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.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Almost 15,000 people died last winter through living in cold homes that they couldn’t afford to heat

Social tenants locked into energy tariff for 40 years

Many Londoners who live in social housing estates are not allowed to switch because their landlord has ‘locked’ them in to buying from one supplier

Will your credit card rewards be scrapped following new EU rules on charges?

Providers are unhappy with new EU rules - but ultimately it is customers who will have to foot the bill
There remain more than a million unclaimed Premium Bond prizes worth collectively around £48m

Have you won £1m in the May Premium Bonds draw?

More than £60m was paid out to more than 2 million prizewinners this month

The 0 per cent introductory deals that credit cards offer are one of the most odious tricks

Beware credit card firms’ odious tricks

Why can’t we just have open and honest charges, without all the cross-subsiding?

The pound’s recent strength against the euro could be hit by economic uncertainty under a new government

How planning can make your travel cash go further

With the pound at a high against the euro, it pays to buy now before uncertainty post-election

Put the phone down on the coldcallers who see pension liberation as an opportunity to liberate your pension from you

Pension freedoms: How to deal with cold calls from scammers

Sean O'Grady offers advice on keeping your money safe
Switching to a better bank account is much easier than it used to be

More people are switching current accounts – but what do the figures mean?

Experts disagree about the 7% increase over the past year

The chance of getting what appears to be free money can be hugely attractive, especially to first-time buyers who can be fooled into thinking it’s extra cash to buy the essential new items they need for their dream home.

Beware the boom in cashback mortgage deals

Too many mortgages are being sold with misleading gimmicks

The firm’s revenues slumped by a third to £217 million in a disastrous 2014

Wonga results could get even worse this year, chief admits

The firm’s revenues slumped by a third to £217 million in 2014

The cost of a buildings policy has dropped by 10.1 per cent over the year, with the cost of a contents policy falling by 8.2 per cent

Simon Read: Mild winter cuts the cost of home insurance

The average quote for a buildings and contents policy has fallen by 3.6 per cent

Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Labour will raise the national minimum wage to more than £8 an hour by October 2019 (EPA)

Barclays new Blue Rewards hands cash to customers. What’s the catch?

Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month

New research reveals that despite the recovering economy, four out of five low-income households have seen no sign of their financial situation improving

Hard-up families could be eligible for financial help

A charity is urging anyone struggling financially to see if they could get help from the state

When is the best time to buy foreign currency?

Video: With an election looming, a hung parliament could hit sterling

General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

    £20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

    Ashdown Group: Marketing Executive - 6 month FTC - Central London

    £25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

    Ashdown Group: Junior Project Manager (website, web application) - Agile

    £215 per day: Ashdown Group: Junior Project Manager (website, web application ...

    Guru Careers: Software Engineer / Software Developer

    £40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before