By Taryn Phaneuf, NerdWallet
Everywhere you turn, another ad is sharing the good news of a great deal. There’s only one catch: You’ve got to download their app to get it.
The trend in app-based rewards and offers is driven by many things at once. A prolonged period of high inflation made everything feel expensive to consumers. So they started making trades — eating in, buying store brands or waiting to make big purchases, for example. That set off alarm bells for companies as they saw sales slumping so much that price hikes couldn’t make up for it.
Meanwhile, in the background, technology has improved, making it easy and convenient to place an order or pay with a phone. And companies have realized their app-wielding customers are some of their best.
So how do companies bring inflation-weary shoppers and diners back or entice them to buy more often? They offer deals in the form of value meals, coupons and rewards. And they put the deals on their apps.
Price-conscious shoppers want a deal
Retailers know the mental math customers are doing right now when they decide where to spend their money. That’s why they’re clamoring to offer the best and most relevant deals to get people through their doors. In-app deals and rewards aren’t new, but they’ve become the perfect place to tempt customers with tailored offers using notifications, location-tracking information, order history or other data.
Take groceries, for example. Persistently high food prices have made people more price sensitive, making them hunt harder for a good deal, says Sean Turner, co-founder and chief technology officer at Swiftly, a retail tech company that offers digital platforms and data analytics to grocery stores.
“Because it’s such a high spend for consumers and there is so much variety of choice and how you allocate those dollars and how you trade up or down depending upon your budget, shoppers spend a bunch of time kind of trying to obsess and optimize over that pricing,” he says.
Saving time and money
Finding the right item at the right price can shape a person’s entire shopping trip, Turner says. “That’s the battleground for these retailers and that’s going to determine do I go to Lucky’s or do I go to Safeway or Raley’s this week?”
Historically, shoppers relied on weekly circulars that came in the newspaper and advertised the week’s price cuts and coupons. Now, those deals appear front and center in the store’s app.
And while you’re in the app, you can check the rest of your grocery list against the store’s inventory and prices, adding a layer of convenience people will come back for. “You want to know that it’s going to be there. Where is it? What’s the price going to be? And that’s how shoppers are using a lot of these retailer apps right now.”
For instance, recent “digital deals” on the app for QFC (part of the Kroger grocery chain) included $4.99 for frozen fish sticks and other products from Gorton’s ($6.99 without the app) and $5.99 for a box of six Kind bars ($7.99 without the app).
Creating perks for members
Forget punch cards. Companies hoping to secure customer loyalty have gone all out to build a list of membership perks designed around their apps. Customers typically don’t have to download the app to join the program and reap rewards, but some bonuses happen exclusively on the app. Here are a few examples:
- Lululemon members get early access to new products on the company’s app, among other special privileges.
- McDonald’s app users get points with each purchase that can be redeemed for free food. First-time app users get a free Big Mac with a $1 minimum purchase.
- The North Face’s XPLR Pass lets members earn points toward rewards when they use its app to check in while visiting a national park or monument.
Concerns about privacy
What might seem like a killer deal comes with a cost. Every time you download an app, you’re agreeing to hand over your personal data to that company, says R.J. Cross, director of the Don’t Sell My Data campaign with PIRG, a consumer advocacy group. “We’re accidentally opting in to our data being collected all the time.”
It’s hard to know what purpose that data collection serves. The more that’s collected and stored — or sold to third parties — the more likely it’ll be exposed in a security breach, Cross says. “It’s not a transparent system. People have to be on their guard.”
Consumer advocates also fear how the use of personal data can influence pricing. Dynamic pricing generally refers to the use of technology to automatically change prices based on supply and demand. But what happens when a company knows a lot about you and your shopping habits and knows you can’t see what it’s charging other people for the same item?
“It’s a system that has the capacity to be predatory,” Cross says.
(Turner says Swiftly, which powers mostly regional and independent grocery stores’ apps, doesn’t invest in dynamic pricing technology for this reason. “There’s some sense that that might not be the most fair thing to consumers,” he says.)
Tip: Don’t download every app
Privacy risks aside, a trove of personal consumer data also enables companies to use targeted advertising to entice people to spend money. Maybe money they’d never planned to spend.
Not every deal is a deal, Cross warns. It’s more like a nudge. “It’s so permeated throughout our culture that we make it hard for someone to opt out of being barraged by so many targeted appeals and deals.”
She would have consumers avoid loyalty apps altogether and push back on companies that say you have to have an app to access something like a boarding pass for a flight or a ticket to a concert. But if you do get the app, be choosy, she says. “Maybe limit it to the ones you visit regularly instead of a one-time deal.”
If you do opt to download an app to your phone, make sure to review your privacy settings to avoid letting companies collect whatever data they want, including your activity on other apps.
Taryn Phaneuf writes for NerdWallet. Email: [email protected].
The article Looking for Deals? You Might Need an App for That originally appeared on NerdWallet.
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