Friday, March 27, 2009

Increasing Loyalty at the Grocery Store

These days, businesses need to hold onto every customer they can get their hands on. Cutbacks in discretionary spending are keeping consumers out of whole categories of stores and malls. Lucky for grocery stores, people still need to eat.

There’s lots of press about how grocery retailers are improving the quality of their store brands. Whether it’s Rancher’s Reserve, Eating Right, Organics, or even Safeway Select, the packaging and products are clearly moving up market. But I would argue those brands are still not loyalty drivers. I don’t go to Safeway to get them, though I do buy them when I’m at the store,a and they do help build perceptions of quality and variety. (In contrast, Costco does actually have store brands that we make a special trip to pick up – like their Sparkling Ice Talking Rain drinks).

In our town, there are three choices of grocery stores. There’s the local, independent market whose owners are deeply involved in the town. We have a cramped Whole Foods with inadequate parking but the best butcher shop. And there is a Safeway across the street from the high school, where most kids eat at least one meal a day (and no adults want to be when the high schoolers take over the place). There are more choices farther away, but these are the store we shop at day in, day out.

I’ve preferred Safeway for years, because of the free and ample parking, the deals, and its broad assortment which makes it a one-stop-shop. Safeway is also the only store of the three with a loyalty program. And today, I experienced the real value of my loyalty to Safeway for the first time. In the past, Safeway has included coupons for Safeway Gas Stations among the receipts the cashier hands customers at checkout. Since there are no Safeway gas stations near us, I had no use for the coupons (I can’t keep track of paper coupons, anyway).

However, Safeway recently launched PowerPump Rewards – a cobranded program with BP, which owns ARCO as well as BP stations across the country. For every $100 I spend at Safeway, I receive $1.50 toward a fill up at an ARCO or BP station. Sounds small. But without even trying, I earned a $10.50 debit card last month that I used today to buy gas. So, now, in addition to saving money on most of what I buy at Safeway, I also save money on gas. And while I occasionally go to ARCO to fill up, with PowerPump Rewards I make a point of it. Apparently, I'm not alone. Convenience Store News reported today that according to Safeway Chief Marketing Officer, Diane Dietz, "The customer response to PowerPump has been tremendous."

For me, the customer, it’s double savings. For Safeway and ARCO, they’ve given me a more powerful reason to be/stay loyal. That’s a win-win-win for them.

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