Inside This Issue - Opinion
Loyalty cards aren’t only road to value
August 12th, 2013
The decision by Albertsons LLC and its component supermarket chains — Albertsons, Acme, Jewel-Osco, Shaw’s and Star Markets — to phase out loyalty cards revives the long-standing debate about the value of that particular marketing tool.
Supported by a majority of grocers, the major drug chains and, in its own unique way, Target, the current consensus is that loyalty plans are an invaluable resource, one that serves to reward regular patrons, provide an added inducement for them to come back and, perhaps most important in today’s world, give retailers a wealth of insights about the people who shop their stores. Advocates note that data generated by such programs is used to hone merchandise assortments, gauge the effectiveness of marketing initiatives and, ultimately, individualize the shopping experience and cement relationships with customers.
The naysayers, whose ranks have always included Walmart, the world’s largest retailer, contend that loyalty plans are expensive, cumbersome to operate and counterproductive.
"All of our customers deserve to get the lowest price on their groceries without needing to carry a rewards card with them," said Shane Sampson, president of Shaw’s and Star Market, when the elimination of those chains’ loyalty programs was announced in late June. "Our goal is to provide our customers with an experience that is simple, easy and focused directly on them."
Sampson and like-minded retailers are betting that for most consumers price is paramount, especially in an economic climate where for many of their customers recovery still looks an awful lot like recession.
The very ubiquity of loyalty programs has arguably made them less appealing to consumers and certainly rendered them less potent as a differentiator for retailers. In addition, a growing number of people are concerned about how much privacy they have to surrender in order to participate. Still, millions of Americans are attracted by the promise of loyalty plans and have signed up for them.
The perception of value is the bottom line for consumers. As in other aspects of the retail business, it’s possible for companies to find success following different paths. The ones that craft the most compelling value proposition — whether or not it involves a loyalty card — will prevail.