I recently reviewed the SaveON More Rewards loyalty card system used by Overwaitea Foods and associated companies in BC.
What I found puzzles me.
The Loyalty cards when presented at the Cash Out often allow a significant discount on the products.
I recall discounts in the range of 20% and more on items.
This is great for the customer; buy a $10 box of cereal for $8 only. This sure helps with the food budget.
And all we have to do is present the Loyalty card and we get the discount. This is great.
There is another aspect to the Loyalty Card and that is points are accumulated for the purchases made.
For most purchases the customer will get 1 point per 1 dollar spent. If the store is a special store then there may be up to 4 points per 1 dollar spent.
Wow. The more I spend the more points I can get.
Time for point redemption.
Points are worth something right?
I looked at the online catalog of products that can be purchased using points and got quite a shock.
I need a gazillion points to buy almost anything.
Here are some examples:
– Acer Aspire Netbook – 160,000 points
– $10 Starbucks Gift card – 6,000 points
I did some analysis of the items in the catalog and I found that the value of each point was only $0.00157. That is a bit more that 1/10th of a cent.
That means 1000 points used in redemption is only $1.57.
Hmmmm
So, to buy the above Acer netbook for 160,000 points you would have had to spend $160,000 (at the 1 point per dollar spent)
To put this into perspective, if you spent $1,000 per week on groceries at Overwaitea or Coopers or SaveON stores then it would take you 160 weeks or about 3 years to earn enough points to buy the Netbook computer which can be purchased from the computer store for about $250.
The net benefit of the Loyalty card redemption for money spent is only 0.157% which is essentially zero.
The real benefit is the major discounts at purchase time which would be denied to the occasional customer who shows up without the magic loyalty card.
But of course, we all know that the store management uses the purchase information to help them make more money on their sales.
I find it difficult to understand what use the management makes of this data.
The codes of all of the products sold and the quantities sold and the prices sold are known by the day, hour, minute over the whole year.
What benefit is knowing that a customer aged 60 years has purchased 2 liters of milk and 2 loaves of brown bread each week for the past year help management with their operation.
There must be some logic to this. The analysts must be able to tease out some benefit from all of this data.
Or can they.
I suspect that the main benefit of the Loyalty cards is to show that those customers who have a Loyalty card are going to get something special, a good discount at the checkout.
This is a distinct and powerful incentive.
The point redemption plan seems to be a minor part of the system that maybe appeals to those who cannot be bothered or able to figure out what the points are really worth. Wow, you mean that I can get a free netbook computer if I have enough points. Wow. I have to spend $160,000 to do so. Hmmmmmm
And the analysis of purchases by individual customers may be analyzed like medicine men analyze the entrails of the sacrificed goat. But who know, maybe there is some benefit here.
–30–
