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Improving customer retention in e-commerce through a secure and privacy-enhanced loyalty system

: Enzmann, M.; Schneider, M.


Information Systems Frontiers 7 (2005), Nr.4-5, S.259-370
ISSN: 1387-3326
Fraunhofer SIT ()
E-Commerce; loyalty system; privacy; anonymity; CRM

Loyalty systems provide an interesting possibility for vendors in customer relationship management. This holds for both real world and online vendors. Many vendors apply loyalty systems to collect customer-specific data that may be exploited for many reasons, e.g., price discrimination and direct marketing. As a consequence, beside some potential benefits of a loyalty system, customers may also fear an invasion of privacy, and thus often refuse to participate in such programs. Thus, a vendor may have problems to turn privacy sensitive people into loyal customers using a typical loyalty system. In this paper, we present two variants of a privacy-friendly loyalty system to be used by online vendors for issuing loyalty points. The systems prevent vendors from exploiting data for the creation of customer profiles by providing unconditional unlinkability of loyalty points with regard to purchases. We propose a simple token-based approach and a counter-based approach which is much more efficient while preserving the privacy and security properties. Furthermore, the counter-based loyalty system prevents pooling of loyalty points which were issued to distinct customers.