6
Dysloyalty
The lady across the hall tried to rob a department store with a pricing gun. She said, “Give me all of the money in the vault, or I’m marking down everything in the store.”
—Stephen Wright1
Honesty is the best policy. If you can fake that, you’ve got it made.
—George Burns2
Some viruses can move from one species to another. Rabies, swine flu, and HIV are three examples. The name for this transfer is zoonosis.
The same thing can happen with marketplaces, where both good and bad ideas can “go viral.” In the last decade and a half, we’ve seen zoonosis happening between the commercial Web and the brick-and-mortar world, as new ideas for capturing customers have moved virally from the former to the latter.
Capturing customers has always been a fantasy of vendors in any case, so the offline marketplace was ready to listen to the virtual voice that said something like, “Hey, forcing people to become voluntary slaves to Web sites seems like a good idea; and consumers don’t seem to mind logging in all over the place, rather than just showing up. So let’s coerce loyalty by making our customers carry around cards and key tags. We’ll post discount prices just for card-carrying customers, and overcharge everybody else for the same stuff. We can track customers and their purchases by the data we gather, increase their switching costs, and personalize our promotions.”
And here we are, carrying around a mess of loyalty cards and key tags, so we can get rewards and discounts everywhere we shop.
My own car key ring goes with our 2000 Volkswagen Passat, which has 162,000 miles on it. The key itself is a proprietary Volkswagen one, designed so only Volkswagen can replace it. Long ago, the key fell apart, but we keep it in one piece with a rubber band, because Volkswagen charges its captive customers hundreds of dollars to replace it.
On the key’s ring are tags for Shaw’s and Stop & Shop, two grocery stores I sometimes visit. (My wife, a foodie, prefers to shop at Trader Joe’s. I explain why in Chapter 25.) I don’t carry any cards or tags in my wallet, but we do have a pile of them in the armrest of the car. My wife also has a separate wallet for loyalty cards in her purse. It may be the heaviest thing in there.
They’re all a pain in the butt.
Loyalty programs of many kinds have been around since the 1800s (the biggest press run in history was the 1966 Green Stamps catalog), but the spread of retailers’ loyalty card systems in the late 1990s and early 2000s clearly suggests that the cookie-based commercial Web model has spread offline as well.3 The offline equivalent of cookies are magnetic strips and bar codes.
Obviously, it’s fair to assume that the programs work pretty well or are at least rationalized well enough to continue justifying them. But so far, I’ve found no research on the customer side that starts from the premise that maybe we don’t need these programs at all—or that it makes sense to base our understanding of loyalty on what customers actually feel.
So I decided to do some research on my own, based on my own feelings and my own experience, just with retailers whose loyalty cards I carry around. I’m just one customer, but I think my experience is revealing.
Mass Markets
We’ll start with Shaw’s, a New England grocery store chain. I shop at Shaw’s in the Boston area for three things I’ve seen in too few other stores: (1) La Brea Bakery bread, (2) Cholula Hot Sauce, and (3) pork sausage. (The first two are tastes I acquired in California. The third is one I acquired in North Carolina.) I usually pick up other staples when I’m at Shaw’s: eggs, milk, fruit, vegetables, meat, and so on. But I wouldn’t bother if it didn’t have those three slightly unusual items.
The “discount” prices for Shaw’s card-carrying customers are about even with other stores that have no loyalty programs, such as Market Basket and Trader Joe’s (e.g., $1.99 for a dozen large eggs). The “normal” prices at Shaw’s are so much higher (e.g., $2.99 for the same eggs) that I assume it overcharges customers who don’t carry the cards.4 Thus, the only “benefit” of my Shaw’s card is a weekly e-mail that has not once attracted me back to the store for anything. The subject line for the latest of these says, “David, Use this Email-Only Soft Drinks Coupon.” (My real name is David. Only relatives, old friends, and robotic acquaintances use it.) The body of the e-mail is a mess of small graphic elements, all but one of which load in my e-mail client. It has “Handpicked Savings Just For You,” including an e-mail-only coupon for $1.00 off Coca-Cola products, and $.30 off Hood milk. I never buy Coke, and don’t care much for bottled drinks. But I do buy a lot of milk, which I use to make yogurt. So I wonder, Is Hood the expensive name-brand milk, or the house brand that’s always cheaper? (Answer: the former.) And, What do the phrases “effective with the Card” and “No Rewards Card Required” mean? Do I need to print this out? Do I need to click on the “Add to my list” button? Will it know when I check out that I’ve got this discount? The answers don’t matter, because $.30 is no deal maker and worth less than the time I’ve already wasted thinking about it.
As for the weekly e-mail-only offers, I’d never bother with those either, but for research’s sake, I hit “download.” This opens a new browser tab with a pdf of a coupon sheet. None of the items makes me want to print out the whole sheet, which would also waste the fresh ink I paid almost $80 for at Staples last week. (Both my printers are free Epsons that came with laptops I bought. They’re good printers, but ink tends to be gone after a few dozen pages. I just calculated the cost of owning these printers at hundreds of dollars per year, and more than $.12 per page. I bring this up because that’s what it costs for me to print out junk mail from Shaw’s.)
Of course, I’m far from typical and haven’t been a coupon clipper since I was last unemployed, many decades ago. But maybe Shaw’s has plenty of customers who love this kind of stuff. Maybe those customers use “my recipe box” and “my shopping list.”5 But I doubt it. What I assume instead is that Shaw’s, like every other chain store, is just trying to keep up with retail technology fashion, which is currently in thrall of “personalizing” everything electronically while depersonalizing the face-to-face side of the business.
For a case in point, here’s another Shaw’s story. A couple years back, the store installed some of those now-ubiquitous self-checkout systems. Our kid loves the things, because they involve bar-code scanning, one of the cheap thrills in his life. Alas, the system failed to give us our members-only prices. After failing to solve the problem with technology, the nice woman behind the service counter gave us a generous credit toward future purchases. She also gave us some interesting intelligence about the loyalty system itself. While this is not a verbatim quote, it’s the gist of what she said: “We hate those things. We have checkout professionals here. They know how to scan and bag your purchases. They are friendly and like interacting with customers. Too often customers make mistakes with self-service, and we have to go help them out, which defeats the whole purpose. The loyalty cards don’t do much, as far as we can tell, besides slow things down for everybody. We have to maintain two prices for everything, and the cards don’t keep people from shopping elsewhere. I think we’d be better off without the whole thing.”
Or, maybe not.
John Deighton, the Harold M. Brierley Professor of Business Administration at Harvard Business School, is one of the world’s leading authorities on this kind of thing. One day over lunch, when I told him that Shaw’s story, he dismissed it as an exception and assured me that these programs work very well for stores that are inventive and execute well. As an example, he singled out Stop & Shop. Since Stop & Shop is on our beaten path, I shop there much more often than at Shaw’s.
Lately (as I write this), Stop & Shop has added a system called Scan It!, which gives customers handheld gizmos to scan bar codes, obtain promotional discounts, and follow running tallies of what’s in the cart. So I’ve experimented with it, shooting pictures of the gizmo screen with my phone, so I could remember later what happened.
The first coupon to come up on my first trip with the gizmo was, “Save 75¢ when you buy TWO (2) of any Old El Paso products. Limit 1.” So I bought two packets of Old El Paso taco seasoning and a can of Old El Paso non-fat refried beans. The gizmo then suggested lots of other stuff, most of which were not interesting, so I ignored them. But the system worked quite well, as far as it went, which was actually quite far:
- Sophisticated (and potentially informative) devices for customers to carry around
- New carts, with holders for the new devices
- New tech at the self-checkout lines
- (I’m assuming) new CRM, inventory management, IT, and other back-end adjustments, to make the whole system work
That’s a lot. Yet I found myself thinking, Why can’t I use my own device here—like, my smartphone? Sure enough, a little postcard-sized circular at checkout said, “Introducing the Stop & Shop app for iPhone and Android.” Here’s the copy:
Your circular just went mobile!
- View it on your mobile device
- Access your online account
- Track your Gas Rewards points
- View your savings
- View online exclusive offers
- Find the nearest store on the go
I took the card home with me, got on the laptop, registered on the Stop & Shop site (using the member number on the key tag), installed the app on my iPhone, fired it up, and logged in. After what seemed like about 10,000 keystrokes and pokes on the phone, I could see my account. Racked up already were 108 “gas points,” which (I saw when I clicked on the link) entitled me to a discount of $.10 per gallon, though I didn’t yet know where. The Weekly Ad link went a screen titled, “Weekly Circular for Store #0776.” Below that were the categories shown in table 6-1.
While I suppose this is a huge improvement over print, it’s still old ink in new bottles and useless except in this one store.
Again, credit where due: Stop & Shop is a pioneering retailer and a Jones for other grocery stores to keep up with. I salute that. Yet I also want a loyalty system of my own: one that can work with any store willing to cooperate. I’d like Stop & Shop to salute that too, when I show up with it.
Gas Down
A few weeks after my first experience with Stop & Shop’s gizmo and phone app, I pulled into a Shell station to buy some gas and found it festooned with Stop & Shop promotional postings. There was a big banner under the Shell sign by the roadside, a stand-alone sign next to that one, another glued to the side of the pump, another hanging from the gas hose, and another next to the pump’s card reader and key pad. They all promised savings of up to $.30 or more per gallon.
On a sticker next to the display on the pump, it said,
BEFORE inserting payment:
- Enter number found on the back or your key tag
- Or insert large Stop & Shop Card
I had thrown away my large (credit card size) Stop & Shop card long before this encounter, because I figured all I needed was the key tag. (After all, that’s what works at the store.) I didn’t have my reading glasses there at the pump, so I held the tag at arm’s length, carefully punched in the tiny thirteen-digit number, and hit Enter. Two messages came back. The first was, “You have no Stop & Shop discounts.” The second was, “Apply for the new Shell Drive for Five SM Card today and save 5 cents per gallon.”
After I finished pumping my full-price gas, I went in the gas station, where one of the many Stop & Shop promo signs told me I could find a brochure for the program. I found a stack and took one home. The rules for reward points and gas price eligibility were both highly detailed and woefully complex. The back panel also featured Shell promotion for five different cards you can use at the station.
I see only two reasons why customers would be willing to do all the work required to get these discounts and make them count for much. One is that they buy groceries only from Stop & Shop and gas only from Shell stations. The other is that they are junkies for promotional gimmicks.