Loyalty Pays Off for Safeway

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Customer Engagement
Customer Experience
Last week, Safeway Inc. announced that its customer loyalty program helped its fourth quarter net income rise 13 percent. Wall St. responded favorably to the news, pushing the company's shares up 14 percent on the New York Stock Exchange the day of the announcement. Meanwhile, the company is tracking toward having its same-store sales gain 2 percent for the first eight weeks of 2013, according to chairman and CEO Steve Burd. The company's recent financial performance is encouraging given that other retailers and restaurants are seeing sales sag as a hike in U.S. payroll taxes and rising energy costs are eating into consumers' disposable incomes.

Last week, Safeway Inc. announced that its customer loyalty program helped its fourth quarter net income rise 13 percent. Wall St. responded favorably to the news, pushing the company's shares up 14 percent on the New York Stock Exchange the day of the announcement. Meanwhile, the company is tracking toward having its same-store sales gain 2 percent for the first eight weeks of 2013, according to chairman and CEO Steve Burd. The company's recent financial performance is encouraging given that other retailers and restaurants are seeing sales sag as a hike in U.S. payroll taxes and rising energy costs are eating into consumers' disposable incomes."We cannot see any blip in our numbers as a result of the payroll tax kicking in," Burd told analysts in a conference call.

Safeway recently introduced a new personalized shopper program called "Just for U" which extends additional coupons and savings to the company's Club Card holders based on their product interests and purchase history. A video tutorial which demonstrates how to sign up for the program makes it seem very easy. While smaller grocery bills are incentive enough for customers to sign up for a program like Just for U, making a loyalty program easy for people to register for and use is critical for its success.

Treating customers right makes good business sense and the approach appears to be paying off for Safeway. Last week, Bank of America upgraded the company's stock from "underperform" to "neutral" while raising its share price objective from $18.00 to $24.00 based on "signs that SWY's initiatives are supporting improved volumes & could gain traction in 2013."

Safeway's customer-centric approach appears to be benefitting both the company and its customers. A recent study by the National Retail Federation finds that nearly three-quarters of U.S. taxpayers (73 percent) have had to adjust their spending plans because of the payroll tax changes. Fifty eight percent of those consumers polled say they've either been "somewhat" or "greatly" affected by the tax increase. Meanwhile, the average retail price for "regular" gasoline has jumped 45 cents per gallon since the start of 2013, according to the U.S. Energy Information Agency.

Has your organization adjusted its strategies to accommodate the spending pressures being felt by U.S. consumers?

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