Fresh & Easy to Import Tesco’s Loyalty Card Approach
Fresh & Easy Neighborhood Market chain has announced it is launching a loyalty card program similar to Tesco’s popular Clubcard beginning this fall.
The initiative, which the company called an evolution of its “Friends of Fresh & Easy” email program that began in 2008, will first be tested in seven Bakersfield, CA area stores before it is rolled out chainwide. The “Friends” progam currently has 360,000 members from Fresh & Easy’s 176 stores in Arizona, California and Nevada.
Shoppers enrolled in the program receive one point for every dollar spent at Fresh & Easy. They can then exchange points earned for cash-back rewards. Members receive bi-weekly emails from the chain with updates on their points as well as bonus point offers.
“We wanted to create a program that was designed to thank our customers for being our friends,” said Fresh & Easy CEO Tim Mason, in a statement. “The program will be digital so points can be online and communication to customers can be sent via email. This model for Clubcard will work well for our U.S. customers and is a great fit for our Fresh & Easy business.”
Fresh & Easy maintains that its program has a key advantage over cards offered by other food retailers. “Friends will not penalize customers who do not use their card with higher prices — it is not designed to be a key to unlock special prices. Fresh & Easy’s everyday low prices will remain the same for everyone,” said a company release.
Tesco continues to look for ways to turn Fresh & Easy around. The chain, which debuted in 2007 to much fanfare, has yet to turn a profit in the U.S.
According to the Financial Times, a key difference between the “Friends” program and Tesco’s Clubcard is that dunnhumby will not be analyzing the U.S. data because of an exclusive deal it has with Kroger. Fresh & Easy will crunch its own numbers here.
Discussion Questions
Discussion Questions: Will Fresh & Easy’s “Friends” loyalty program provide the chain with an advantage over food retailing competitors? What grocery retailers in the U.S. are “best in class” when it comes to loyalty programs?
While I don’t see a downside to adding a loyalty program to their offer, I don’t see it as a game changer for Fresh & Easy. The program will not be sufficient to turn Fresh & Easy from red to black. It looks like someone said, “Hey, we are a profitable organization in the U.K. and not in the States. What is the difference? Ah, in the U.K. we have a loyalty program and in the States we don’t. Put one in and that will fix things.” It won’t.
If Fresh & Easy’s “Friends” loyalty program can duplicate the “totality” of Kroger’s loyalty program, which also includes aggressive promotional merchandising, then F&E might awaken its sleeping USA profit process. So, Fresh & Easy, crunch away until you make good things happen here in the colonies.
In surveys, consumers consistently prefer immediate discounts to points. However, this program is a better way for Fresh & Easy to foster behavioral loyalty for two reasons:
1. Currency. In contrast with most loyalty programs’ two-tier pricing, points are malleable currency. They can be retargeted and redirected in ways that address shopper needs and F&E’s strategies. They can encourage shoppers to spend a little more to unlock further rewards.
2. Digital. F&E is promoting online signups that capture the email addresses many shoppers omit on paper. Rewards come online, rather than through physical vouchers. This improves activation, enables better tracking and reduces operating costs.
From a positioning standpoint, points are slightly better than immediate discounts in reinforcing EDLP. This program is a better alternative to the non-personalized coupons F&E has been using to promote sales.
As Steve notes, F&E needs to grow customer numbers to climb out of losses, which grew from $250M in 2009 to over $300M in 2010. It’s not easy, and they will need more fresh ideas.
While there are books written about Clubcard, and rightly so, it’s unlikely the same thing will happen for Fresh & Easy’s Friends. There are very different circumstances and very different competitors for Fresh & Easy than Tesco had in the UK.
The Friends test appears to be a very formulaic approach to “loyalty”, though perhaps it will be a richer payout than most programs, especially when combined with coupons as it promises.
Loyalty in the grocery sector is less driven by programs — we don’t see any real standouts, including Kroger’s — than by the customer experience (which includes product quality), price/value and habit.
Whole Foods is a great example, as was Ukrop’s, now part of Ahold.
While it’s questionable whether or not this initiative will make a decisive difference in Fresh & Easy’s business situation, it is an interesting development in that it is a loyalty program that moves away from a card that gives access to in-store discounts to a real rewards program. Many supermarket chains have in fact allowed their loyalty programs to deteriorate into a way for consumers to access promotional pricing, rather than to develop a long-term shopping relationship. The Fresh & Easy Friends program being online, providing points, and making rewards easy to take advantage, appears to be a simple, basic program that can build customer relationships.
I don’t see it as a game changer, but I do believe it is something Fresh & Easy needs to be doing. I personally hate that I have to remember to scan my card to get the sale prices.
Probably something they need to do to stay competitive, but on the other hand, one of the best supermarket chains in the country, Publix, has no program at all. They rely on their top notch shopping experience to win the day, and I think it does.
Grocery programs are far down on the list of why a consumer may remain loyal to a store. Location, price, and quality are much more important drivers. If Fresh & Easy is doing fine on these dimensions, and still having serious defection among top shoppers, then a points program may help.
“Friends will not penalize customers who do not use their card with higher prices.”
Sorry folks, if using your card gives you a(n add’l) discount, then not using it DOES result in a higher price (even if it’s not higher than what’s shown on the shelf) … but that’s the whole point of a loyalty card, isn’t it?
The simple answer to the main question is “no”; probably helps, might hurt, but an incremental change either way. If the FE model is unworkable, this isn’t going to change that.
Fresh & Easy’s approach is definitely a “fresh” perspective on grocery loyalty. Does providing shoppers instant discounts drive higher loyalty than providing rewards for continuous loyalty? We’ll see, but given the success of airline, hotel and gaming loyalty programs, we suspect they have a good shot at it.
A number of the comments presented here seem to suggest that a loyalty card program “can’t hurt,” and might help make Fresh & Easy a success. Let’s stop right there. If it doesn’t help drive a lot of sales, then it will hurt. The incremental sales generated by the program will need to be greater than the fully allocated costs (staff, computer time, materials, etc.) incurred in promoting, administering, training staff, delivering bi-monthly online communications, and providing those cash-back rewards. If that doesn’t happen, then they are just additional costs that will be a drag on Fresh & Easy’s drive for profitability.
Anyone know if a market test of the program economics was ever run for Clubcard in the UK (with real test and control groups to quantify the differences in purchases)? Or like many other points programs are we simply being told that customers that join the program are more loyal and buy more than those that don’t join? (A matter of self-selection yes, but no proof of any cause and effect).