Kroger program helps shoppers give to charities

• Kroger believes program will boost sales
• Shoppers won%27t sacrifice in-store discounts or gas points
• Safeway offers similar option on its loyalty card program

CINCINNATI -- The nation's charities are getting a powerful new ally: Millions of loyal Kroger shoppers.

In a new twist on giving, the nation's largest supermarket chain also aims to bag more customers and bigger sales receipts.

It's rolling out a nationwide program that lets loyalty card holders select charities to which Kroger will donate, based on dollars they spend in stores.

Strategy, not sentiment, is driving the move.

The desire to easily contribute to a favorite good cause is becoming an increasingly important motivator of human behavior, the experts say.

"Our objective is to find ways to make our shoppers even more loyal," said Lynn Marmer, Kroger's group vice president for corporate affairs.

By the end of next year, most Kroger divisions will contribute to a combined $50 million that will be given to schools and other nonprofits based on local shoppers' charitable preferences and their shopping habits.

Kroger's Community Rewards program will account for one-fifth of the grocer's total $250 million-a-year charitable activity.

Cincinnati-based Kroger has donated millions to charitable causes for years.

But analysts believe that tying the grocer's local giving to shoppers' purchases could prove to be a sales bonanza if it motivates target customers. The expectation is they will spend more of their grocery budget at Kroger, knowing they're racking up points that will help their favorite cause – whether it's the United Way, an animal shelter or their kids' band practice.

Kroger didn't invent the idea – Safeway Inc. has offered a similar option on its loyalty card program for years, with proceeds all benefiting education.

But Kroger's bid to roll the program out nationally, and focused on local charities of all kinds, is expected to shape the industry.

"The top 20 percent of your customers provide 80 percent of your profit. If you shift the right customers that's huge," said Mark Johnson, chief executive of Loyalty360, a Cincinnati-based loyalty program trade group.

Kroger has been tinkering with tying its loyalty card to local charities for nearly a decade. But starting in 2012 the Cincinnati/Northern Kentucky/Dayton area became the fifth of Kroger's 18 divisions to embrace the new and improved model.

During its first year, Kroger donated $5 million to 2,500 organizations in the Cincinnati region. Kroger awards at least $1 million to local community groups every three months. The retailer won't disclose the sales goals it hopes to achieve through the program.

Under the system, loyalty card shoppers sign up online and choose a favorite charity from a list of local nonprofits that Kroger has agreed to help fund.

Kroger then tracks all the card holder's purchases (excluding alcohol, tobacco and gasoline), with every dollar counting as a vote for the shopper's preferred organization.

At the end of each quarter, Kroger totals up dollars spent by enrolled customers and distributes money to nonprofits proportionately.

Shoppers don't sacrifice any in-store discounts or gas points they earn on their Kroger card; the charitable component is a separate, extra feature.

The new method replaces clunky prototypes. Previously shoppers could use reloadable gift cards to influence Kroger contributions toward their favorite nonprofits. Kroger also sold gift cards to nonprofits below face value for organizations to resell to supporters.

"What's great is it's so much easier," Marmer said. "The beauty of it is there's no work on the part of the consumer."

Marmer says the system gives a strapped mother with several kids an easy way to help their school's gymnastics program. The mom may not be able to spare extra cash, but her hefty grocery bill racks up a lot of points. The system likewise provides an easy way for a busy young professional to help his church – he just enrolls his preferred organization once a year, and that's it.

Since switching to Community Rewards in Cincinnati, Kroger has quietly rolled out the program to about half its operating divisions. Next year, it expands throughout the West, Pacific Northwest and the Southeast.

So far, Kroger hasn't aggressively marketed the program, preferring to let community group leaders like schools or churches spread the word among supporters. Company officials say that will change as the program rolls out nationally.

No one expects the program to change shopping patterns by a majority of customers. But in an industry where grocery rivals battle for every incremental gain, influencing just a sliver of customers could prove a gold mine.

Safeway has seen results from the program it started in 1999.

"It's an effective loyalty program," said Joanne Remillard, an executive vice president with Electronic Scrip, the outside vendor that runs the program for Safeway and other regional supermarket chains.

"As customers are choosing where to shop, they stick with the retailer that supports a cause the customer supports."