Supermarket brings back 1930s-style rewards program

My local Albertsons supermarket recently brought shoppers a blast from the past: a savings stamps program where loyal customers receive stamps for spending at the store and then trade the stamps in for certain items. In this case it's cookware. Once shoppers fill up a savings card with stamps, they can get a frying pan or a dutch oven for a penny. With enough stamps, they can get a whole cookware set, piece-by-piece, penny-by-penny. The program has proved so popular that last week, my local market ran out of the stamp cards.

It's a customer loyalty reward system that was first seen in the 1930s. Housewives (that's what stay-at-home moms were called before the term became politically incorrect then became alright to use again thanks to reality TV shows) would collect S&H Green Stamps at the supermarket. After books of them were filled up, they would flip through a catalog and pick out something nice for the home. It's how my grandmother got her first toaster and how my mother got her first toaster oven. Fortunately, I did not need to paste stamps into little books to get my first microwave.

So is there some larger meaning that a program that encourages savings and patience has returned to our culture with a vengeance? Will we be bidding adieu to instant rewards and no longer seek immediate gratification?

Apparently so, says consumer psychologist Michael McCall who chairs Ithaca College's marketing department and is a research fellow at Cornell University's hospitality center. McCall studies rebate programs, customer loyalty rewards systems and the public's attitudes toward them. He believes the recession has made us more amenable to the idea of delayed gratification.

With credit tight and employment uncertain, consumers see the benefit of setting a goal and working slowly toward it, he says. Having control over what our reward will be is empowering in these tough economic times since so many other factors are beyond our control. While all sorts of rewards programs have been introduced in the past couple of years, Albertsons' makes the most business sense.

One of the reasons the Albertsons program is heading for greatness is that it gives consumers a chance to choose the reward they receive, an opportunity to be in control of one (albeit small) aspect of our lives.

"This program is a cookie jar savings account," McCall said. "You can pick what you want to spend your reward points on and decide the level at which you want to cash in." Should I buy the 10-inch frying pan for 50 stamps or save up and get the deep fryer for 100? Consumers like choice, McCall said.

Airlines, on the other hand, will give you a plane ticket, but they do so on their terms: the airline chooses the flight, the time of departure and whether or not mileage seats are available.

The 1981 American Airlines rewards program, which has 57 million members today, is the granddaddy of all the frequent flyer programs. Only one problem with them, McCall says: They (and the other airlines that mimicked them) don't reward the best customers. They give points for the number of miles traveled, not the number of dollars spent. So someone who gets cheap Internet fares and crisscrosses the country a dozen times accruing miles while spending very little actually benefits more than the guy who buys one first-class ticket to Hawaii and spends more money with the airline.

A similarly flawed system exists in Las Vegas casinos. The guy playing the nickel slots for four hours expects the same free drinks or free buffet ticket as the guy playing craps at the $1,000 table. But Vegas is changing, McCall says. New reward credits now take into account dollars spent on hotel rooms, in restaurants, in the gift shops and nightclubs. Once you spend a certain amount of money, you'll start getting your freebies on the casino floor.

The rewards systems that McCall says are the least effective -- if not illogical from a business' perspective -- are those that give you your tenth cup of coffee free after you buy nine. Chances are strong that if you already bought nine cups of coffee there, you would have sprung for the 10th one anyway -- so what's the point?

Another "beautiful thing" about the Albertsons model, says McCall, is that it gives the supermarket a chance to learn more about you. Since you must show your Albertsons card, your purchases are tracked. They know how frequently you shop, how fast you run out of milk, whether you prefer organic produce and when your kids stop wearing diapers. All of it is useful information about a customer and helps the store adjust its inventory and marketing to the changing demographics of its shoppers.

All of that information, plus the repeat business that rewards cards can engender, is worth the cost of a frying pan.
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