Reward Cards - Still Rewarding?

Faffing with the contents of my wallet today in the supermarket, I began wondering about reward cards - are they still worth the plastic they’re printed on? They’ve been around in the UK for over a decade, and two major supermarkets - Tesco and Sainsbury’s - still use them. I have one of each. However, I sometimes wonder why I don’t throw them away - cash rewards of approximately 1% (presumably all that the supermarkets can afford) hardly seem worth the bother of carrying them.

Safeway (now Morrisons) scrapped their loyalty scheme in 2000, citing that it wasn’t worth the money to run it. They may have been right. Nevertheless, Tesco, now the UK’s biggest grocery retailer, still retains their scheme, and as the Economist states, the information goldmine (the only reason the supermarkets run loyalty schemes) is lucrative - although they don’t say exactly how lucrative. Safeway’s decision indicates the margins can be thin. Despite the low return on hassle I mentioned above, though, there are still plenty of takers - empirical evidence would suggest that more shoppers have loyalty cards than don’t.

There have been other issues; for example, loyalty cards came under fire from David Blunkett in 2004 in a fairly obvious attempt to draw away attention away from the problems surrounding the ID card debate:

Mr Blunkett said the cards produced key details about people's shopping habits but were accepted because they were run by private firms. People should not distrust ID cards because they are a state idea, he said. ... Holding up a Nectar card, he said people voluntarily signed up to allow such details to be collected through such loyalty cards by private firms. "There is a real issue about how that should be overseen and supervised," said Mr Blunkett.

Mr. Blunkett presumably ignored the fact that voluntarily signing up to handing over data about tomato-buying preferences was a more respectable practice than being forced to hand over more medical information to travel. Fortunately, his illiberal idea didn’t seem to gain much traction. In all fairness, though, it’s quite likely than many folks don’t know that their data is used in this way; for that, The Guardian deserves some praise for educating the public.

Maybe reward cards will die out eventually. It’s hard to back that up with public data, although I’m sure Tesco have a hard time quantifying the exact benefit they get from theirs (how do you measure repeat custom accurately - with and without the card?). If I’m right, though, I hope they die because they don’t make business sense - not because the government regulates a harmless practice out of existence. Interestingly, Wikipedia alleges that this has already happened in California.

It’ll be interesting to see where the reward industry is in five years time.

Comments

Really? I shop in M&S all the time, dontcha know :) Actually they do nice sandwiches at Waterloo station.
As long as they're the only big supermarket near me, they'll continue to get my business. :) Well there is the M&S, but I don't think I've moved to that price bracket yet!
Well, yes and no. If you spent the money you're not spending your cash. That is liquid and gains interest. I'm sure Sainsbury's consider you a good customer though :)
I wouldn't describe it as 'money', goods to the 'retail value' of, would be more appropriate. So it's probably only costing them a tenner. :) The Safeway card is free, I think it's some sort of co-opt setup, which allows them to have such a high discount.
Miles, thanks for your comment. You're not bothered about loaning Sainsbury's all that money interest-free, then? ;) Anyway, the Safeway card sounds good. Do you have to pay for it?
I've had a Sainsburys/Nectar card since university. I've slowly collected rewards, and now have 100 odd quid coming to me. Since it took so long to collect, I loathe spending it, so it just sits there. I convince myself it's an emergency food fund if I'm ever out on the streets. Probably not what Sainsbury's originally planned. Although I imagine it'll just go on a case of booze one day. I'm over in the states at the moment and picked up a Safeway card. Now there's a decent rewards card, it knocks off about 10% of your bill each time.
Not sure what the true story is..... my experience is mainly anecdotal. All the people I know that shop at Sainsbury's comment on how frustrating it is that one or more of the things they want (different each time) is out of stock. Their website hints at their problems: http://www.sainsburys.co.uk/shoppingandservices/FAQs/sainsburys_faqs/foodandgroceries.htm (search for "stock") Appears somebody thinks their Borough store is always out of stock too: http://www.london-se1.co.uk/forum/read/1/42094 And somebody else: http://www.philodox.co.uk/mo/Sainsburys.htm Looks like it's a widespread problem.
Yes, I've heard about their alleged poor stock control before: although I don't really know much about it (after all, I don't need to, right? :) ). Can you shed any more light?
"Their central Winchester store is a clear example of poor data analysis: they are consistently running over or understocked on certain lines." Haha! I think that's a result of one of their other problems: they must be have the worst stock control and/or distribution system of any large retailer. That a large retailer can so consistently manage to run out of things is laughable.
Yes, I have to admit I get that impression about Sainsbury's too - their central Winchester store is a clear example of poor data analysis: they are consistently running over or understocked on certain lines. I haven't seen much feedback from Tesco's either but I don't shop there often enough to give them much data.
I don't bother with them but I do remember when they came in. As far as I can tell, Tesco were first to do it properly and really knew what they wanted to achieve. The others followed quickly but clearly didn't have their hearts in it, didn't really understand the business case and probably didn't have the backend systems in place fully to capitalise on the streams of data flying towards them. The classic example was that Tesco noticed my parents' spending habits and started sending them vouchers for money-off items that were just a bit more "premium" than they usually bought. They took up some of the offers and ignored others. One or two of them stuck and they continued to buy the new stuff as a result of Tesco correctly predicting that, if they tried it, they'd like it and would be willing to pay for it. Sainsbury's, by contrast, just used to knock some money off your bill when you hit a certain threshold.... completely indiscriminate.
James, you're probably thinking of either Barclaycard or Vodafone, both of which dropped out in August 2005: http://en.wikipedia.org/wiki/Nectar_loyalty_card#Current_members I wouldn't get me started on ID cards either (although I'll resist the temptation for the time being).
I thought Sainsburys had an interesting approach when they scrapped their own loyalty card and switched to the multi-retailer Nectar card. If loyalty cards don't die out, it seems like a more promising approach, if only to win the wallet space competition. (I notice that Tesco appreciate the competition for my wallet space as well and provided a handy key ring alternative... which I also leave at home.) Hard to say how the Nectar experiment is going since I believe one of the big initial backers dropped out some time ago, yet anecdotally more and more shops are asking if I have a Nectar card... ...to which I usually reply, 'not with me' -- I keep using it for a while (when I remember), then being 'disloyal' in an attempt to get extra offers to win me back! Not with much success it must be said. (Don't get me started on ID cards.)