Playing the discount card game

Consumers take a harder look at at preferred-customer programs.

Supermarkets once mass-mailed weekly circulars filled with coupons to area households. Now, such grocery-store discounts are often a privilege of membership.

From Bangor, Maine, to Fresno, Calif., few supermarkets offer bargains and two-for-one deals to customers across the board. Instead, low prices are reserved for loyal shoppers who carry tiny plastic cards.

Discount-card programs, often called loyalty programs, are easy to join. It takes just a few minutes to sign up, and there aren't any apparent costs of membership. Most important, benefits appear extensive - shaved prices on everything from milk to measuring cups.

The cards are hugely popular among American consumers: More than 70 percent of households are enrolled in at least one card program, according to polling firm ACNielsen.

But shoppers who are hesitant to join - those who cite concerns about privacy, for example - find it has become increasingly difficult to find a store that doesn't exclude them from savings. Their protests have opened the programs to scrutiny, and may be leading others to question whether the cards offer a real advantage, or are just the latest gimmick in the grocery store.

Some consumers are dumping the cards altogether, citing doubts about their overall savings and concerns about privacy. Others are starting to shop strategically, making more stops and unsheathing multiple cards to make select purchases wherever the top discounts lie.

And some major supermarkets are now dropping the card programs, though experts say they're unlikely to disappear altogether any time soon.

Customer-loyalty programs offer convenience. They end the need to clip and hoard coupons, distilling storewide discounts into a wallet-sized wafer or a key chain attachment.

Convenience also drives most shoppers to head to the local supermarket for groceries rather than hunt all over town for deals.

It's one reason discount-card programs have been easy to promote. As of last year, 10,000 supermarkets offered card discounts, up from 4,000 in 1996, according to Catalina Marketing and Retail Systems Consulting.

Laura Mack is a recent adoptee. The sophomore at Boston's Northeastern University didn't hesitate to sign up for the card at her local Stop & Shop supermarket. And when a CVS food-and-pharmacy outlet first started offering a card a month ago, she was quick to join.

"If they discount something, I want to be able to take advantage of that," says Ms. Mack.

Turned off by CVS's aggressive promotion and loud posters, Boston resident Joan Call has a flintier view. "I think [the cards are] foolish to have. I gave in because they kept pestering me," says Ms. Call.

Questioning "savings" claims

Most customer disaffection has resulted from supermarkets' dubious claims of savings, experts say.

Customers of Whole Foods, a national gourmet supermarket, have grown impatient with the store's card program, according to one employee, who preferred to withhold her name.

"I don't like that we call the program 'free.' Of course you have to pay for the card. They pay indirectly," she says. "A program with all these pretty plastic cards - and team members that need to explain it - isn't going to be free."

The same observation prompted one of the South's largest supermarkets to drop its card program last year. Mickey Clerc, spokesman for Win-Dixie, based in Jacksonville, Fla., says the company's card system was expensive to run, and that customers had been growing wary of the program.

"It's costly to [offer] those programs," says Mr. Clerc. "There are warehouse costs, data collection costs, administration costs."

Win-Dixie no longer excludes anyone from discounts. That has helped them hold prices in check. "We've passed the cost reductions to customers in the form of lower prices," says Mr. Clerc.

Stores with card programs practice what is called a "high-low strategy," in which they discount popular products like cereal to draw customers in or to expand their purchases. They'll lower the price of ketchup, for example, hoping to inspire shoppers to buy buns, hot dogs, and potato chips.

Marketing experts argue the strategy is the best way to push high-volume products that might otherwise languish in stock. But cardholders spending $100 a week don't save money overall, they say, because stores boost prices on nondiscounted items to subsidize discounts.

"This high-low strategy is an additional way to communicate with consumers," says Ronald Cotterill, director of the Food Marketing Policy Center at the University of Connecticut. "The cards are a way of creating retailing excitement. If everything is sold at an everyday low price, there's less an opportunity to promote savings."

But shoppers can find alternatives. Trader Joe's, a small national grocery store, has managed to attract a niche of dedicated shoppers without offering a card program. The reason, according to a chain spokesperson: the store's policy of cutting advertising and in-store promotions to ensure lower prices.

"We just keep a steady price that is almost assuredly below the marketplace," says Ira Cohen, vice president of manufacturing. "Should I only offer my best price part of the week? Or wouldn't it be better to do business seven days a week? [Customers] can come in any time and be confident that price will not be lower."

An issue of privacy

Some of the card programs' most-ardent opponents cite the privacy issue.

Cori Zuppo, a piano teacher in Dublin, Ohio, is an anticard activist with a supermarket pedigree. Her great-great uncle founded Ohio's Big Bear grocery chain. And her mother has been in the grocery business for more than 30 years.

Ms. Zuppo felt betrayed when Big Bear and Kroger, the country's largest supermarket chain, unveiled cards four months ago. "I don't want them tracking how many rolls of toilet paper I buy, and I shouldn't have to help them do their homework," she says.

Most chains promise not to sell customer information, though they aren't legally bound. Nevertheless, the data have been a boon to their marketing campaigns. And the methods of using information to pinpoint discounts are growing more sophisticated.

Mr. Cotterill says the cards help stores catalog the items people purchase by constructing a profile of each customer. The coupons that many card-using shoppers receive after they pay - often printed on the backs of receipts - are directly related to purchases they have just made or have made in the past.

Cotterill offers the example of dog food, which he buys every week. Because he consistently purchases Puppy Chow, the store is less likely to offer him a Puppy Chow discount, but might offer it to someone who normally buys only dog treats, he says.

"The consumer loses. They are able to split you out and price discriminate," says Cotterill. "They'll find the maximum price you are willing to pay and not let you pay less."

Proponents of the check-out coupon system argue that it helps give customers discounts they will actually use.

"It's a much more accurate process than sending out a random circular," says Ms. Klug, president of Catalina Marketing and Retail Systems Consulting, which helps manufacture the coupon devices.

Yet there are signs that the information crunching and constant marketing are taking their toll on customers, who are aiming their discontent at stores.

It's one reason Albertson's, the second largest US supermarket chain, one of several chains that have advertised with "no cards" slogans, discontinued its card program last year.

Strategic card use

Other experts say strategic use of the cards is a customer's best revenge. Arun Jain, a marketing professor at the University of Buffalo, says shoppers with a knack for zeroing in on card savings are an extension of the "coupon mafias" that traditionally hopped from store to store in search of the best deals.

He says those same shoppers now use discount cards to their advantage. Joan Call is typical of many such card "players," taking advantage of discounts at CVS, Star Market, and Stop & Shop every week.

"I'm not more loyal to any of them because of the cards," she says.

(c) Copyright 2001. The Christian Science Monitor