Guided by consumer research, two regional operators recently decided to discontinue discounts tied to loyalty cards, opening up the discounts to any shopper.
The move was made by Tidyman's, Spokane, Wash., a chain of 17 stores operating under three banners, and by Sentry Foods, a group of 39 independent stores that franchise the Sentry name from Supervalu, Minneapolis, the stores' wholesaler. Sentry's marketing programs are handled by Supervalu's Midwest region, Pleasant Prairie, Minn.
While the Sentry stores are doing away with the card altogether, Tidyman's will continue to use its card to support its S&H greenpoints program, which has been restructured to emphasize sharp discounts on staple products.
Last November, another small operator, 10-store PW Supermarkets, San Jose, Calif., announced it was discontinuing the linkage of store discounts to its loyalty card. Despite these examples of retailers backing away from card-based discounts, Carlene Thissen, president, Retail Systems Consulting, Naples, Fla., does not believe they represent a trend.
On the contrary, "both chains and smaller retailers are getting more sophisticated with stealth marketing [via the cards]," Thissen said. In particular, several top 10 food retailers will be getting more aggressive in their use of card-based data collected via discount programs, she added.
Still, Tidyman's found through surveys of its customers and across its markets that consumers were unhappy with the card discounts. "The message we heard was, 'All we're getting is a reduced price. I can go to another store without a card and get the reduced price, so why should I hassle with the card,"' said Mike Davis, president and chief executive officer, Tidyman's. Eliminating card-based discounts "removes a barrier to shopping with us."
Unlike Tidyman's, most retailers using the S&H greenpoints system continue to offer store discounts as well as points via a card, said Danny Portal, former vice president of business development, S&H Solutions, Fort Lauderdale, Fla.
In a survey conducted by Supervalu on behalf of Sentry stores, "the big number we looked at was the 82% who said they preferred to get the savings without the card," said Aija Upite, area marketing director, Supervalu's Midwest region.
In addition, half of respondents said they simply asked the cashier to use the store's card rather than proffer their own, Upite noted. Moreover, she said, in Sentry's southeastern Wisconsin market, since most retailers offer cards, they have became a "me too" commodity.
"So we decided to make Sentry stores more convenient to consumers and pass on the savings to everybody," doing away with the cards, said Upite. A majority of Sentry's 25 owners approved the decision, and all are required to follow the new cardless program. Supervalu also consulted with Sentry's elected Advisory Group before making the decision.
The change took effect April 4. For turning in their EZ Save card, consumers are being given $5 off their next shopping basket of at least $50, Upite said.
Upite noted that Supervalu's Midwest region was not opposed to cards across the board, supporting card programs offered by other independents in its territory. "In other markets, the card works extremely well," she said. Most of Supervalu's corporate stores do not offer card-based discounts.
Rather than abandon its Northwest Fresh Rewards card, Tidyman's decided to ramp up the value associated with the card's 3-year-old S&H greenpoints program. Since March 1, Tidyman's has been allowing customers in eight of its 17 stores to redeem their greenpoints for "Crazy Prices" on 10 common grocery items such as milk, eggs and ground beef.
Points can also be traded in for catalog items, discounts off total purchases and occasionally other items.
"In the past, you could spend your points to get lower prices, but the savings weren't dramatic," said Davis. "Now, if you use the card, we'll give you points for incredible savings on core items. Consumers are saying, 'OK, we do want to use the card, because you're giving me something not available elsewhere."'
Tidyman's awards shoppers 10 points for every dollar spent, with bonus points for high-margin items. "Crazy Prices" rewards require between 400 and 1,000 points. Among the deeply discounted offers are: bananas for 9 cents per pound; a dozen eggs for 9 cents; a gallon of milk for 99 cents; Huggies Jumbo packs for $3.99; large Tide detergent for $3.99; and 24-roll bathroom tissue for $1.99.
Asked how Tidyman's could afford to offer such deals, Davis said that promotional dollars are being channeled from other products into the targeted core items, with low prices in effect offered only to high-volume shoppers.
In the eight stores where the "Crazy Prices" have been available, unique household counts increased by about 7% during the first month of the program while remaining unchanged in the other stores, said Davis. TV, radio and print advertising has supported the program. Front-end cashiers are receiving positive feedback from customers about the program.
Despite the early success, Tidyman's will continue to evaluate the program for several months before deciding whether to offer it in the remaining stores, Davis said.
Tidyman's got help in developing its new program from loyalty marketing expert Brian Woolf, president, Retail Strategy Center, Greenville, S.C.. "In the past I thought a two-tier [card-based] pricing was the best way," he told SN. "But in recent years I've been moving to the conclusion that a good points program, provided the points are used strategically, is a powerful alternative."
Woolf called the "Crazy Prices" offered by Tidyman's "access pricing." Consumers "get access to the low prices by being regular shoppers," he said. According to Woolf, about 80% of Tidyman's shoppers now use the card. "I don't know of a points retailer that gets that with a points-only program," he said. "It speaks to the power of the dramatic prices."
Many retailers who use card-based discount program don't leverage the data collected to target shoppers with special offers, noted Woolf. Both Tidyman's and Supervalu said they did target shoppers using loyalty card data. Davis said Tidyman's will continue to target offers to shoppers.