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[16 comments]

Big Y Offers Rewards Card with a Fee

March 31, 2011

Big Y has launched a new savings program for its customers on top of its current loyalty card. What makes this program different is that to get the additional savings promised with the Silver Savings Club card, shoppers need to pony up a $20 annual membership fee.

"It's like a warehouse store within a traditional store program," said Harry Kimball, Big Y's director of database marketing, told the Hartford Courant.

Big Y's existing Express Savings Club program is free of charge. Shoppers receive gold and silver coins based on their purchases that can be redeemed for discounts on specific items sold in the chain's 61 stores. Big Y customers present the coins at checkout to receive their discounts.

While redemptions in the free program are on a one-to-one basis, members of the Silver Savings Club may "purchase up to five of any individual item" that has a special silver coin price.

Another benefit of the fee-based program is consumers do not actually have to present coins to get discounts. Members of the Silver Savings Club receive benefits on top of those offered in the Express program.

"The coin program is very popular, but customers asked us for a more convenient way to do it," Mr. Kimball told the Courant.

While some consumers expressed interest in the new plan, others were unenthusiastic.

Regina Wytas, a Connecticut resident who shops at both Big Y and Stop & Shop, told the Courant, "It's only a deal if you're interested in the items they have on the silver coin list."

Big Y seemed to anticipate objections like those of Ms. Wytas. The company prints out savings associated with its fee program on every checkout receipt. If the savings consumers receive don't surpass the membership fee, Big Y will refund shoppers the $20.

Discussion Questions:

Discussion Questions: What is your reaction to Big Y's new fee-based savings program? What do you think motivated the company to offer it and do you think other grocers will follow?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How successful do you think Big Y will be with its Silver Savings Club card?

Comments:

Potentially a very smart move. Consumers are beyond the point of fatigue with free loyalty programs that offer little value. A membership fee implies value. Hopefully they can deliver on that expectation.

Doug Stephens, President, Retail Prophet

I think that the Super Savings Card can be a beneficial program for both the retailer and the consumer. However, the key will be how it is communicated. It's rare that a retailer--supermarket or otherwise--would have two separate programs. Big Y needs to make sure that existing members don't get confused between the two programs. Additionally, if the second program is ultimately disappointing, participation in the first will likely dwindle.

Gregory Belkin, Research Analyst - Retail, Aberdeen Group

Big Y's move to a fee-based elite tier is, pardon the pun, a coin toss. This program is interesting given its use of tokens (coins) to fulfill the discounts, however the fee must tie to a direct expectation from customers that the incremental benefits are not only worth $20, but well beyond that. Not having to carry the coins is a good start, as is the guarantee but it would seem that there might be other soft benefits tied to the fee like an exclusive checkout line.

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Phil Rubin, CEO, rDialogue

Why make things so complicated for consumers? And why make consumers pay for rewards on only those items that interest the retailer? This seems like the antithesis of a loyalty program. A good loyalty program should have low barriers to entry, be easy to use and offer a wide variety of rewards, some of which are easy to attain.

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Max Goldberg, President, Max Goldberg & Associates

What happens when competitors offer similar savings without a fee? This is a tough business and the average consumer does not want to pay for something that they feel they are entitled to, particularly if they are a loyal shopper. This one will be interesting to watch!

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J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

Is Big Y in the grocery business or in some promotional business? The U.S. supermarket needs to reinvent itself in the fashion of today's diversifying wants and needs but not with more gimmicks.

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Gene Hoffman, President/CEO, Corporate Strategies International

The most successful and highest sales per square foot stores have no loyalty program at all. Big Y runs nice stores but they often fall short compared to their competitors when it comes to sales per square foot. In my opinion, the days of confusing gimmicks are on their way out. Consumers want the special price without cards, tokens, coupons, membership fees, minimum purchases, or any other barrier to buying. Walmart is getting more liberal all the time with their price match policy and I think they will eventually match all these promotions.

I realize Big Y is stuck in the middle of vanilla grocery land, like many other sterile chains, trying to come up with anything to win customers back from Walmart and Aldi. Time will tell if this is going to work. At least this sounds better than A&P's new senior discount program.

David Livingston, Principal, DJL Research

Sounds like some good and some bad. On the good side, more convenient than the present savings program. Guaranteed that you will save at least your $20.00 or you get the difference back.

On the negative side, it's too complex and too confusing.

If I was the competition, I would go after their customers with a program that said "we treat everyone equally" or even better, "are you tired of being treated second class?"

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Mel Kleiman, President, Humetrics

Membership fees have been central to the formula of low cost, customer loyalty, and profits of Costco. Similar for BJ's, which recognized shoppers' willingness to pay in January when it increased its fees 10%.

But these are club stores. The competitive dynamics are very different for a grocer like Big Y.

Why act now? Competitive dynamics play a big role. Stop & Shop is already formidable. Aldi and Wegmans are adding stores in Big Y markets. Target is adding groceries.

Big Y's existing coin program was creating frustration for shoppers who forgot coins. But adding this new choice also adds further complexity, as Gregory and Max note. Complexity creates a headwind.

But gasoline may create a tailwind. Both BJ's and Costco recently reported increased store traffic as drivers sought to take advantage of the club stores' bargain per-gallon pricing. Big Y will offer 5 cent gasoline discounts. At least that changed the mind of a shopper in the Courant article, considering this program from "no" to "maybe."

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Dan Frechtling, Vice President, Global Product Management, hibu, PLC

I don't think a fee-based rewards program would work for many retailers, but it might for Big Y. As the article mentions, Big Y already has a rewards program more complicated than many supermarkets, thanks their use of coins, that is very popular with their customers, so the retailer has already "trained" their customers to expect a more complex loyalty program. The fee for the program will also help encourage repeat business from their already loyal customer base as people return to Big Y to get their money's worth out of their rewards care fee. From the customers' side of things, the coin deals at Big Y are significant, so being able to take advantage of more coin deals without the hassle of physical coins is probably a sufficient incentive for many people to sign up.

Other retailers should be wary of adopting such a plan though. Big Y is uniquely positioned to attempt this program, but other stores with less loyal bases will likely receive flack from the consumer bases for what could easily come off as a naked money grab.

Jesse Rooney, Sales Support Coordinator, Acosta Sales and Marketing

I'm with David on this one. No store is going to succeed based on its loyalty program, regardless of simplicity/complexity. Better to invest time and energy in figuring out how to become a destination based on the assortment, services, etc.

Bill Emerson, President, Emerson Advisors

Loehmann's does this too. Customers pay a fee to get the card, then the card provides a percentage off of each sale. This would make sense to a customer who buys all their clothing at Loehmann's. Wonder what percentage of their customer base has agreed to do this...?

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Cathy Hotka, Principal, Cathy Hotka & Associates

I applaud the innovative approach taken by Big Y. The grocery segment is much in need of fresh marketing approaches.

I'm just a little skeptical about how the value will play out for members and whether the program fee will be justified over the longer term.

We regularly see a statement of "savings" printed on receipts at grocers and in pharmacies. I often wonder about the source of the savings and mentally acknowledge the intent of the retailer while writing off the actual amount saved as "fuzzy math."

I'm surprised that customers at Big Y were willing to collect and carry around coins in the first place, so eliminating coins is a positive aspect of the paid program.

I would have to see data to understand just how good the value will be in the program. Still, Big Y gets an "A" for breaking from the pack.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

The last time I visited a Walmart I didn't need a card or have to pay a fee to get any product in the store at any price.

Unless these so called 'deals' are substantially better than Walmart or any other competitor (10-20% lower), there is no real value for the inconvenience. I do not mean 10-20% lower than Big Y's price. I mean lower than anyone.

Retailers thinking that they are developing loyalty through gimmickry simply seem lost.

The idea that they will refund the fee if savings isn't achieved is very arrogant. Costco does this as well with their higher-level programs. It is equally as arrogant.

I don't see this as a program of attraction or promotion. I see it as a reason to eliminate the grief and mind games of figuring out how much I'm paying and just shop somewhere else.

Its extremely puzzling when retailers, especially struggling ones, go into a program actually knowing it will cost them more customers than they have already lost. Its no surprise that these types of retailers engaging in these programs were likely losing them in the first place.

'Scanner'

I don't get it. Why would a retailer want to make consumers collect coins and have to remember them at checkout to cash them in? It reminds me of savings stamps and all the hassle and consumer resentment they created decades ago.

So getting rid of the coin requirement is the right step. However, their prices will have to be really be good to justify charging consumers a membership fee. Consumers have developed expectations for membership club discount stores which don't usually include supermarkets. Time will tell how many of Big Y's customers want to pay a fee to get lower prices.

Odonna Mathews, President, Odonna Mathews Consulting

With membership fee-based shopper programs, the key determinant of success is whether consumers feel they actually receive their membership fee back, e.g., some form of transactional discount(s) during the year that clearly equals the value of the membership or some form of softer benefit(s) that makes the consumer feel it's worth the upfront fee, e.g., jump to the front of the line checkout service for members.

The we don't see a lot of membership fee-based programs across retail is probably an indicator of both consumer desire and retailer success. Big Y gets props for trying something new, and I wish them success. That said, we'll know in about one year whether members signing up now feel like they got their $20 worth.

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Tim Henderson, Editor/Writer, Independent

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