Many factors figure into a shopper's allegiance to a particular grocery. Among them are prices and food quality, store location and cleanliness, the helpfulness of the staff and efficiency of checkout. And, according to a 2012 National Grocers Association study, those all have greater impact than customer loyalty programs.
Which means if Jewel-Osco's decision last week to discontinue its Preferred Customer Card speeds checkout by even a few seconds because cashiers no longer have to ask for the card — or move to extend the same discounts to nonmembers — it stands to boost the supermarket chain's appeal more than its now-dead loyalty program did.
"The program didn't really have any substance to it by the end of it. Everybody got the discounts anyway," said Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management. "Many of these grocery programs have struggled because, for a loyalty program to work, there has to be real incentive. There has to be a financial upside. The problem with grocery loyalty cards is it's not compelling enough to get people to switch from one store to the next, so it doesn't create a lot of value for the store."
"The programs tend to work with airlines because people who tend to fly a lot are worth a lot, so airlines can give them meaningful rewards. The problem in a grocery store is each individual customer isn't all that valuable, so they can't give you an incredibly compelling reward because it doesn't make economic sense. It's almost a self-defeating idea because the rewards aren't big enough to do what they want the program to do."
Jewel's loyalty card has gone the way of S&H Green Stamps, a retail incentive program that for decades was ubiquitous but now is a hazy memory of coupon books and catalogs. It was a club with all the exclusivity of a Members Only jacket, and in the end not much more cachet.
In an industry with famously tight competition and even tighter margins, Jewel will find out soon enough if it is costly to eschew some of the ritual markdowns that gave shoppers the primal rush that comes from a perceived bargain. Give the chain credit at least for not making the J.C. Penney mistake of eliminating sales discounts altogether. The grocery chain's plan is to give everyone the same lower price and add specials to the mix.
But while it may be too soon to know if this Jewel move is a prelude to a larger trend, many retailers already have shifted resources to platforms such as social media and mobile apps to reach out to and bond with consumers. Special discounts, for example, can be offered to followers on Twitter or Facebook, a tactic Whole Foods Market has employed successfully.
Experiments by grocery chains in other parts of the country, such as Stop & Shop in Massachusetts, include encouraging shoppers to use their mobile phones to price and pay for items as they go in their baskets. That kind of interaction presents the potential to offer discounts based on specific buying patterns and location within the store.
"Frequent shopper cards, when they first came in, were exciting to customers. Those days are long over," said Phil Lempert, editor of The Lempert Report, an industry newsletter. "We just assume now that because we have that card, we're going to get that savings. What social media does is elevate it and get us (engaged), and frankly, in five years or less, there probably will be something that replaces that. But I think the time has come for the frequent shopper program to find a new path."
For all the talk about how much customer data there was to be harvested from tracking the purchases and shopping habits of each cardmember, Jewel, like most other chains, wasn't able to do much with it beyond targeting a shopper for special discounts on the kind of item he or she already had shown an affinity for.
"It had a lot of potential, a lot of promise, but never realized it," Lempert said. "What supermarkets were doing was collecting all this great information and so on, but really didn't have the back-end to analyze it, with the exception of Kroger."
Kroger, which shrewdly partnered a decade ago with dunnhumby, a British market research and consulting firm that specializes in that kind of analytics, was one of the few supermarket companies to actually come up with a way to monetize its data.
"On the surface, you would think having all this information is really valuable," Calkins said. "In reality, it's harder than you think to make use of it. So even if you knew somebody liked to buy just peanut butter, that knowledge isn't necessarily going to create a lot a value."
Value is what drives everything.
Whole Foods enjoys the loyalty of its clientele on one end of the price spectrum, just as Wal-Mart and dollar stores do on the other, and Calkins notes "none of them make extensive use of loyalty cards."
Jewel's loyalty program, said Lempert, "wasn't sexy. It wasn't cool. It wasn't special."
And, as anyone who ever got the cashier to swipe a stand-in card for them knew, it wasn't necessary.