Cheers Safeway. That’s one less loyalty card to clutter up my
wallet, a slight reduction of the unsightly bulge factor in my jacket
pocket. Plus, if Safeway is to be believed, an extra pounds 50 million
saved by cancelling the card scheme which it can now channel into even
lower prices with which to pursue the battle against the mighty
Asda/Walmart. Yippee indeed.
From where Safeway sits, it looks pretty straightforward. A new ’best
deals’ price-cutting policy introduced in October has seen like-for-like
sales rise by 5.7 per cent and 750,000 new customers visit the
Safeway isn’t saying where those customers are coming from, but clearly
some must be from Tesco and Sainsbury’s, both of which run loyalty
Conclusion: loyalty schemes don’t work and anyway they’re expensive,
especially if, like Safeway, you get into points inflation. Better,
therefore, to divert that money into price cuts. The City certainly
seemed to agree, marking up Safeway’s share price by 10 per cent.
Pardon me, but isn’t there a flaw in that logic? If, as Safeway
acknowledges, those new customers have been attracted by its price cuts,
what’s to say they won’t flit off to Asda when, as it surely will, it
fights back on price? If that happens, all that Safeway will have done
is to have fired off a new pricing war in which, in financial terms,
it’s the one with the pop guns while everybody else has the heavy
Surely, having won those new customers, it is imperative for Safeway to
hang on to them. A loyalty card may be expensive, but that is the price
of staying in the game.
So, are loyalty schemes really a waste of time - ’boring to customers’,
as Safeway’s chief executive put it? Or is Safeway really trying to hide
the fact that it just failed in the implementation of its particular
I’d guess the latter. This is where the term ’loyalty’ can be
The cards can be used in a number of ways, of which loyalty is only a
broad generalisation and a way of making customers feel valued. Winning
new customers is another application (hence Safeway’s foray into double
and triple points), but so too is the opportunity to build a really
decent database and then mine that information for all it is worth.
As I understand it, Safeway really only used its ABC card as a means to
generate more customers while Tesco and, to a lesser extent Sainsbury’s,
have seen it as a way to increase their customers’ share of wallet and
to use that information to diversify into new areas such as financial
services, car insurance and so on.
With six million people registered for an ABC card, that’s a lot of
potential customer information for Safeway to give up on. In the end, we
must conclude that it was never as committed to extracting the database
benefits as its rivals.
Still, it obviously feels that is a small price to pay. Whither now?
The logic of Safeway’s strategy suggests it is preparing to go
head-to-head with Asda - which has consistently refused to have a card.
Good luck to it. But, without one, what is Safeway’s point of difference
and where is its competitive advantage?