In a surprise move, Loblaw Companies has begun testing a loyalty card program through its Zehrs Markets chain, which operates 57 stores in Ontario.
Although loyalty cards have been rapidly gaining in popularity among North American grocery chains in the last several years, Loblaws has always contended its private label products, led by its premium quality President’s Choice label, were all it needed in a loyalty program.
Initial market testing of the Advantage Plus Card is taking place at a single Zehrs outlet in St. Thomas, Ont.
Gary Burke, vice-president of store operations for southwestern Ontario, says the firm will not expand the program for quite some time.
‘This is something we want to give a lot of time to for tests, to be sure we’re on the right track,’ Burke says.
Zehrs, based in Cambridge, Ont., is handling its own database management for Advantage Plus and will not be distributing the information gathered to third parties.
The program has not been advertised locally.
Customers find out about the card only when shopping at the store and enroll by filling out a small survey at the sign-up desk.
When the card is presented to the cashier during checkout, it is swiped through a card reader to record buying information and enter shoppers automatically into a sweepstakes draw.
Periodically, coupons, vouchers, gift certificates or other offers will be sent through the mail.
The buying history gathered through the program helps determine what offers each customer gets.
Many of Zehrs’ direct competitors have well-established loyalty plans, and, in the u.s., the concept is used by about 50% of supermarkets.
The Great Atlantic & Pacific Company of Canada was one of the first grocery retailers in North America to introduce loyalty cards when it began experimenting with programs about three years ago.
It now has more than three million households participating at about 200 of its 230 Ontario stores.
a&p operates four banners in the province.
Each runs a different loyalty card program: a&p has Super Saver; Dominion offers Priority Plus; Miracle Food Mart has the Magic Card, and Ultra Mart has Power Card.
Bill Sheine, vice-president of marketing for a&p, says loyalty programs were first introduced as a way of rewarding loyal customers and to get customers who had not been as loyal to make that transition.
But Sheine says loyalty cards have other uses as well.
‘We run a lot of promotions and contests, and the card provides an electronic entry so we don’t need contest entry forms,’ he says.
‘We also know who are customers are.
‘Following the Miracle strike, we were able to communicate directly to our customers with a letter from the chairman of the company to apologize for the inconvenience and give them a special offer only they could get.
‘The response was excellent, and we got most of our customers back.’
a&p, which handles its databases internally, has designed proprietary software that allows it to do much more than just track buying habits.
The company has eliminated the use of coupons. Discounts on promotional products are given electronically at time of purchase and savings are shown on the cash register tape.
Special offers are also printed out on the cash register tape. New products can be introduced with offers targeted to customers who have a history of buying the product type.
At any give time, roughly 500 to 600 products are on special, with each special lasting four weeks.
Customers do not have to clip coupons, cashiers do not have to verify them, and suppliers save by eliminating a third party clearing house.
Sheine, who notes proprietary research has shown customers want instant gratification, says in the next few weeks, after its next generation of software is installed, the company will have the ability to tailor special offers to individual customers.
‘If someone buys chocolate milk on a regular basis, you can make the offer that every time they spend $10 with us, they get chocolate milk free,’ he says.
‘Other offers such as `Buy X and get Y,’ for example, `Buy Scope mouthwash and get a free tube of Crest toothpaste,’ will also all be done electronically.’
Last month in 14 London, Ont.-area stores, a&p began a test of a partnership program with Zellers.
Customers can have their Zellers Club Z loyalty card electronically linked to their grocery card to earn Club Z points by shopping at a&p, Dominion, Miracle or Ultra Mart.
While loyalty cards have been successful for a&p, the Ontario division of competitor The Oshawa Group withdrew from the Air Miles loyalty program, run by Loyalty Management Group, of Toronto, last summer after two years as a member.
Denis Bachand, vice-president of marketing for Oshawa Group, says pulling out was a tough decision, but adds ‘we weren’t seeing justification through sales.’
Bachand says Oshawa monitored its customers for negative response to the program’s withdrawal ‘and what we saw was very little reaction.’
He says keeping prices competitive is a key component to thriving, especially in Ontario, and because of the cost involved for loyalty programs, the elimination of Air Miles is helping the company deliver on price.
While he is closely watching his competitors’ loyalty programs, Bachand would not comment on any specific plans he has for a proprietary program at Oshawa Group stores.
Oshawa Group is the franchisor of more than 640 iga stores across Canada excluding b.c., and the franchisor of nearly 800 stores under various banners such as Metro in Quebec and Mayfair in the West.
It owns more than 110 iga, Food City and Price Chopper stores in Ontario and Nova Scotia, as well as the PharmaPlus chain of more than 140 drugstores.
