Club cards: Loyalty in the bag? Not really

In the hyper-competitive supermarket industry, where pennies count, customer loyalty is a grocer's bread and butter.

That's what Safeway, QFC, Albertsons and other stores say drove them to ask Northwest shoppers to sign up for "loyalty cards" in exchange for discounts and other incentives. Each hoped its card might compel us to single them out for our shopping needs. Each hoped knowing who we are and what and when we buy would show them how to keep us coming back.

While stores say the cards have done wonders to promote customer loyalty and marketing efforts since they first began arriving in the Seattle area a decade ago, industry analysts say the results are a mixed bag.

"The card doesn't really lock the consumer into shopping at one particular store," said Blaine Becker, marketing director with the Hartman Group, a Bellevue-based marketing firm. "In many ways consumers are telling us they feel almost hostage by these cards because there's really nothing special they're seeing beyond the savings."

And many shoppers, including the advocacy group Consumers Against Supermarket Privacy Invasion and Numbering, say they don't appreciate having to swap their personal information to get the sale price on ice cream, lunch meat and salad dressing. They've devoted entire Web sites toward the elimination of club cards or getting the good deals incognito.

Most stores report that the vast majority of customers carry the cards. But more than two-thirds of sales still come from a loyal core that's less than 20 percent of a store's customers, just as they did before, according to data provided by the Food Marketing Institute, a grocery trade group. Stores still advertise in newspapers and print coupons, costly tools some predicted they'd be able to skip once loyalty programs got going.

In a study released late last year of 989 shoppers nationwide, the Hartman Group found that while 85 percent of shoppers owned at least one card, about a quarter of that number had three or more.

But the cards and the data they provide offer supermarkets a chance to evolve and better compete for our loyalty in the future, said Willard Bishop, a longtime national grocery analyst based outside Chicago. And that's through providing everyone with an ever-growing array of conveniences and making big spenders feel appreciated.

Stores across the nation are aiming to do both in the coming years.

Safeway has redesigned stores based on the buying preferences of core shoppers at each location and offers frequent-flier miles with United and Alaska Airlines. Rather than require separate punch cards for sandwiches and Hallmark cards, the club card tracks those purchases, and also earmarks a portion of spending to school fundraisers of the shopper's choice.

"You can react to the customers' buying trends much more quickly by using this data," said Teena Massingill, Safeway's manager of corporate public affairs.

QFC invites its top shoppers to ribbon cuttings and other special store events to build a sense of community, and tailors its coupon offerings to customer buying habits, said Kristin Maas, a QFC spokeswoman. "You don't want to just mail randomly. You want to understand your customer base, and this helps us do that."

• What's next? Bishop says to be on the lookout for kiosks that print out coupons tailored toward your buying habits or health needs with a scan of your card, and that alert you to sales going on in the store that weren't listed in weekly ads. With your permission, software could analyze the contents of your cart to determine how well you're managing your low-sodium diet, Bishop said.

Across the nation, supermarkets already are offering discounts at businesses and events around town for loyalty club members, and providing top shoppers with special discounts occasional shoppers won't receive.

"Wouldn't you be thrilled if your supermarket said 'Hey, because you're a good customer we actually want to make sure you get the very best milk prices in town. Come in and get a coupon for two gallons at a price most are getting one gallon?' " Bishop said.

Grocery loyalty programs have been around as long as there have been supermarkets, but the modern loyalty card scanned at checkout has existed for 20 years, since Ukrop's Super Markets introduced it in Virginia 1987, said Bill Greer, a spokesman with the Food Marketing Institute, a grocery-industry advocacy group.

About half of major supermarkets now use cards in some form, which he links to the advent of warehouse stores, supercenters like Wal-Mart and Target and other retailers selling groceries, making a low-margin industry even tougher.

In this environment, it makes perfect sense for stores to do everything in their power to keep customers coming back, Greer said. And as the nation's demographics change, having such data will help stores better anticipate how to serve customers in the years to come.

"You're seeing an enormous amount of creativity in the industry now trying to capture the customer's loyalty, which is quite a challenge in today's marketplace."

Stores that have found success with their card programs tend to be those who spent the money on software or staff to rigorously analyze data to provide the best experience for their top shoppers, he said.

"Those are your bread and butter, those are your people you're counting on for the bulk of your sales. If you know what they want, you're well on your way to doing well," Greer said.

All that analysis doesn't sit well with many shoppers, however, who offer fake names and share cards to avoid having their purchases tracked. While stores pledge to keep data to themselves and analysts can't recall a time someone's buying habits were used against them in court, the fear persists.

Over the weekend some media reported that law enforcement might use a QFC receipt found at the scene of a Sammamish vandalism incident to help find suspects. The culprits confessed before the King County Sheriff's Department sought a subpoena or search warrant (which QFC requires to release such information, Maas said) to learn the club card member's identity, said Sgt. John Urquhart.

Customer complaints prompted some chains, such as Wild Oats Markets, to end their card programs. Others opted to offer consistently lower prices, stylish interiors or specialty products shoppers can't find elsewhere rather than a club card program.

Metropolitan Market and Fred Meyer officials say they offer the same prices to all who come through their doors. PCC Natural Markets has a similar philosophy, but those who pay a lifetime membership fee get a discount at checkout on certain days of the month, plus other perks, said Diana Crane, a PCC spokeswoman.

"I do think we have a pretty good sense of who our shoppers are," Crane added.

That's the essence of success for any supermarket, Bishop said. And for those who use loyalty programs, the imperative is to make it worth the customer's while.

"When people start realizing the data is being used to their advantage, the tradeoff becomes clearer."

Karen Gaudette: 206-515-5618 or kgaudette@seattletimes.com