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Safeway Shares Some Loyalty Secrets

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Safeway Shares Some Loyalty Secrets
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First hand data from loyalty programs which can be shared openly is hard to find. Few want to reveal detail in public conference venues, and much of what we hear from clients is restricted by agreement from public disclosure. As an alternative, I’ve found value in reviewing the quarterly earnings reports from publicly traded companies to pick up key data points.

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For example, Safeway has made recent announcements of partnerships with ExxonMobil and Chevron to operate loyalty programs in the Eastern and Western US States, respectively. The programs conform to the familiar gas/grocery partnership model, i.e. program members make purchases at the grocery store and collect rewards in the form of cents-off-the-gallon at the participating fuel retailer. Safeway includes a twist in the form of an uncoupled debit product which connects a member checking account with the loyalty program membership. Using the ACH system, payments can be made with the loyalty card, earning extra benefits for the member while reducing transaction processing costs for the retailer.

In addition to this core loyalty offer, Safeway has added “Just For U” , a program where customers can benefit from personalized discounts in what some Club Card members equate to be an “upgrade” to their card.

I read the transcript of the Q4 2012 Quarterly earnings report given by Safeway to the investment community at Seeking Alpha and wanted to share some interesting insights that might help you in managing your own program.

In discussing Just for U, Steven Burd, Chief Executive Officer shared that the program has about 5.4 million active members which represent 45% of annual sales. Over time, Burd hopes to see the penetration of Just for U members to increase to 65% of annual sales. During a year’s time, Burd stated that about 9 million unique people transact with Safeway, meaning the 5.4 million loyalty club members are about 60% of the total customer base.

Burd illustrated the power of generating personalized coupons for customers by comparing it to the gas program they run today. The pump rollback programs are highly effective while offering a $.10 for $100 of grocery spend.  Personalized offers allow the grocer to offer higher discounts of $.20 and $.30 based on customer characteristics and are experimenting to find the sweet spot that triggers incrementally higher grocery spending. By diligently testing and learning from different offers, Safeway is unlocking tremendous upside potential in its customer base.

Safeway has goals in mind for Just for U that should be familiar to most operators. They aim to improve the loyalty of existing customers and to attract new customers. Measuring the penetration of sales by the customer loyalty group and the increase in sales that can be triggered by personalized promotions are just two metrics by which they measure success.

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