📱 loblaw media

the points economy and monopolies

Loblaw has built a sophisticated advertising platform into its PC Optimum loyalty loop

The grocer has innovated in the online targeted ad space and is selling access to this platform through Loblaw Media

Loblaw Media launched in April 2019 as a full-service digital marketing agency that uses transactions-based insights to help brands plan and deliver more relevant campaigns.

Consumer data allows us to identify and reach micro-niche audiences that are easily overlooked or underserved by traditional marketing campaigns. Vegans are a good example of this — they may be hard to find on the internet when looking at third-party data, but because we know what people are buying in stores, we know if they’re buying vegan products and not buying meat. This level of insight gives us the opportunity to create a specific audience segment based on actual behaviour, then create a relevant ad campaign with measurable results.

This approach has taken our entire traditional marketing model and turned it upside down because it starts with the audience first, instead of the message. The ultimate goal is “zero-waste marketing,” where all available data is used to make smarter decisions. It connects otherwise anonymous transactions together to create a customer record, and allows us to understand how the customer shops.

I didn’t fully appreciate the implications of this platform when I wrote Laying Down the Loblaw. My original assessment of their loyalty program was basically around how the company leveraged PC Optimum to nudge shoppers to shop more often and purchase more. That’s true (and perhaps, obvious). What I didn’t properly grab onto is how they have steadily evolved the popular rewards app into an advertising platform that can serve ads to customers on behalf of other brands when they sell access to it.

As they add users and more data (such as linking to banking data through PC Financial and pharmacy through Shoppers Drug Mart), the firm will have an ever-enriching database. (To give you a sense of scale: the PC Optimum program has about 18M members, which means that more than half of the adult population in Canada is a PC Optimum loyalty member). 

In this way, Loblaw’s points economy is revolutionizing grocery e-commerce in service of one of Canada’s largest consumer data sets. 

Loblaw is also innovating in the broader web monetization space. Because Loblaw media seeks to “reward” Optimum members when they view their ads, the firm is aligned with broader internet efforts/experiments to compensate people in the attention economy. But let’s be real: the real winner is Loblaw Companies LTD. 

One way to look at large companies building their own advertising mechanisms via their little loyalty programs is as a form of resistance to big tech. Instead of buying Facebook or Google ads (*which the company may still do), Loblaw can communicate with their customers directly - if they are enrolled in the PC Optimum program and use the mobile app. Because the program is proprietary, they can then sell access to the platform to other brands that can pay to have their product micro-targeted to specific audiences as a special “offer.” 

Brands (other than President’s Choice or No Frills) can “precision-market” based on what people have bought in stores, then measure the impact of that precision-marketing campaign.

We have a rich set of data that offers unique insight into almost every aspect of our business. As we continue to enhance our analytical capabilities, we are already seeing the benefits of smarter promotional decisions and improved assortment.

Their audience catalogue demonstrates their coverage of the “everyday essential” market. Owning the platform also improves Loblaw’s negotiation clout with vendors, enabling them to potentially increase the subsidization of loyalty points and marketing communications costs. 

Share regs to riches

My concern with PC Optimum is not privacy. I think the Loblaw has pretty strong privacy policies that are clear, easy to read, and easy to find. 

My concern is about power.

Loblaw’s micro-niche advertising via the PC Optimum program can further accelerate the firm’s monopolization of the grocery market.  

Below an excerpt from, “Break ‘Em Up: Recovering our Freedom from Big Ag, Big Tech, and Big Money,” by Zephyr Teachout and Bernie Sanders:  

Amazon, Google and Facebook are so powerful and have such a long leash from Wall Street that they are no longer market participants. They are the market which is the point: why be inside a market when one can control it? They all use their dominant position to promote their own products, Google search results show Google products, Amazon search results show Amazon products, They have replaced the newspaper, the atlas, the phone book, the post office, the bookstore, the travel agent. They all use two techniques that are particularly dangerous for democracy: monopoly power and targeted ads. Monopoly power removes them from the market. 

Three activities—surveillance, discrimination, and addiction—define the Facebook and Google operations. Surveillance is the art of extracting as much information as possible from every person and every interaction. Discrimination is providing different information and different advertisements to each person, based on indicators. The goal is to maximize the amount of money Facebook and Google can make off of knowing who you are. Addiction is the best mechanism for ensuring that you spend as much time as possible hooked up to a machine that will send money to Facebook and Google.

To be sure, Facebook and Google are not the only companies that spy on their customers. At this point, every company of a certain size makes data collection and data sale part of its business. Domino’s Pizza, airlines, shoe companies—they all collect data on their customers. They sell the data to aggregators, who in turn sell it back to those same companies and others who are trying to reach customers. The ads based on this data are the cheapest in the business. They make up at most 40% of the digital ad business. Much more expensive ads—and data— are available from Google and Amazon. These two companies do not sell data. Instead, they buy data from the exchanges, and then use it to augment their own high-quality data. What they sell to other companies is access.

Now, participation in the loyalty program - which is the main way to save a modest amount of money on household shopping - is taken as tacit consent to the “micro-niche” advertising. It seems as if it is mutually beneficial: shoppers receive “rewards” for responding to specific ads that are algorithmically informed by their shopping history and demographic information. 

Another way of interpreting the hostage-like trade-off of this data sharing (literally pennies for your purchase history) is as a feminist issue - PC Optimum has one of the largest marketable female databases in the country. The rewards program is convenient, and people still have a choice not to use it, but they may not be able to access comparable discounts elsewhere. Plus, people are pretty price sensitive when it comes to purchasing groceries - which further nudges people into these seemingly harmless programs. 

Loblaw Media’s advertising platform also creates a new form of competition between the brands that it stocks - meaning that facilitates competition while managing to basically be borderline monopolistic. It’s another way for dominant grocers to squeeze suppliers. For instance, grocery stores already earn money on slotting fees, which are a charge that manufacturers pay retailers to be on the shelf and other promotional, advertising fees. 

In fact, Lobaw’s proprietary loyalty consortium-turned-media-company looks a lot like Amazon Advertising, where Amazon can sell digital access (ads) to its platform. 

Some say that Amazon’s acquisition of Whole Foods in 2017 catalyzed e-commerce initiatives. I mostly just think it’s worth looking at the power of the PC Optimum program in different ways.

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A lot of people may feel as if they have nothing to lose by being part of Loblaw’s points economy. If we continue to have a decent amount of choice when shopping and equal access to unique discounts, we shouldn’t be too fussed. But (!) as the firm incrementally constrains competition, wrapping itself into our everyday banking, health, and food purchases while creating a media company, we may want to ask ourselves what the points of it all is?  

🏢 regs

  • Ad Standards Canada is the industry’s non-profit self-regulating body;

  • Proposed legislation (Bill C-11) would introduce data algorithmic transparency; at a person’s request, organizations will have to explain automated decision systems that “make a prediction, recommendation, or decision” based on individual personal information. It is not clear to me if this explainability would extend to the type of rationale offered by Facebook’s “Why am I seeing this post?

  • It is difficult to imagine this platform information being of interest to law enforcement, which is a contrast from social media platforms that engage in targeted advertising. 

💰 riches

  • Owning a digital advertising platform like the PC Optimum mobile application is a way to control the market by controlling access to it (in this case, access to the eyeballs and pockets of shoppers) and has anti-competitive ~vibes~ ; 

  • Loblaw can also earn money from brands that have limited alternatives when it comes to advertising to Canadians; 

  • Participating in a loyalty program is very rewarding...for the parent company.

Vass Bednar is the Executive Director of McMaster University’s new Master of Public Policy in Digital Society Program.