Loyalty programs provided some of the first applications of big data to personalized pricing. When a buyer joins a loyalty program, they typically provide some personal information and consent to a seller tracking their purchases. In return, the buyer typically receive some type of benefit such as seat upgrades or free flights from an airline frequent flier program, or price discounts on specific items from a grocery store.
Sellers use loyalty programs to customize their marketing. Some retailers also partner with companies that aggregate data from loyalty programs and use it to create customized coupons, which are printed on the back of receipts that a customer receives at the cash register or point of sale. Firms that specialize in this type of personalization claim that data-driven analysis can increase the redemption rates on such coupons from 1 percent for non-personalized coupon offers to as much as 25 percent for highly-targeted coupons.