in the old days shopping could be fun. A trip to the shops gave a chance to catch up on local gossip. And when it came to actually buying things, your friendly storekeeper would order whatever line of goods appealed to you. With the slow death of local shops and the arrival of monolithic out-of-town hypermarkets, relationships have disappeared and products are abandoned if they don't move off the shelves fast enough for big profits. But now supermarkets are under attack, from cut-price shops and wholesalers. To survive, they must differentiate themselves from competitors.

Anxious to replace the good feelings previously associated with shopplng, supermarkets have initiated a raft of promotions, ranging from the somewhat loopy to the plain money-savers. Earlier this year, Asda launched a scheme to cater for lonely hearts. As part of the store's "love nights", single shoppers were given vouchers for free coffee and cakes and encouraged to join one another at candle-lit tables while smoochy music played over loudspeakers. More prosaically, Safeway's new flagship store in London's Camden features a coffee shop, a dry-cleaner and parent-and-child parking spaces. But the latest and must widespread initiative is The Customer Loyalty Card.

If major retailers have their way, our wallets will soon bulge with their plastic cards. Over the past two years, Boots, Shell and W H Smith have jumped on the bandwagon. Among the supermarkets, Sainsbury's has offered its Saver Card in selected stores for a year-and-a-half; Safeway uses its ABC card in 130 branches - but it's Tesco, with its Clubcard, which has developed the most advanced loyalty card in the market.

So what does it offer? Quite simply, a bit of money off. As five million users (or almost a quarter of the country's households) now know, the Clubcard works on a points system. Cardholders hand their cards to checkout operators before the shopping is scanned, and points are added electronically to the Clubcard 'account'. Customers receive two points for the flrst pounds 10 and one point for every pounds 5 after that (with no points at all if you spend less than pounds 10). Every three months you are sent a statement and providing that you have collected at least 50 points you will receive Clubcard vouchers which can be spent in any store. To gain 50 points (worth pounds 7.50 in vouchers) in three months, you must spend pounds 250 (nearly pounds 20 a week).

Not exactly a huge saving. But it ought be enough to make you shop exclusively at Tesco rather than a rival, and to spend a little extra if you were just short of the pounds 250 target. There is more. Tesco recently invited hairdresser to-the-stars Nicky Clarke to Its Watford branch to conduct a hair demonstration. The bash also included a buffet and free wine, and (thrill of thrills) "a chance to have a chat with the store manager." A Tesco spokesman explains, "It's a way of our managers returning to the day of corner-shop managers. It's much more personal - Tesco will get to know its customers intimately."

Advertising campaigns underline the warm emotional tone of current supermarket marketing. Sainsbury's is propping up its glamorous celebrity-recipe commercials with ads showing "real" people explaining why they like the store, and has launched a commercial showing a twentysomething couple eyelng each other up as they shop. For its part, Tesco introduced Prunella Scales as mad Dotty Turnbull, dubbing her the "mother of all shoppers".

Paul Buckley, a psychologist specialising in consumer behaviour who has conducted projects for the Ministry of Agriculture, Fisheries and Food, believes supermarkets are trying to make the shop an extension of the home. "It's all done to make you feel part of the system, but they are all clever devices to make you spend more - whether it be widening the aisles, singles nights or discount cards."

Tesco's spokesman claims the company launched the Clubcard as a "thank- you to customers". But supermarkets do not make this kind of investment out of altruism: Clubcard cost an estimated pounds 10m to set up. For the stores, the benefits of loyalty cards are huge. They will be able to build up databases of millions of customers, revealing where they live, what they buy, and how often they buy it - information invaluable in the planning of products and stores.

Before loyalty cards arrived, supermarkets used already-sophisticated electronic point-of-sale systems which could tell exactly what products were brought, at what times and in what quantities. Now, however, stores can pinpoint the particular individuals who are buying beans, for example - and tell whether they are baked by Heinz or plain kidney beans in salted water. Moreover, the customer's preferred day and time for shopping will also be noted.

The new technology has enabled a radical shift in retail strategy. In the past stores sought to attract vast numbers of customers, but nowadays the goal is to increase the products and services taken by the established customer base. By the end of this year, Tesco is likely to have harnessed the Clubcard information in such a way that it can send out targeted promotional materials to the highest-spending customers. Talking to consumers through new techonology such as smart cards and database, "one-to-one or 'relationship' marketing" is already massively successful in the US.

Paul Hawkes, a director at strategic consultant Abram Hawkes, explains: "Tesco has built a five-million name database in record time at record cost. The store will know who its customers are, be able to build up purchase patterns and identify the wine lushes, for example, and target them with specific offers." Such as special rates on a crate of your favourite tipple, perhaps, or, if you are really lucky, there might even be some wine-tasting event to attend. According to a report for Marketing magazine, Tesco's pilot promotion, targeting heavy wine-buyers with a Chardonnay offer, was so successful that rolling it out across the whole Tesco chain would have required buying up the world's entire stock.

Information from every sale made by cardholders will fill up huge databases containing a wealth of valuable information. According to a recent report by the Henley Centre, consumers displayed "fear and suspicion about company motives for attempting to conduct a relationship".

And the National Consumer Council is concerned about customer privacy, too. "People should be aware of the sort of information stores can collect on you using these cards, and be cautious about how the data is used."

To be fair to the supermarkets, the information gleaned from applicants' forms is pretty tame. Tesco, for example, asks your name, sex, address and the number and ages of people in your household. Tesco also insists that the data collected is confidential and will never be sold to other organisations.

It is debatable whether it's an infringement of personal liberty for Tesco to know that you tuck away 20 tins of tomato soup each week or that you have a penchant for Cadbury's Dairy Mllk - but other things could be a little embarrassing, such as a higher-than-average purchase of panty liners, or an absolute failure to buy deodorant. To be entirely cynical, if you are a confirmed alcoholic, for example, your supermarket will know all about it. Tesco naturally puts a less sinister gloss on its plans for the information. In the long run, it says, the cards will allow stores to tailor their services to customer needs. As Tesco chairman, Sir Ian MacLaurin, said at the launch, "The technology gives us a clearer picture of their likes and dislikes which helps us to glve them an even better service."

But as Paul Hawkes points out, it is unfeasible for stores like Tesco to communciate wlth all five million cardholders on a regular basis. "lt costs on average pounds 250 to mailshot 1,000 people, so it's going to cost almost pounds 2 million to communicate wlth all five million cardholders just once. Using it as a mass communciaton technique is not feasible."

Loyalty cards enable supermarkets to pinpoint top spenders and these are the ones who will be courted with freebies and chats with the manager - indeed, the Nicky Clarke demo was only open to the top 200 spenders in that partlcular Tesco store. So supermarkets will cream off their highest- spending customers and target them. For the rest of us, the measly one per cent thank-you discount will have to suffice.

8 Harriet Green is a section editor at Campaign magazine