Food Shoppers Want Cheaper Groceries - Not Gas Cards

DENVER, COLORADO-AUG. 15, 2005-The Denver Post talks to people putting gasoline in their cars at the Safeway Gas Station at East
Lyn Alweis/The Denver Post via Getty Images
"Paper or plastic?" asked the grocery store checkout clerk. But a better question would be, "Do you want cheap gas or cheap groceries?"

That's the upshot of a new report released by LoyaltyOne, a specialist in designing and implementing customer loyalty programs for retailers. Analyzing survey data from 1,000 American shoppers, LoyaltyOne reports that most of us are unenthused with supermarkets "rewarding" us for our shopping with "points" that can be turned into discounts on gasoline purchases.

Turns out, when grocery shopping, what we'd really like is just cheaper groceries.

Survey Says ...

Grocery store chains such as Safeway and Kroger (KR) like to reward shoppers with loyalty points that can be traded in for discounts on gasoline purchases at their store-run gas stations. (Kroger's points can also be used at Shell gas stations). And yet, in what LoyaltyOne described as a "resounding message" for such grocery store chains, the agency discovered that 72 percent of shoppers would "prefer that grocers offer discounts in the aisle instead of at the pump."

As you might expect, folks shelling out the most ($700 a month and up) for groceries were more likely than average to demand cheaper groceries. Eighty-three percent of such big spenders would prefer to spend a bit less and let the supermarkets keep their gas points.

Young shoppers (ages 25-35), statistically less likely to even own cars, prefer cheaper groceries over cheaper gas by nearly as big a margin -- 76 percent. And this fact backs up a point made by LoyaltyOne Consulting Managing Partner Dennis Armbruster: "a generic fuel offer [may not even be] relevant to all customers." Warns Armbruster, when supermarkets "reward" customer loyalty with a reward the customer can't use (or just doesn't want), that represents "untargeted marketing spending undermining ROI."

(Translated from corporate-speak, that means "wasted money.")

Further complicating the issue, some shoppers said they'd like to receive "travel rewards" (8 percent) rather than discounts on gas. Six percent want a free toaster -- or as LoyaltyOne put it, "electronics, housewares or apparel."

What It Means to Grocers

LoyaltyOne's survey suggests that grocery stores that give shoppers what they want may be able to steal customers away from more mule-headed rivals. According to the survey, 62 percent of respondents "said they'd switch to grocery rewards if a grocer offering gas rewards gave them the option of a different type of reward."

The first grocer to figure that out may succeed in stealing customers from its rivals.

What It Means to You

Speaking of which, if you count yourself among the 72 percent of Americans who prefer cheaper groceries over discounts on gas, travel, or even free toasters -- congratulations. You're part of a trend that extends through the grocery store, past the checkout counter, out into the parking lot, and all the way down the street to the bank.

Cheaper groceries put more money in your pocket -- by not requiring you to take it out of your pocket and hand it to the cashier in the first place. And it turns out, money is a pretty popular "reward." A 2012 survey by Bankrate (RATE) subsidiary, for example, found that credit card users "prefer receiving cash more than other perks, such as airline tickets." Explained, the reason is simple: "cash is cash, and there are no tricky conversions trying to determine the value of points or miles."

Three years after its initial finding,'s latest update reports that 60 percent of "affluent Americans ... say cash back is their favorite credit card perk." And a recent Fidelity survey says that overall, 63 percent of rich and poor credit card holders alike prefer getting cash back.

Summarizing its findings, notes: "Cash back is king."

All of which makes sense. While supermarkets, gas stations and airlines may like the idea of locking customers into restrictive systems, and forcing you to jump through hoops to earn your "rewards," these aren't always good deals for consumers. All else being equal, it's better to just get more money in your pocket, whether from cash back or simply cheaper prices on goods and services. Then you can use that money to patronize whichever company offers you the best deal -- on gas or on groceries, airplane tickets or toaster ovens.

Granted, this may not be the ideal solution for the supermarkets. Presumably, the deals they've worked out with the gas station chains make it cheaper for them to offer gas-point discounts than to expend an equivalent sum on giving grocery discounts. That would explain why they've chosen this form of reward over others. But if the idea is to spend this money to "buy" customer loyalty, and if gas points aren't doing the trick -- perhaps giving loyal shoppers the rewards they actually want would be money better spent?

Motley Fool contributor Rich Smith doesn't own shares of any of the stocks mentioned above. (Nor does The Motley Fool). Rich collects gas points at the supermarket because -- well, why not? But all else being equal, yes, he'd really probably prefer cash back, too.

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