SAFEWAY U.K. ADDS TO CARDHOLDER REWARDS

JIM FALLON

HAYES, England (FNS) -- Safeway plc here has upped the ante in the fight to retain its loyal customers through an upgrade of its card-based frequent shopper program. The retailer's extra rewards are part of a plan to compete with other retailers in the market that also offer additional rewards to their cardholders.

Last month marked the beginning of Safeway's new reward program that entitles loyal customers to earn up to triple the number of reward points currently offered.

The new program aims to retain Safeway's most profitable shoppers. Under the plan, shoppers who spend $265.60 per month will earn double the usual number of points under Safeway's ABC frequent shopper card. Those who spend more than $398.40 a month will earn triple the number of points.

The points can be redeemed for merchandise and gifts throughout all of the retailer's stores. Points must be redeemed within a specific time frame. The retailer estimates that it currently has approximately 5.6 million card holders.

"We're breaking ranks as we want to make it even more rewarding for customers to spend more with Safeway," said Colin Smith, the company's chief executive officer. A Safeway source added the average U.K. family spends about $99.60 a week on groceries.

Safeway estimates the cost of redeeming the extra points, as well as the marketing activities around the initiative, will be about $33.2 million over the next eight months.

Loyalty cards have become almost standard among most U.K. retailers over the last three years, ever since Tesco plc, Cheshunt, England, launched Britain's first card-based loyalty program in February 1995. Current loyalty programs offer either product discounts, a special catalog of products, or points toward the purchase of products or services. Analysts said the Safeway initiative could spark an inflationary battle in loyalty cards as each of its competitors struggle to keep up and maintain consumer interest in their own card programs.

Extra point award schemes already have been creeping into the U.K. market, however, with Tesco offering extra points to some of its highest-spending customers. In addition, J. Sainsbury plc, London, provides extra points as part of specific product promotions. Safeway, the United Kingdom's fourth-largest food retailer, has been struggling over the last year as a result of pressure from ASDA plc, Leeds, England, the third-largest chain, and a rejuvenated Sainsbury's, which is second in the market behind Tesco.

Some analysts criticize the plans, though, saying there now are so many that they have lost track of their original goal of identifying and keeping the retailers' most loyal customers. Retailers only now are just beginning to use the data they are collecting on customers to build targeted marketing programs.