A Disloyalty Movement? Supermarkets and Customers Drop Loyalty Card Programs

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Loyalty programs provide consumers with special discounts, and they give retailers loads of data on shoppers’ habits and preferences. So why are supermarket loyalty membership numbers falling? And why has one major grocery company pulled the plug on its loyalty program?

In the grand scheme of things, customer loyalty programs seem to be rapidly on the rise. According to a study by the research firm Colloquy, the number of U.S. loyalty program memberships grew by 26.7% from 2010 to 2012. Last year, Americans had a collective total of 2.65 billion loyalty program memberships.

But the study reveals that these programs may not be quite as ascendant as they initially appear. “Even though the average number of loyalty programs per U.S. household has grown to 21.9 (up from 18.4 in 2010), only 9.5 of those memberships – less than half –are currently active,” the report states.

What’s more, certain loyalty program categories actually saw a decrease in memberships. In 2012, Americans had 172.4 million supermarket loyalty program memberships, down from 173.7 million in 2010. That’s a decrease of only 1%. But considering that until recently loyalty program totals have generally only gone upward, and that most program categories saw robust growth, any decline in memberships is significant. Combine that with the fact that the percentage of memberships that are active has been falling across the board, and what becomes apparent is that many consumers have grown sick of having to fumble through a pocketbook to find a loyalty card at the grocery store.

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It’s not just that the loyalty program cards or key chain fobs are a hassle. “Savvy customers understand that loyalty programs gather and utilize customer data to make marketing decisions,” the Colloquy study reports. “If programs are not crystal-clear in providing benefit to the customer in exchange for that information, and are not clear in their privacy policy, consumers can back off from participating.”

Shoppers aren’t the only ones who are tired of loyalty programs. Over the last few weeks, the supermarket company that runs brands such as Albertsons, Shaw’s, Acme Markets, and Jewel-Osco has been announcing the elimination of all loyalty programs. Shaw’s, for instance, has been pushing the change as “Card Free Savings,” in which “Everybody gets a low price,” regardless of whether the shopper is a loyalty program member or can produce a card to get zapped at the register. “The card isn’t so special anymore,” the grocery company announced via its website. “Everyone has one. So we want to take the special step of not requiring one anymore.”

Many customers view the change as a win-win: no need to keep track of a card (or use a smartphone app) for discounts, and no (or fewer) concerns about privacy and personal data. Other shoppers who have become masters at using loyalty programs to their maximum potential for epic discounts have reason to be upset about the idea of merely getting the same discounts as everyone else.

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What’s in all this for Albertsons and its sister brands? By getting rid of loyalty programs, aren’t these chains also giving up access to all sorts of data about its shoppers? Isn’t that data extremely valuable for marketing and pricing purposes?

Perhaps it’s not as useful as you think, as Chris Wilcox, a spokeswoman for Albertsons LLC, explained to the industry publication Supermarket News:

“We found that tracking individual shopping habits isn’t as critical to our overall strategy as knowing what our customers in our neighborhoods are shopping for. Tracking individual purchases can be one way to do it, but it’s not the only way. Getting to know our customers in neighborhoods, learning each store like it’s our only store, and offering best-in-class customer service is as much of a differentiator.”

At the same time, other supermarket companies are putting an even greater emphasis on loyalty programs—and the potential they give for customized marketing and personalized pricing. As CNBC and the Associated Press have reported, Safeway and Kroger’s, among others, have been stepping up efforts to use customer’s shopping histories to present them with personalized deals and coupons to boost spending. “There’s going to come a point where our shelf pricing is pretty irrelevant because we can be so personalized in what we offer people,” Safeway CEO Steve Burd said earlier this year, according to the AP.

Such a concept may strike some shoppers as being inherently unfair: How would you like paying twice as much for hamburgers or coffee than the person checking out in front of you? Then again, a scenario like that is likely to make you sign up for the loyalty program, which is sorta the point. Many customers will, in fact, love personalized pricing because it’ll make them feel special—like they’re getting a unique deal created just for them.

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Regardless, Albertsons and its sister grocers aren’t the only supermarket chains skipping loyalty programs and personalized pricing. Whole Foods and Aldi represent the high and low end of grocers that have done very well without resorting to loyalty programs. But some analysts are skeptical that a business model without loyalty programs or customized pricing and marketing can be successful down the line. “In the future, it will be increasingly difficult for Albertsons to compete against retailers like Safeway that have loyalty programs and are advancing down the road towards personalization,” Jon Hauptman, partner at Willard Bishop, told Supermarket News. “That’s where the puck is headed.”

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22 comments
PDMacGuire
PDMacGuire

These stores don't actually need loyalty cards, since everyone uses debit cards anyway. They can still track purchases that way.

pvar06
pvar06

Basically in most of the loyalty schemes, customers does not get any decent gains. This is primarily due to various loyalty schemes offering and all these schemes are not interconnected. On average people have around 18-20 cards with them but when it comes to active cards then it will be just 5-7 cards. So balance cards are just a waste of money for the business establishment and no use for the customers.

Historically the customers have been offered loyalty cards stating that the customer will get some discount by means of loyalty points. But with the kind of cost involved in implementation / maintenance of loyalty solution, the business establishments are not in position to offer great discount. Also in the competative world the business establishment can not charge higer price to maintain the loyalty solutions. So basically the very purpose of the loyalty card solution was to understand the customer behaviour / pattern. It has only helped the companies in some way with no major gain to the customers.

Such issue of disloyalty will keep on happening until unless there is a collabrative approach for the loyalty solutions. In such approach both the customer and business establishment will be in gaining position and will maintain the interest.

Orator
Orator

There is lot of competition among different Brands for the Loyalty Cards. These days even smartphone apps are coming up with rewards and points if anyone do shopping through them. One may check for such offers on various shopping apps, for eg :

http://apps-catalog.com/products/shopping-apps

jalbertini
jalbertini

When Shaw's had cards their prices were way higher than other local stores UNLESS it was on sale, which required the card.  So if it wasn't on sale or you didn't have a card you overpaid by quite a bit compared to other stores.  Now the cards are gone but the high prices remain.


jalbertini
jalbertini

Shaw's dropped their cards and said they'd offer everyday lower prices.  Hasn't happened.  Prices are still the full, inflated prices you paid before without a card.

rinetguy
rinetguy

As for loyalty cards, I have a stack of 'em in the car. If I forget one (or am shopping somewhere new), the I'll just bop over to customer service and get a new one.

Most of the time, the person will hand over the card + "application" and say something like, "just fill it out at home and bring it back next time." That app goes in the recycle bin later. If they insist I fill it out, then 'William Tokington' at '4432 East 3rd St' gets another

rinetguy
rinetguy

How would you like paying twice as much for hamburgers or coffee than the person checking out in front of you?

Hmm. You might want to ask yourself why you are so insecure that you have to compare yourself to (and by extension, keep up with) the Joneses.

I couldn't care less what other people are doing. If I find the price acceptable, then I'll buy it. If not, then I won't.

dougx
dougx

I hate them.  They are just a big annoyance and waste of my time.  I probably go through 5 of them a year so i doubt they are getting much out of tracking my purchases.

TimeLiner
TimeLiner

I personally like the loyalty cards. I get tons of benefits including coupons for free products I actually buy, very cheap gas using uel savings, and a lot of other great deals. I don’t think they jack up prices elsewhere to make this possible. I think they make it possible by requiring less advertising spending to keep people coming in the door and making better customer-oriented  usiness decisions using the data they get. Everyone know it’s much cheaper to keep a regular customer than bring in a new  ne. And learning to run the stores better and offer what people want creates more demand and higher volume. There’s your savings.  

All the talk about customer tracking and privacy is kind of laughable. First, it’s just groceries, people! Are you really that  oncerned about the company knowing what groceries you buy?? Secondly, these same people complaining about privacy are putting their  ntire lives on the internet via Facebook and Twitter, and they should know full well that when you get a service for “free” you are  he product, not the customer. Those social networks are gathering your information, much more personal than your shopping  ist, to make money off it from people other than yourself! Yet people still use those sites. So I think the privacy issue is  verblown, or people have a really twisted sense of what they want to be public vs. private.

leon1376
leon1376

Jon Hauptman is flat wrong. Anyone with half a working brain knows that the artificially-low prices on special card items are subsidized by higher prices elsewhere. This creates in the mind of the customer a perception that the merchant is "playing games" with pricing. Being somehow dishonest. There's an Albertson's right across the street from me in Scottsdale, AZ, and they have good sales. I save money by "shopping the sales". But Albertson's did something else really important. The CEO booted the automatic checkouts. He stated that if someone shops in one of his stores, they should not leave without speaking with at least one store employee. Also, the store near me installed some big shade awning on pylons in the parking lot. Arizona gets hot and it's nice to come out to your car parked in the shade. Their grocery baggers will also help you to your car if you have a big load. It's the little things that create customer loyalty. not stupid cards.  

MichaelSweden
MichaelSweden

Yeah, the corporation offer to give you a small, very small economic incentive to in exchange for getting to know every last little detail about what you buy through the loyalty card.

Didn't pay off enough apparently, oh well it is always important for the corporation to be flexible.

Next step could be, why not, to offer the same small economic incentive, only this time they want you to carry a gps around around the clock, and a few visits to your house, just to check your profile as a consumer.

Totally harmless....

r_mjm
r_mjm

Loyalty cards linked to a point system linked to a cash discount is nice to have.  Coupons linked to extra points linked to next transaction is worth it.  The rest a major waste of paper.  Supplier promotions should go directly to price ticket to consumer

BrianGreul
BrianGreul

The real issue here is that retailers like Kroger engage in deceptive tagging strategies that make the card price look like other prices.  Instead of marketing useful coupons they are pushing absurd paper coupons to get customers to buy more of a product.  It's a form of noise to me as a shopper and violates the trust model of shopping there.  What I see is a retailer who invests alot of energy in manipulation while neglecting basic service factors like quality produce, product in stock, product sizes tailored to my needs.  

RobinMiller
RobinMiller

@rinetguy - I'm a man, so I don't carry a purse full of disloyalty cards. I just give them my phone number, which is the ID they all seem to use. 

BradHart
BradHart

@leon1376 Not all of us want employees talking to us.  Give me a self checkout any day.I don't go to the grocery store to chat.  I dislike people hold mini reunions in the middle of the damned aisles blocking everyone else trying to get their shopping done, and I want to smack cashiers and customers who think the checkout line is the place to exchange gossip.

mahadragon
mahadragon

@leon1376 As far as I'm concerned you are flat out wrong. I have a Safeway Card, a Fred Meyer Card, a QFC card, and an Albertson's card. I don't think merchants are playing games and how is having a discount card dishonest? Do you even know what dishonest means? I can save quite a bit by using my loyalty card sometimes depending on what I get. I also get gas discounts when I spend so many dollars.

If you think about what you said, it really lacks any logic. If you take any retailer on the planet, pretty much all of them have sales on different items at various points in a calendar year. It's the higher prices on other items that help subsidize the lower sales prices. All retailers do this and there's nothing dishonest about it. 

BradHart
BradHart

@r_mjm When they are linked to gas discounts its even better (assuming your station is competitive with everyone else in town)

leon1376
leon1376

@BrianGreul Well said, Brian. Throughout the whole of retail history, every time a retailer drops into a death spiral it's invariably caused by a CEO who thought he was smarter than his customers. No one is smarter than the customer. Ever. 

leon1376
leon1376

@BradHart @leon1376 Agreed. On the other hand, you just need to relax. Several years ago I happened to be in a small place of business in a small town in New Hampshire and everyone in line knew everyone else. While waiting, I eavesdropped on the chatter. One of the hausfraus had a new baby stroller for her crumb cruncher with a music box attached and at the moment, it was playing "Puff the Magic Dragon". Me being me, I casually mentioned that the song her toddler was listening to was all about smoking dope. This got everyone to talking. Nobody believed me. When I finally got up to the window, a lively discussion was in full swing. The woman at the window made me wait while she called a friend in another town about the origins of the Peter, Paul, and Mary song. "He'll know for sure," she said. She listened for a minute, put down the phone, and said, "he's right. It's about smoking marijuana." I then had to spend five minutes reciting the lyrics and explaining what they really meant. Too funny and a wonderful memory. 

leon1376
leon1376

@mahadragon @leon1376 So tell me, how is that Albertson's card working out for you? Where do you actually use it? Huh? Safeway? Seems to me that everything you wrote before "Albertson's card" and after 'Albertson's card" is pretty much horse pucky.