Do Pricing Discounts Really Build Customer Loyalty?

Where I live, there are two grocery chains - Fred Meyer and Quality Food Centers (QFC). Actually there are several more, but what ties these two together is that they are both owned by a single parent company Kroger. In spite of that, the two stores have two different card programs. QFC uses the standard grocery card program where they have two sets of prices on many things: a regular price and a member price (member being a person with a card).

Fred Meyer, on the other hand, uses a rebate program with their card. The card doesn't immediately save you anything. The prices are the same whether you have card or not. The rebate program is quarterly and the more you spend the more points you earn that quarter. At the end of the quarter, you receive dollar valued coupons along with percent-off coupons. How much dollar value from the coupons you get depends on how much you have spent during the quarter -- it's scalable!

Interestingly, Fred Meyer’s normal prices on standard items are far less than QFC. Where do you think I shop? The rebate style incentive gets customers to return, the first kind that QFC uses doesn't. QFC needs to rely on other things to get customers to return.

What does all this have to do with home based businesses? Well I have always felt that customer loyalty is not created just by showing a lower price and/or bragging about your low prices. There are other price tricks too; like having the list price stricken out and having another (much lower) price alongside it marked "our price". I think customers will appreciate a fair price even more if there is an incentive there. After all, "what's in it for me?" is one of the questions business owners must ask (and answer) on behalf of their customers.