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”.

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ctsc
ctsc
13 years ago

You failed to take into account that the quality of the gas at Chevron is higher than all the other stations you listed other than Shell, unless the independents you mentioned are on the list in the link below. By purchasing gas from chevron you are extending your engine life, saving you money in the long run

http://www.toptiergas.com/retailers.html

Susan
Susan
13 years ago

Another way to look at is that it’s actually your convenience that’s being taxed, and the loyalty card is getting you a bit of a refund. Loyalty programs exist to serve the retailer and only the retailer; they are marketing programs pure and simple (just like TV exists only to make us buy things). My local coffee shop has loyalty cards – you know, the 10th latte’s on them. Most of the customers leave their cards at the shop, alphabetized in a box on the counter (easier than keeping it in your wallet). On the rare occasion I buy coffee… Read more »

Charles
Charles
13 years ago

Your Safeway card is not designed for your convenience or savings. It is designed to collect information on your purchases. Safeway has a powerful consumer information database and actually makes more money selling statistics to marketing companies than it makes profit on groceries.

dimes
dimes
13 years ago

I agree with Susan. You go where it’s convenient. If you were bypassing other gas stations to go to the Chevron, you’d be a schmuck. If you were fickle, you’d go where the gas is cheapest (not overly out of your way though) and then go to the cheapo car wash down the road that only costs $3, but is DIY.

matt
matt
13 years ago

I buy my gas at Speedway. It works out so that I get a discount of 7-10% (and 12% to start out with) in exchange for paying in advance. It works like this: – I got a Speedway MasterCard (from Chase), which has 8% rewards for the first 60 days and 4% thereafter on all purchases at Speedway. Purchases made at other places give me 1% rewards. – I enrolled in the Speedy Rewards program. – I buy discounted Speedway gift cards. They usually sell for $24 for a $25 card or $49 for a $50 card. They run this… Read more »

The Tim
The Tim
13 years ago

If you take issue with Safeway tracking your personal spending habits, why not become a clone of Rob Cockerham?

http://www.cockeyed.com/pranks/safeway/ultimate_shopper.html

Also, no offense to ctsc in comment #1 above, but I’m pretty sure there’s not a significant difference in “quality” between different brands of gasoline.

The consensus at metafilter seems to confirm this:

http://ask.metafilter.com/mefi/23613

P.S. (I actually contributed a worthwhile–I hope–comment to a post that wasn’t related to housing! :^) )

Nickey Robo
Nickey Robo
13 years ago

I avoid the Safeway loyalty card like the plague. Instead of having my own, I enter the phone number “123-4567.” It works, and I have no idea who the number belongs to (although it is obviously not a real phone number). It is obvious that tons of other people do this too, because at the bottom of the receipt it always says something like “you have purchased 5 of 7 drinks towards your 67th free Starbucks drink!” For me, though, I try to avoid Safeway in general. It is the closest grocery store to my house- it’s only three blocks… Read more »

Gaming the Credit System
Gaming the Credit System
13 years ago

Susan has a good way of looking at it. It’s not worth it to go out of your way to get a convenience card if there are better deals around, but if you find yourself using the same store over and over again, it makes sense to get their convenience card since you’re already shopping there frequently, despite the price differences. That’s why I got my Shell MasterCard. It gives me 5% back on gas purchased at Shell (the 5% rebate applies only towards more gas at Shell). I simply found myself always going to a particular Shell station that… Read more »

J.D.
J.D.
13 years ago

In a strange co-incidence, we discussed this subject (tangentially) tonight at my writers group. Three of the guys live in the same neighborhood, an area where they can walk to many conveniences. Because it’s Portland, the neighborhood has two (maybe more) coffee shops. The guys all used to go to one coffee shop. Now, though, one of the guys has switched to different coffee shop. “It’s a bit farther to walk,” he said, “but I like it better. They have more comfortable seats, so I don’t feel rushed. They remember my name. And they have a loyalty card, which gives… Read more »

Dorkydad
Dorkydad
13 years ago

At least there is full disclosure in the higher price you’re paying at that Chevron. Price discrimination on the web is pretty rampant and not very transparent. As you’ve experienced, loyal customers are less likely to shop for better deals, and therefore, often unwittingly, end up paying more. It always pays to shop around.

Dusty
Dusty
13 years ago

My local gas station offers a prepay card program where you prepay your gas on a card and then use the card at the pump (no personal information is required when you sign up). Originally it was supposed to save you 5 cents/gallon, but in the past few months I’ve noticed that it is actually deducting 10 cents/gallon (after you swipe the card the digital price above each grade changes). The station is normally quite competitive, although sometimes it seems to be a cent or three higher, but I figure I’m still saving 7 cents per gallon. In my opinion… Read more »

martin
martin
13 years ago

my $.02 (pun intended) is that it entirely depends on the situation. I have a safeway loyalty card, but if safeway wanted to know my spending habits, I buy extremely large quantities of beer on the holidays and the occasional bag of chips with salsa. I don’t care at all if they have this info. But it sometimes drops the price of the case from $12 to $9.99, well worth it for me. I also have a buy 12 get the 13th free at Hamilton Deli by Columbia Universty. Getting that 13th free just remind me I have spent $70… Read more »

Bob
Bob
13 years ago

I’ve found this website is pretty useful (although not always accurate) way to compare gas prices in the area.

http://autos.msn.com/everyday/GasStations.aspx

It doesn’t rely on user input (like GasBuddy) but instead some combination of credit card data and magic.

I wouldn’t go out of my way to hit the cheapest one on the list (especially since it tends to lag actual prices by a day or two), but it definitely helps to show what the average of the area is and if you’re being taken to the cleaners while filling up on gas.

fumbducker
fumbducker
13 years ago

i dont get it. unless you are in a situation of extreme penny pinching, how is saving 5 cents per gallon worth the effort? even if you fill up 3 times per week thats a savings of about 100 bucks per year..

James Kew
James Kew
13 years ago

Colour me a penny-pincher then, because to that I say: how is saving $100 per year *not* worth the minimal effort of keeping an occasional eye on the prices?

ScooterWes
ScooterWes
13 years ago

The Chevron gas is a higher quality with the Tecron additive. Over the last few years I’ve noticed a significant difference in engine performance (and therefore engine longevity); with the Chevron gas the engine runs better than with the discount independent brands, which don’t have any performance additives.

Gwyn
Gwyn
13 years ago

You’ll be better off in the long run if you *don’t* get the car wash. All of the automatic car wash machines slowly degrade your paint work. You’ll notice after a while of using them that you get small scratches in the paint. You’re better off doing it at home with a hose, bucket and a sponge.

Steven
Steven
13 years ago

When I had a car, I just let the rain wash it. I’d do a good scrubbin’ (by hand – soap in a bucket costs practically nothing, and I spent perhaps half an hour of my time) about once every summer. I did not notice any significant decline in my (used) vehicle’s appearance over the years.

James
James
13 years ago

Good call on the safeway card. We have one as well and use it nearly every time we go to safeway.

Best,

James H.

23h12rjuh12
23h12rjuh12
13 years ago

Most gasoline stations give you 5% rebate on purchases at their chain if you use their credit card. Discover card has a gas card that gives you 5% back on gasoline and auto repairs. Hess gives you back 10% for the first 90 days you have the card (I called and was told it’s actually 5 billing cycles) If you aren’t getting 5% back, you are subsidizing everyone else who is. If you have problems handling credit then it might be better to avoid credit cards – but unfortunately stores raise prices for everyone to pay the transaction costs for… Read more »

Karla
Karla
13 years ago

I buy gas at Chevron based purely on price. Not because it’s the lowest, but because it’s consistent – all Chevron’s within a ten mile or so radius are all relatively consistent. On the other hand, there are three Shell gas stations on a one mile stretch of street, yet the variance is typically about 10 cents a gallon, and occassionally as much as 19 cents a gallon. Do I always get the best price? Nope. But I appreciate not feeling ripped off when I pass the next station.

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