. Over time, this created enormous amounts of detailed shopping data for each customer.
What began as a simple tool to encourage repeat visits turned into something much bigger. Retailers started using this information to make smarter decisions about what products to stock, how to arrange shelves, and which promotions worked best. But they soon discovered an even more profitable opportunity: the data itself could be sold.
This is when loyalty programs truly became stand-alone profit centers. Companies began sharing or selling their customer purchase histories to data brokers — specialized firms that collect, combine, and resell consumer information. Major data brokers like Acxiom, Experian, and others built massive profiles by pulling together loyalty card data with information from many other sources: public records, online activity, credit reports, and more.
Suddenly, a grocery store knew not just that you bought cereal and milk, but could infer details about your family size, health concerns, income level, and shopping habits. When combined with data from dozens of other retailers, these profiles became incredibly detailed and valuable. Data brokers packaged and sold this information to marketers, advertisers, insurance companies, and even other retailers who wanted to target specific types of shoppers.
The shift was complete. Loyalty programs were no longer just about rewarding customers. They had become powerful data collection systems that turned everyday shopping into a steady stream of valuable personal information. What started as a plastic card in your wallet had quietly grown into one of the building blocks of the modern data economy.
How Big Is It?
As Derek Kravitz, an investigative reporter for Consumer Reports, noted in "Inside Kroger's Secret Shopper Profiles: Why You May Be Paying More Than Your Neighbors":
"Kroger’s “precision marketing” division made an estimated $450 million in profit in 2023, $527 million in 2024, and could see profits of $825 million in 2027, according to Guggenheim Securities, an investment banking company."
Simply put, it's a very sizable stream of revenue. The sheer volume and uses of this data collection are quickly becoming uncomfortable.
Our Take
We have come a long way from the punch card era, and we would rather not help build our own Panopticon if possible. A few cents off may feel like a win, but the real cost is much higher.
Your offline shopping life enriches the data collected from your online life, and vice versa. This information gets used in many ways: targeted advertising, dynamic pricing, and even government surveillance.
We still use some loyalty programs, but we protect ourselves with Synthetic Data, unique email addresses, unique phone numbers for each account, and cash whenever possible, for example.
When a clerk asks for your phone number, a polite "no" is one of the simplest and most effective ways to limit data collection.
Remember: We may not have anything to hide, but everything to protect.
