You Can Be Bought for a Dime

Try one of our proven sales seminars.
A sales seminar that lives up to its promise.

Free Articles and Shortcuts Tips

You Can Be Bought for a Dime

By Paul Johnson


We like to believe we're rational creatures. We make good, logical decisions based on the facts. We're smart. Yet somehow a clever retailer has elegantly sidestepped all that and managed to earn our loyalty for one thin dime.


What Price Loyalty?

Loyalty programs are as common as Camrys these days. A novel marketing innovation when they were first introduced, ground-breaking programs like American Airlines frequent flier program have now been copied by all their competitors. Loyalty programs are now more of a consumer expectation than a company advantage. According to the 2005 book Loyalty Myths, 91 million participants belong to the 90 frequent-flier programs, and many of them belong to five or more. Any advantage American Airlines once had is long gone.

That's what makes this new program so intriguing. It's so simple, so cheap... so irresistible.


These Groceries are a Gas

The Kroger Company is one of the largest grocers in the U.S.. They also run hundreds of convenience stores under the banner of a Quik Stop and Kwik Shop. Here in my hometown of Atlanta, we've seen them merge these two businesses by putting gas pumps on the parking lots of their grocery stores. I personally didn't make the association between gasoline and food, but apparently the folks at Kroger thought it worth a try.


Now here's where the genius comes in. A few months back, Kroger introduced a loyalty program that connects grocery purchases with gasoline discounts. The proposition works like this: for every hundred dollars in groceries you buy, you save 10¢ a gallon on your next fill up. It sounds simple enough, but I can't believe the huge change in behavior that 10¢ creates. Even in my own household, we talk of planning our purchases around Kroger gas fill-ups.

  • "The _____ vehicle is low on gas. Let's go to Kroger and fill up. Be sure to grab the grocery list..."
  • "Our $100 credit expires tomorrow. Better run over to Kroger and fill up the tank, even though it's only half empty, or we'll lose our credit."
  • "We need gas NOW, but let's try to make it to a Kroger station because it'll probably be cheaper there with our 10¢ discount." 


Funny Money

These all sound rational on the surface, until you start looking at the numbers. If our vehicle gas tanks were nearly bone-dry, one tank would hold 15 gal., the other 20. My maximum savings would therefore be $1.50 and $2, respectively. Was I really changing my behavior -- day in and day out, week after week -- to save $2? Does this sound rational and logical, especially when you consider how fast we can throw away two bucks?

  • We drop in at Starbucks.
  • We order a full salad instead of a half salad, and then not finish it.
  • We order magazines and newspapers that we don't read.
  • We throw away a printer ink cartridge before it's not really empty, because we're tired of seeing the "low ink" pop-up message on our computer screen.


Yet we continue to think we're rational beings. Kroger knows the joke's on us.


And I know it's not just me. Last Friday afternoon, I went by the Kroger gas station and there were cars at almost every pump -- eight or nine of them. Across the street was the BP station with one car at the pumps. And the posted BP price was 5¢ a gallon less! That means Kroger customers were saving a net of just 5¢ per gallon -- maybe a buck total -- AFTER they spent $100 on groceries. This monkey business is sure working for Kroger!


It's Truly Monkey Business


In a news release from Yale University dated June 20th, 2005 ( ) they report that "Humans Rational and Irrational Buying Behavior is Mirrored in Monkeys". A basic economic theory is that people work harder to avoid losing money than they do to make money. Researchers wanted to test this theory to see if it was shared by monkeys, suggesting that this trait has a long evolutionary history.

I'm not sure that this is comforting or not, but the monkeys' behavior supported this theory. M. Keith Chen, assistant professor at Yale School of Management, reports, "The economic view says people are aware, rational and in control of their major decisions. Social psychology cuts in the opposite direction, maintaining that people are often unaware of the forces that dictate their behavior." Chen adds, "We are fighting tendencies that may be biologically hard-wired." Apparently Kroger is using that wiring to their advantage.

We can all agree it is stupid to pay too much for anything. Plus, we'll work hard to NOT lose a price advantage WE'VE ALREADY EARNED, even if it's only 10¢. In the process, look at what Kroger gains: They not only sell more gas (I never bought Kroger gas before they offered the discount), they also sell more groceries. What's it cost them? They limit a fill-up to 33 gal., so their cost -- the most you can save -- is $3.30, or 3.3%, of your $100 grocery purchase. I'm guessing their real cost is actually closer to 1%, considering that most gas tanks are smaller than 33 gallons, credits expire, they buy the gas wholesale, and so on.


Make Me Stop!

I'm trying to rebel, but it's hard. Whenever I get a Kroger receipt, I avert my eyes from my grocery credits total revealed at the bottom. I try to forget about the expiration dates. I struggle to wait until my tank is really empty before I fill up wherever I am, instead of topping off at Kroger when my needle is nowhere near "E". I try, but sometimes that biological hardwiring takes over. Have I become a Kroger Gas Zombie? Rationally, logically, I say, "Hell, No!" But then, we're not rational and logical, are we?


I applaud Kroger for coming up with a fresh, new loyalty plan that seems to really work. And their timing couldn't be better. With higher gas prices, we're all paying more attention to the money we spend at the pumps. But is it rational to pay so much attention to a dime? Apparently we can't stop ourselves. The marketing gurus at Kroger have broken that behavioral code, and now they're buying our loyalty for a dime.



© 2005 Paul Johnson. All rights reserved.




Note: This article is available for reprint at no charge. We only ask that you include our copyright notice in your reprint, along with the About the Author (byline) information we provide at the end of the article.


Back to Articles Index