The Cost of Customer Loyalty
For the past few months, I've made a point to buy gas at a nearby Chevron station because they gave me a customer loyalty card. After I fill up my tank ten times, I'll receive a free “gold” car wash (a $5 value). By my calculations, this loyalty card ought to save me $.50/tank, or roughly five cents a gallon.
But I noticed something yesterday. While this Chevron is charging $2.66/gallon for regular unleaded, the independent station down the street is charging $2.60/gallon. On a hunch, I drove past several more gas stations. Another independent was charging $2.60/gallon, as was a Texaco dealer. Two Shells were each charging $2.62/gallon. A second Chevron was charging $2.64/gallon.
I'm not the kind of guy who's going to drive out of his way to save two cents per gallon on gas. Even so, it seems pretty silly that my customer loyalty card will actually end up costing me a buck. If I'd been filling up at the local independent, I'd be saving about six cents a gallon over the Chevron station. After ten fillups, I'd have saved enough to pay for a car wash and have a buck left over to put quarters in the vacuum cleaner.
I wonder what the actual value of customer loyalty programs is. I know why the business do it — such promotions generate repeat business — but what's the value to the consumer? Obviously there's a perceived value: when we participate in a loyalty program, we believe we're saving money. But are we?
Here are the other loyalty cards I have in my wallet:
- Safeway — I would shop at Safeway even without this card. It's the only grocery store convenient to us. Thus, this card saves me money. (It also allows Safeway to track my spending.)
- Ace Hardware — Again, I would shop at this store even without the card. Our local Ace has a real “neighborhood store” feel to it, and I much prefer it to Home Depot. Kris and I often marvel that Ace makes any money on us at all. Because of their program, they're always mailing us $5 coupons and other discounts. Another winner.
- Oregon Book Company — Buy twelve books, get $5 off your thirteenth. In other words, save 39 cents a book. Since all of the books are at full retail price, this loyalty program is almost worthless. I like to support local merchants, but this isn't much incentive.
Ultimately, it doesn't make a difference to me. This Chevron is convenient on my trip home from work. I'll continue to buy gas there. I only wish my loyalty wasn't being “taxed”.