What price customer loyalty? Supermarket shoppers will get discounts under glitzy new schemes. But Big Brother may come to rule the till

Frances Howell looks at the latest weapon being wielded in the trolley wars WHEN YOU'VE JOINED UP
Last week, Safeway joined Tesco in launching a nation-wide customer loyalty card. For anyone who has ever used a petrol service station, the system is all too familiar. Customers are allocated "smart cards" to nestle next to their Amex. At the check-out, the card is swiped, and points are credited in line with the amount spent.

However, unlike their petrol station predecessors, supermarket card points can be redeemed against not only china, but also against the weekly shopping bill.

On the surface, these cards seem too good to be true. Instead of simply taking huge chunks out of many families' weekly income, supermarkets now profess to be giving money back.

Supermarket chains are, however, big business, not charitable organisations. If they were not getting more out of customer loyalty cards than they put in, they would not be dangling these carrots in front of you. As Roger Ramsden, director of brand marketing at Safeway, admits: "These cards generate a sufficient increase in sales to cover their cost."

Sales are not the only bonus for supermarkets. Each time that your card is swiped, it registers not only the total amount spent, but exactly what you have spent it on. The supermarkets can therefore build up a customer profile of each card holder.

Tesco claims that this will enable it to provide a personalised service, at least at mailshot level. The flipside is a Big Brother-like databank that could result in letters such as: "We note that you almost exclusively purchase pick'n'mix chocolates, croissants and chicken tikka masala. This is an extremely unhealthy diet. May we suggest that you boost your vitamin C levels by taking advantage of our current satsuma offer?"

The real plus for the supermarkets from the cards is cheap market research. But how does it add up for shopper?

The bottom line is individual customers win. The losers are likely to be specialist stores, like chemists and fruiterers, who provide some or all of the products offered by the supermarkets.

What you get depends on where you shop. Safeway's scheme differs from those of both Tesco and Sainsbury, which are only promoted in selected stores. Safeway awards points for every pounds 1 spent, whereas Tesco and Sainsbury have a minimum spend of pounds 10 to get points, which are then awarded per pounds 5 spent (in Tesco), or per pounds 10 (in Sainsbury). In Tesco and Safeway, to cash in points requires a minimum spend of pounds 250 or pounds 100 respectively, whereas Sainsbury has no lower limit.

The value of these points varies from chain to chain. Over six months, the average family of four, spending about pounds 75 per week, should get pounds 20 off their bills at Tesco and Safeway, and a princely pounds 50 off from Sainsbury.

At the other end of the scale, the pounds 10 per week shopper will earn pounds 2.50 worth of points from both Tesco and Safeway, and a marginally higher pounds 3.30 from Sainsbury.

This works out at an approximate 1 per cent discount at both Tesco and Safeway, whereas the average family of four can save 2.5 per cent on a Sainsbury Saver Card.

So, how do the supermarkets rank? In terms of discounts, Sainsbury offers the best value for the big weekly shopper. Although any money spent that falls between pounds 10 units counts for nothing, the greater return makes up for it.

If you are only spending pounds 19.99 per week, however, you might get better discounts at Safeway, which will credit you with points for pounds 9 of that pounds 9.99.

Unless you spend at least pounds 10 at each shop, and you buy in pounds 5 units, Tesco will give you points for less of your shopping than Safeway, at the same rate of return.

Tesco defends its points system on two counts. "We decided not to award a point per pounds 1, as customers then end up needing a ridiculous 800 points to get Mr Blobby cake," says Andrew Coker, Tesco's press officer.

"Also, independent research has shown that Sainsbury is 3 per cent more expensive than Tesco, and Safeway is 5 per cent more expensive."

If this is the case, then the extra discounts at Tesco's competitors are written off by the higher costs of shopping. Another catch with the Sainsbury Saver Card is that it is only used in a couple of hundred stores at a time, and for six-month stretches only. At the end of this period, unused points expire.

Cash discounts for points earned are only part of the picture for Tesco and Safeway. Safeway's ABC Card offers free products and services or family days out instead of, and to a greater value than, its cash discount equivalents.

The marketing is carefully directed: bright photographs of free chocolates and alcohol prevail in the offer catalogue. Once you have spent pounds 400, you can get both together, with a free 200g box of "famous names liqueur chocolates". Is this the sort of treat that might persuade the exhausted family shopper, with two screaming children in tow, to buy an extra can of baked beans?

Tesco is developing its Clubcard name to the full. Members are invited to celebrity wine and cheese tasting evenings, with hair product demonstrations by Nicky Clarke. Free haircuts by the man himself are not, however, on the agenda. At a return of 1 per cent, you would probably have to spend the national average annual wage, gross, before you had enough points to pay for it.

do

Take advantage of all three cards.

Think about any difference in price before you think about the discounts.

Remember that Safeway money-off points can be redeemed only in the store in which you register, so choose the most convenient one.

don't

Be tempted to spend more simply to get another point on your loyalty card.

Remember that the rate of return may only be 1 per cent, so you are better off saving your money.

Take a list and stick to it.

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