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[36 comments]

Safeway: No Loyalty Card, No Discounts

April 3, 2012

It's not uncommon for cashiers at supermarkets and other retailers to swipe a generic loyalty card for customers who forget their cards or don't have one. That enables the shopper to gain the savings applicable under the store's rewards program.

Apparently, the reason the clerk-swiping practice is allowed by some is because stores avoid disappointing or outright annoying shoppers at the final step of the shopping experience. For new or less-frequent shoppers, being forced to take the time to sign up for a card to get a deal is also perhaps not the best welcome.

But other retailers, including Safeway, have stringent policies against the practice.

At Safeway's annual investor conference in early March, CEO Steve Burd said that since launching its rewards program 15 years ago, Safeway, because of the value of customer data, has been "highly disciplined" about making sure only card holders gain the savings. He believes Safeway's diligence in preventing clerk swiping has become a competitive advantage since other stores have been more lax.

The data serves as the backbone of its new Just For U marketing program, which offers special deals to individual customers based on their purchasing history. Safeway takes steps to assure customers aren't inconvenienced despite requiring enrollment in its program for any deals.

"We have a very quick in lane sign-up process so you can get the benefits of being a loyalty card carrier in our stores," said Mr. Burd.

As an extra step, Safeway has guards in place to prevent associates from providing free-swipes on their own.

"We also have a fraud protection function in our stores," said Mr. Burd. "So that if the checker were swiping because maybe there was a reward going with increasing your own purchases, we'd be able to detect that in a matter of less than an hour. And we'd be able to shut that down. So we have been working on maintaining the integrity of our data for a long time."

FINANCIALS:     [NYSE:SWY]

Discussion Questions:

Discussion Questions: How strict should stores be in requiring only loyalty cardholders to gain access to rewards? In what cases, if at all, should associates use generic cards for customers forgetting or lacking cards?

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:

Should stores let shoppers who have forgotten or lack loyalty cards gain reward savings?

Comments:

I like the fact that Safeway stands up for this -- it brings the meaning back into loyalty programs. I never have my Kroger or CVS card with me, but both work off my phone number, which they are always happy to enter. Hopefully they also have a program to entice new shoppers into their stores and their program, perhaps emphasizing the discounts only come with the cards.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

If a brand chooses to implement a loyalty program, the real value in its implementation is the customer information and data. Leveraging that data to 'reward' a loyal customer is the inherent value of a loyalty program. If the loyalty card is nothing more than a generic electronic swipe to get a discount, then what's the point of having the program and all of its operational headaches? On the other hand, if the system were robust, a customer using a credit card should be automatically identified by the system as a 'registered' loyal customer and the associated 'awards' should be seamlessly and automatically applied. Why does this remind me of John Belushi on SNL..."Badges?....we don't need no stinkin' badges!"

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

There is a reason Safeway keeps losing market share and has fallen from grace in Philly, Texas, and Chicago. They seem to enjoy pissing off customers. A lot of customers don't want big brother nosing into their purchase patterns. Or they don't like having to carry a card for every store they shop. Even if a customer uses a card are they really getting a good deal compared to Walmart, Target or Aldi? Probably not.

Customers know it's a big joke. They are not as stupid as the corporate executives think they are. It doesn't take a genius to know that an item selling for 89 cents at Aldi is cheaper than 10 for $10 at Safeway. I would guess that the majority of supermarkets doing $1,000,000 per week or more in sales in the USA do not use loyalty cards. For the most part, it's all those struggling, plain vanilla, sterile, publicly-held chain stores that use loyalty cards. Sure, as a market researcher, I love them. I get to use the data to determine where every dollar is coming from. But as a customer, I hate them. Really successful grocers like Walmart and Aldi avoid them. It just adds to the cost of goods and stores have to raise prices to pay for the cards.

David Livingston, Principal, DJL Research

Makes sense. When a shopper sees that anyone can get the benefits, it kind of begs a question of what the point of the program is. That said, making it easier for shoppers to use phone apps (like Keyring) that aggregate loyalty cards for easy access and digital offers makes a big difference. Shoppers generally don't want a lot of cards to carry, and giving out phone number as alternate identification is not appealing.

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Matt Schmitt, President & Chief Experience Officer, Reflect

This is a totally reasonable practice by Safeway. They are providing the discounts and promotions in exchange for the shopper data. Plus, a phone number can be taken in lieu of the card, so the chance of angering an actual registered member of the program is minimal. Non-members shouldn't be able to access the discounts.

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Martin Mehalchin, Partner, Lenati, LLC

Wow. Could you get any more anti-customer experience if you tried?

As a consumer, I feel more loyalty to the retailer who cares about me more than their need for data. I appreciate when my local Stop & Shop does a swipe for me, but then again I like it even more when I don't even need a card at Whole Foods.

The decision also puts their frontline staff in a very difficult position. I sure hope the executives who made this decision spends some time on the register telling people no. But we know that probably isn't going to happen....

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Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Too many retailers look at this as being an individual shopper, not the household. Keep in mind, the idea of a tiered pricing system was not the original objective of frequent shopper programs. Say the female in the household does 90% of the shopping, but the male is asked to pick up a few items. As the male does not frequently shop the store, he does not carry the frequent shopper card. By having a strict rule, the household is being over charged. If the male has his own card he will not be viewed as a frequent shopper. Further any marketing or communication efforts to reach him are unlikely to be successful.

The best solution I have seen is to have the cashier enter the household telephone number. Even this is not a perfect solution as 25% of households only have individual cell phones.

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W. Frank Dell II, CMC, President, Dellmart & Company

It is a free program; why are you going to punish the customer that doesn't have a 'card' with them or doesn't want to sign up? Better yet, charge them more! That isn't driving loyalty, it's "anti-loyalty."

If the customer asks, swipe the generic card!

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

I think it is interesting to call these efforts loyalty programs. They are really simply savings programs that engender little loyalty as the discount for a person buying an item is the same whether that person buys all their groceries at that chain or has multiple cards and spreads their purchases among chains for whatever reason.

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Steve Montgomery, President, b2b Solutions, LLC

I've always asked the retailers I go to, to use the generic card. Actually I was under the impression that they were required to if asked until I read this piece.

Like many have commented, if I was missing out on "substantial savings" and the cashier refused to swipe the generic, I would likely stop shopping there.

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Paula Rosenblum, Managing Partner, RSR Research

Another annoying practice similar to the one outlined in the story is for shoppers who do not have or have forgotten to bring their loyalty cards to "borrow" one from the shopper in back of them on line or in the next lane. These shopper behaviors are a symptom of the fact that at many retailers, the cards have degenerated into merely providing access to in-store discounts, and this undermines the overall value of loyalty cards for the merchant.

Safeway is 100% right in insisting that the cardholder use their own card. Their program is a 360 engagement with their shopper base, and all merchants that set up loyalty programs should follow this example. Swiping a generic card or allowing shoppers to use someone else's devalues the loyalty program and reduces it to simply a price promotion.

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Roy White, Editor-at-large, RetailWire

Safeway should NOT allow the use a generic affinity card. It erodes all the value of having a loyalty/affinity program and diminishes the value of the customer insight collected by the program.

However, no customer that asks for the Club Card Price should ever be disappointed either. Safeway should have a fast and easy way to instantly register shoppers in the program (using their e-mail or phone number) and then apply that instantly registered account to the in-progress transaction.

Safeway does already allow phone numbers to be used in lieu of the ClubCard. The problem is that Safeway hasn't invested in its customer facing IT enough to make club card registration an instant process (so it's an offline process that is time consuming to initiate at to the POS).

When a retailer offers a loyalty program to customers, they raise the shoppers' expectation that their loyalty will be recognized and rewarded. When the retailer cuts corners, and only half-heartedly supports that program, the gap between expectation and delivery and the resulting disappointment is greater than if no loyalty program had been offered at all.

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Jason Goldberg, VP Commerce Strategy, Razorfish

I would think that the "generic" card could be extracted from the "Just For U" shopper card history, using an algorithm or other mechanism. So, I wonder if it isn't just a little peevish to deny one's customers at the POS.

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Liz Crawford, VP, Strategy & Insights, Match Drive

I applaud Safeway for maintaining the integrity of their card program, however, if I was a Safeway card holder and forgot my card I would feel cheated if I could not get my discount, since I already signed up!

Many retailers other than grocers (Panera Bread as an example) simply ask for your phone number and verify that you have a card. This is a quick and easy way to keep your loyals happy and yet maintain the integrity of your system.

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

While I agree that refusing a shopper what they want while in line at checkout is a negative, Safeway is trail blazing with their "Just for U" program that many, including me, think will both provide a valued service to the shopper and a competitive advantage for Safeway. It is permission-based.

If the shopper is truly getting highly relevant and useful content, including savings, they'll accept the need for sharing data to enable the process. At most grocers with long running loyalty programs, over 90% of ACV is card-identified, and that's *without* a relevant dialog in place. Most unidentified purchases are convenience trips that have only items with no card-based discount.

Reality is that very few shoppers refuse to identify on principle. Also, retailers aren't interested in shoppers' personal identities, only developing a valued service that is possible only with consistently linked purchase transactions.

Dave Carlson, CEO, Relevance Partners, LLC

What Mr. Burd probably doesn't know is that Safeway card holders will swipe their cards for visitors, because Safeway's "regular" prices are indefensible.

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Cathy Hotka, Principal, Cathy Hotka & Associates

I have mixed feelings, but I think it is a bad practice. Years ago as a clerk at Lucky's, I hated the cards because people often forgot them but wanted the discount, thus would be forced to sign up again with a different card number. Where is the value in that? As a customer, I hate that CVS won't swipe because as someone pointed, my wife has the card and I am usually just picking up one thing without her, thus I get screwed on the price. As for Safeway, I question their practice in the name of keeping the data clean because of my personal experience ... my friends and I all use the same card number (phone number). We have shared this account since we were teenagers over a decade ago. We set it up to buy eggs at midnight, if you get my drift. Now there are at least three or four households using said account. How must these buying habits look?

'prighello'

The nub of the issue is that card programs are based upon shopper bribery. In exchange for identifying themselves unambiguously at every purchase occasion, the retailer offers shoppers advantageous prices. The awkwardness at the checkout for non-members is a feature, not an accident.

Retailers who use card programs say they want to capture behavioral insights they can use to pursue greater offer relevancy, trade spending efficiency and margins. They talk about "loyalty programs" but they are really just renting price-sensitive friends.

I'm not sure if the data streams generated by card programs are large enough to negate the behavioral confounds inherent in this arrangement. I suspect that the errors are just glossed over for the most part. If so, who really cares whether a clerk swipes a generic card for a non-member?

On the other hand, the appearance of rigor is crucial if the retailer wants to justify the rates it charges trading partners for delivering relevant offers to shoppers. Mr. Burd is probably well aware that most Safeway offers to shoppers are not finely targeted, but hey, that's the way we play this game.

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James Tenser, Principal, VSN Strategies

If there is a candidate list for that TV show where bosses are working at the employee level, Steve Burd's name should be at the top. I forget my loyalty card in the car -- I do not have a wallet or a keychain. I know the cashier for over 3 years and the cashier knows me. Now Steve Burd is putting my personal relationship with the cashier at risk by not understanding that I left my loyalty card in the car? This is bad micro-management at best!

So what's going to happen is the customer behind me is going to say "here, use my loyalty card," something Safeway didn't consider in this social engineering design.

Ed Dunn, Founder, (Stealth Operation)

The reason loyalty cards were implemented was to increase sales by providing customers with product and services they wanted and needed, not to provide discounts. Gathering that information is of paramount importance. Restricting a customer is rather counter productive. Loyalty programs are really at their infancy. It is important to make them as straight foreword and easy for the customer to provide you with the information that you need as possible.

If you want to see a loyalty program that is starting to provide the retailer some returns, take a look at Kroger.

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Joe Nassour, Chief Technology Officer, RetailTactics

The store is completely within its rights to enforce the rules of its loyalty program. Of course the customer may tell everybody they know and may vow to never shop at that store again. So the question should be, is enforcing program rules and keeping a few dollars in margin worth losing a customer for life? I would say that it is never a good practice to penalize a customer when they are about to give you their money.

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Larry Negrich, Vice President, Marketing, nGage Labs

When we had a local Associated Foods store, we did 90+% of our shopping with them. Then, if we went to a local chain using a loyalty card, my beautiful wife, in response to the cashier's request for the card, would say "Just rip me off!!" Double exclamations are hers, not mine. The cashier would usually swipe a generic card and she went on her merry way, to only shop the chain when she had no choice. The AF store is closed and we shop the chains with a card, but imagine our preferences when we have a choice again.

Hartland Clubb, store manager, Clubb Store Co.

The old adage of "garbage in equals garbage out" is just as applicable to today's retail loyalty data as it was XX years ago in that first programming class. Safeway is ensuring best data by avoiding the "garbage in" caused by generic loyalty card swiping or worse, by a store associate swiping their own personal card. With today's technology and practices, it is easier than ever to provide a very quick sign-up process for new loyalty card members (Panera does a nice job of this), reducing the annoyance factor cited.

Bottom line, Safeway gets it -- it is easier to input clean data than trying to cleanse data after the fact and that should make their loyalty program more effective -- a competitive differentiator.

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Verlin Youd, Principal, VPY LLC

If you forget your card, most loyalty programs have the option of sharing a phone number or e-mail address. Loyalty programs are designed to reward loyalty, not just the "cherry-pickers."

Good for Safeway in sticking to their position.

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Roger Saunders, Managing Director, Prosper Business Development

Rule #1: Satisfy the customer.
Rule #2: Do it in a way that protects the integrity of the Customer Loyalty program.
Rule #3....Have such a rewarding program, customers are incented and pleased to present their cards 99% of the time.

tony schiano, managing director, BSI

One of the advantages of living in a major metro area is that one regularly gets to see and compare the ad prices of 6 or 7 different grocery retailers. If a brand of peanut butter's on promo and Safeway discounts it via loyalty card, and Jewel discounts it as a bogo, and Sunset or Marianos or Farm Fresh lower the stated shelf price for the week -- it's pretty obvious what's going on. Same with private label products like eggs, butter, or sour cream at holiday times. If Safeway thinks protecting that loyalty card is worth ticking off good customers over, they darn well better give some lush discounts that aren't easily available at other local stores.

'Liatt'

I think it is always a trade off of convenience, price, and value; part of the challenge is that grocery is a commoditized shopping experience. There should be alternative entries like phone, or link the loyalty program with e-Receipt and perhaps credit card information. The key is to add value to the shopping experience with the loyalty card, not just discounts. I personally don't ever need the paper receipt when I grocery shop. How about giving the option of linking phone number or opt in to have my credit card linked to loyalty, so e-receipts are automatic and the rewards are logged?

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Kenneth Leung, Director of Enterprise Industry Marketing, Avaya

For me, what Safeway is doing seems totally rational, and not anti-consumer in the slightest. It's interesting to me to see how many folk, including people I like and respect, disagree. Ah well. Different strokes, different folks. No biggie.

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

Wow...this was a good one! First of all, Mr. Burd is all bluster and no bite. If I was in his shoes I would do exactly the same thing and say in front of that particular audience we have ways to protect us from ourselves. I guarantee you when in a meeting with store operations they are nodding their heads and at the same time rolling their eyes. Yeah sure, 100% of our swipes "earn" two-tier pricing and they are valid swipes. Keep fooling those in the audience -- the shopper, the cashier and the store manager know differently. At same time can also guarantee you that the analytics partner at Safeway, Kroger (dunnhumby) and others absolutely throw out data that looks like an anomaly.

Kudos to the group of friends using the same phone number for years and looking like the best customer in the store -- I am certain they have received little if any incremental value from the chain for projecting to be the highest lifetime value customer.

Customer identification matched to the basket is all about mutual gain -- you give me "special" pricing and I allow you to match my profile to my transactions. Inform merchandising decisions but never ask me what I want that you don't have in the store. Two weeks ago I asked the manager at my Dominick's (owned by Safeway) to stock a frozen spinach pie in a large serving size and handed them the brand name, which they do stock. Promised a call back -- do you think I've heard from them? Of course not.

It's a free program, people -- there isn't anything onerous about it. If you don't want your purchases to be tracked, shop somewhere else or pay $24.95 instead of $15.95/lb for Alaskan Crab Legs. In Chicago, my favorite store is Village Fresh Market in Carpentersville, a 20 minute ride from my home. They don't have a rewards program and their prices are much better than Dominick's or Jewel. It's a pleasure not to have to play the game, I certainly agree.

The question is this: Just for U -- will it deliver on the promise of truly personalized value and recognition for the customer who is willing to participate in the loyalty scheme? Time will tell.

David Slavick, Director, Loyalty & Retention, FTD.com

I see a lot of vitriol in the earlier comments on this topic, but not a lot of knowledge. I'm guessing that some consider it PC to dislike loyalty cards. Hitchhiking on Dave Carlson's last 'graph, "Reality is that very few shoppers refuse to identify on principle. Also, retailers aren't interested in shoppers' personal identities, only developing a valued service that is possible only with consistently linked purchase transactions," allow me to offer the following:

There are no privacy issues with loyalty cards. At Safeway, where I shop, you can give any name you like and are not required to provide a phone number or address. I signed up as Doc Jericho, with no other information at all.

Many of the comments today show very little respect for shoppers. "What if I forget my card?, What if I left it in the car?, What if we have only cell phones in our household and I can't remember the number associated with the card? What if I can't remember my phone number (if I gave one when signing up)?" If you look hard enough, you can find any number of whiny excuses for not being able to access the savings. But, I live in a retirement community and closely observe the seniors as they check out (they're usually in front of me and writing a check). They're sharp. For them, it's important to get the discounts. When they don't have their cards, they reel off their phone numbers. And I've never seen a shopper denied the discounts because their card info couldn't be found. That's because I've never seen a shopper who didn't have their card or phone number.

I buy gas at Safeway. Premium is currently $4.35. My Safeway purchases gave me a 30-cents per gallon discount as I filled a 25-gallon tank this week. The last time I filled up, I had earned a 40-cents per gallon discount. I doubt that even the loyalty card haters can find fault with that.

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

This issue of "No Loyalty Card, No Discount" has two simple answers:

1. With today's technology capabilities, there is little excuse for a retailer not being able to "alias" a loyalty card number with a mobile (or other) phone number. This makes it easier for customers to be compliant and correspondingly, for the retailer to properly associate the right customer with the right transaction.
2. Following this, if the loyalty proposition is more than one-dimensional, i.e., more than just a discount tied to a single transaction, there is little incentive for customers to want to use a generic number or card swipe.

So with alias functionality and the right customer value proposition -- one that is multidimensional and goes beyond basic transactional loyalty everyone wins: the customer gets value and the retailer gets data, insights and a more valuable customer.

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Phil Rubin, CEO, rDialogue

There are many valid comments here. Suffice to write: any barrier to pleasing a customer is foolish.

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Christopher P. Ramey, President, Affluent Insights

This is crazy. The majority of stores don't manage their data properly to begin with. Data mining and data management are wish list words in the retail environment. The sheer number of out-of-stocks at retail demonstrate how poor data management really is, since the simple process of inventory management based upon product sales from real-time information at the register, requires no loyalty card, and is the pure basis of any retailer. Despite all of this, the percentage of product OOSs at retail is an embarrassment.

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Kai Clarke, President, Kowa Optimed, Inc.

The whole concept of these grocery "loyalty" program cards baffles me. In an age of Facebook 'likes' and other social networks that allow you to show your love of particular brands, the old model of loyalty cards is dying. Rather than force met to carry a card or give you my phone number, ask me to scan a QR code to 'like' the store and then target me for individualized deals I get because I 'like' you.

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

I think retailers should counterbalance their strictness with increased benefits and advantages they offer their loyal customers.

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Jerry Gelsomino, Principal, FutureBest

I think this practice is 100% indicative of the Safeway attitude. The customer comes last. Can the chain be any less customer-centric with this policy?

Joel Warady, Chief Marketing Officer, Enjoy Life Foods

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