Sainsbury puts loyalty to the test

When Tesco launched its loyalty card scheme 18 months ago, Sainsbury was dismissive. David Sainsbury, chairman of the store group, described the move as no more than an "electronic Green Shield stamp".

Yesterday, Sainsbury appeared to join the crowd, by launching the Reward Card. This latest piece of plastic to clog up the shoppers' wallets was unveiled the same day as Tesco launched its new Clubcard Plus - so signalling the latest round of the trolley wars.

The purses of the British public are now awash with cards rewarding them for undying loyalty to one or another supermarket. Sainsbury's faithful should, by now, have two cards - Spend & Save, used in Homebase, and the all-new Reward. Tesco customers will be putting the Clubcard Plus next to their Clubcards.

Clive Vaughn, a consultant at Verdict Research, the specialist retail analysts, said: "These schemes obviously work. Tesco has managed to get 8.5 million people to sign up. And the cards give the supermarkets vast amounts of data about who is buying what, information that they are only just starting to use effectively."

Mr Vaughn thinks that, on balance, Tesco's Clubcard Plus offers the best value. "Sainsbury is now where Tesco was 18 months ago," he said. Like other loyalty discount bonus schemes, the Reward Card allows customers to build up points when they spend more than a certain amount. In a major link-up with British Airways, customers with this card can also clock up Air Miles.

Clubcard Plus, meanwhile, develops the loyalty card into a payment card. The money that members put on to their cards each month is deducted from the balance reached after a shop at Tesco. The money earns interest at a rate of 5 per cent per month and credit is given at 9 per cent. Money can be withdrawn through "cash-back" and at NatWest cash machines.

Tesco has not yet commented about Sainsbury's marketing about-face, but an insider suggested that the supermarket had itself turned down a similar deal with Air Miles. "We have had discussions with a number of companies," said a spokeswoman for Air Miles. "Sainsbury's was attractive to us, as we share a similar brand image."

Sainsbury is keen to regain the number-one supermarket slot now occupied by Tesco. Last month the chain revealed a pounds 100m slump in annual earnings, its first fall in profits for 22 years as a public company. "We are confident our new card will pull business away from [rival supermarkets]," said Kevin McCarten, Sainsbury's marketing director.

Mr McCarten predicts that the Reward Card will produce sales growth of about 3 per cent. Launching it is costing the group between pounds 10m and pounds 15m, but the link with British Airways produces a vast database and valuable marketing information on about 10 million people.

As for the other players in the field, Safeway maintains its ABC card still offers a better deal, while Asda, which initially sat out the early trolley wars, has finally succumbed to the loyalty trend by trialling a card in 18 stores nation-wide.

"But surveys we have conducted show that people are far more concerned with value for money than with loyalty schemes," said Judith Robinson, the supermarket's marketing director. "Independent research has shown that we offer the lowest prices nationally and our priority is to maintain that."

How supermarket chains hope to score points and woo customers

Tesco Clubcard Plus

Points exchanged for cash vouchers after a minimum spend of pounds 5 (pounds 10 on the original Clubcard). Money paid each month on to card at 5 per cent interest, which is then debited each time the card is used. Can also use to withdraw cash from NatWest machines. Allows people to budget for food and petrol.

Independent Loyalty Rating: 33333 Points mean prizes.

Sainsbury's Reward Card:

Points exchanged for Air Miles or vouchers after a minimum spend of pounds 5, one point for every pound. Eventually, vouchers will be available at check-outs to cut out hassle. Air Miles can be exchanged for a wide variety of goods, but no credit facility.

Independent Loyalty Rating: 333 Took 18 months to copy Tesco's idea, which was ridiculed at the time by one David Sainsbury.

Waitrose Card:

Free Waitrose account card with 18 per cent APR. Customers can receive up to 56 days interest-free credit. Good credit facility, but not accepted by cash machines. No money-off vouchers for Waitrose's middle-class customers.

Independent Loyalty Rating: 333 Money-off facilities can never be too downmarket.

Safeway ABC Card:

Customers collect one point for every pound, without having to spend a minimum amount. Points can be redeemed at the till. No minimum spend.

Independent Loyalty Rating: 3333 In-store payment points planned for the future. Customers will soon be able to "Shop and Go".

Budgens Loyalty Card:

Customer Visa card with 22.4 per cent APR. pounds 10 bonus for every pounds 200 spent at Budgens or pounds 500 spent elsewhere. pounds 15 fee after first year.

Independent Loyalty Rating: 3333. Access to cash-points world-wide, when you've flown abroad on your Sainsbury Air Miles.