UK: Safeway's 'disloyalty' scheme could be a winner - COMMENT
Loyalty card schemes are beginning to fall out of favour with retailers. Sainsbury's has drastically altered its offering; now, Safeway is gambling that short-term offers will seduce customers away from their current supermarket. Both strategies are based on the realisation that customers do not choose supermarkets in the hope of long-term reward.
Retailers' rethinking of traditional loyalty card schemes continues to generate new initiatives. Following Sainsbury's replacement of its loyalty scheme with Nectar (a joint venture with BP, Debenhams and Barclaycard), Safeway has decided to target the apparently loyal customers of its rivals.
Nectar has attracted criticism, as it will now take more money for customers to rack up points towards rewards. Clearly, Sainsbury's does not expect to alienate customers with this change. Rather it expects the majority of its customers to stay loyal for much more fundamental concerns. It is these concerns which Safeway hopes to target.
Safeway will email customers of Sainsbury's and Tesco who also live near its own stores with an offer to entice them to switch their shopping habits. If customers visit Safeway's four times, spending over £50 (US$77.7) a time, they will receive £10 of free petrol. This offer has its basis in research suggesting that customers only need four visits to new-format Safeway stores before switching their allegiance.
This offer is likely to enjoy some success. Loyalty card benefits take time to accumulate, but the relatively quick return on Safeway's offer, and its better value, will attract customers. But will customers continue to shop with Safeway?
This depends on factors that have nothing to do with loyalty cards. Consumers' core demands from supermarkets are value for money, suitable product range and convenience. Loyalty schemes may reward those consumers who decide that a certain supermarket meets their needs, but they are not enough to bring customers to a store.
Sainsbury's new loyalty scheme is due to a reconsideration of its value to both customers and the retailer. Safeway's offer expects to find that customers are loyal only to their own needs, and its gambling that enough new customers will find shopping with Safeway a better deal than they had before.
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