Loyalty is in the cards

Offers entice, but it still pays to shop around

January 25, 2004|By Richard Burnett | Richard Burnett,YOUR MONEY STAFF WRITER

Offers entice, but it still pays to shop around

Judy Okraski is the quintessential "rewards customer" -- a consumer warrior who makes a virtual science of capitalizing on loyalty programs in the retail world.

The 56-year-old Winter Park, Fla., resident has received airline upgrades, gift cards, bonus bagels and a free lunch now and then. By her calculations, she has saved hundreds of dollars in the process.

"I do use them a lot, and I think they are a very good promotional tool," she said.

She uses them at a grocery, department store, gas station and discount store, "anywhere I would be shopping at normally, anyway," she said. "So why not do something that'll save you money?"

Airlines, with their frequent-flier programs, were the early adopters of this marketing approach, but supermarkets and drugstores now dominate the loyalty landscape. Hotels, department stores and video rental outlets programs are growing too.

Blockbuster lets members earn free movie rentals, among other perks. Starbucks customers can build credits toward a free latte. Buy 18 cups of coffee at a BP gas station and you can walk away with a free bagel or sandwich from the chain's Wild Bean Cafe.

Some programs, such as Blockbuster, require annual fees. Many are tied to credit card use or different levels of spending. Some are simply discount cards, while others promise access to invitation-only sales events, gifts or entertainment offers.

But be careful: There may be products in the same store, even on the same shelf, that offer more savings than the brand with the "loyal customer" price.

At supermarkets, for example, the best loyalty-discount prices often are offered on the house-brand products, but customers might find a competing brand on sale for a better price only a few feet away, said Jack Gillis of the Consumer Federation of America.

"The key is what it always has been: Check the per-unit price of the item, not just the price tag," Gillis said.

"Consumers have to be careful, because there is a psychology with these loyalty cards that implies there is no question this is the best deal. But it is a competitive marketplace, and it is certainly conceivable you could do as well or better with another product."

Because different items always are going on sale, it pays to shop carefully. You might find a store's house-brand soda loyalty-priced at $1.50 for a 2-liter bottle, and two shelves away find the same size bottle of Coca-Cola on sale for $1.39.

In most cases the savings are real, and that has helped mainstream retailers establish some credibility for their loyalty cards, said Britt Beemer, chairman of America's Research Group, a retail consulting firm based in Charleston, S.C.

Of course, stores wouldn't keep loyalty cards if they didn't work. Clients tell Beemer that consumers who belong to their card program spend 40 percent to 60 percent more than those who do not.

And cultivating one's best clients -- the goal of loyalty programs -- is crucial for any company because 80 percent of annual sales are generated by 20 percent of its customers.

Richard Burnett is a staff writer for the Orlando Sentinel, a Tribune Publishing newspaper.

Pivacy traded for discounts

How safe is it, in terms of personal privacy, to use store loyalty cards?

Companies collect information about you whenever you use their cards. That includes everything from what medication you take to how much liquor you go through in a week to what sorts of movies you regularly watch.

In some cases, a company may allow outside partners to monitor your buying patterns. That contributes to intrusive marketing and gives unscrupulous employees more opportunities for identity theft.

"They know your food purchases, they know what prescription medicines you buy, they build databases on you for their profiles," said Larry Ponemon, founder of the Ponemon Institute, a privacy research firm based in Tucson, Ariz.

Before you jump in, experts advise:

* Give a company only basic personal information, such as name and address.

* Never give out your Social Security or bank account numbers.

* Always ask how the retailer intends to use your personal data. Get a written guarantee that it won't be shared with outside parties.

Be ready to receive repeated marketing pitches.

Is it worth it?

How coffe drinking pays off at BP:

Buy - 6 cups of 6 oz., Reward - free soda or other beverage

Buy - 18 cups, Reward - free sandwich from Wild Bean(1)

Buy - 24 cups, Reward - free sandwich and drink from Wild Bean

Blockbuster's deal gives mroe for weekday renters*:

Rent - 6 movies/month, Reward - 12 free a year

Rent - 6 movies/month including one on Tues., Wed. or Thurs. - Reward - 24 free a year

(1) Wild Bean Cafe found at BP locations

* Blockbuster Rewards card annual fee: $9.95

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