Kudler Frequent Shopper Program

Background

Kudler Fine Foods is a San Diego, California based fine foods store that has three locations within the San Diego area and has a web presence as well. The Sales and Marketing want to implement a frequent shopper program to track purchase behavior at the individual customer level and provide incentives through a partnership with a loyalty points program. Customer purchase patterns will help the company refine its processes and offerings to best satisfy their customers. Price is not the primary differentiating factor for Kudler consumers; these customers are focused on quality and finding specialized items. The program will provide customers with loyalty points that can be redeemed for high-end gift items, first-class airline seat upgrades or other specialty food ("Sales & Marketing Sales Plan 2007", 2013). Such a program does have the potential for many legal, ethical and information security concerns.

Legal Issues

In order for this program to work properly, Kudler will need to assign a unique membership number to every individual shopper that opts in to the program. This number will be used to track the purchases made by the customer, which will be stored and maintained in a database. The main issue with this is that some people feel that this is an invasion of privacy. The Terms and Conditions page on the company website has a section that explains the Privacy Policy that Kudler Fine Foods follows. What it does not cover is the type of private customer information that is going to be shared with the loyalty points program or how that party is going to use the information.

Another thing the Kudler needs to be aware of is state and federal privacy laws. California Senate Bill No. 1386, Chapter 915, specifically relates to unauthorized access to private data that are maintained in a computer system. According to California Senate Bill No. 1386, Chapter 915" (2002), “Any agency that maintains computerized data that include personal information that the agency does not own shall notify the owner or licensee of the information of any breach of the security of the data immediately following the discovery, if the personal information was, or is reasonabl y believed to have been, acquired by an unauthorized person” (Sec 2(b)). In nonprofessional terms, this is saying that Kudler Fine Foods is responsible for safeguarding the private information gather and any breach of that data, the individual needs to be informed as soon as possible. Kudler may be responsible for any stolen identities or any other issue coming from stolen private information.

The Privacy Act of 1974 says the same things as Senate Bill 1386 but it also contains a section on criminal penalties. Section (i) states that anyone that willingly allows access to the data faces a fine of $5,000, the office or agent in charge of the