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Discounts Are One Thing, But Gouging Is Another

November 18, 1999|KENNETH REICH

Most of the public now accepts the airlines' practice of offering deep discounts on seats purchased well in advance for leisure travel, happy that the prices are dramatically below the fares available a day or two before flights.

Similarly, many major grocery chains, including Ralphs and Vons in the Southland, offer club cards, giving regular customers discount prices that customers without the cards can't get.

A survey by the Food Marketing Institute shows that 50% of grocery customers nationwide say their markets offer cards and that 66% of the cardholders use them once a week and 85% at least once a month.

The grocery cards have drawn only scattered objections.

But some differential pricing plans on consumer goods have proved highly unpopular. When Coca-Cola said last month that it was developing vending machines that would charge more on hot days, when the drink is most in demand, than on cold ones, the outrage was so great that the company quickly and categorically backed down.

"We are not introducing vending machines that raise the price of soft drinks in hot weather, and we have no plans to commercialize technology that would do this," Ben Deutsch, a company spokesman, told me.

Another example of pricing that has proved of questionable popularity is the very high charges for the millennium celebrations scheduled for this New Year's. Reservations for such events have been so sparse that some, including key events in both Los Angeles and San Francisco, have had to be canceled.

It didn't take many would-be millennium eventgoers long to figure out that if they waited three weeks into the new year, cruises, hotels, restaurants and so forth would be spectacularly cheaper.

What is the principle at work here? It seems that rewarding customer loyalty with a discount is acceptable, but price gouging is not.

Higher Coke prices in hot weather would be the opposite of rewarding loyal customers. Such a practice would penalize those customers, who could grow a lot less loyal in a hurry.

To cite another example, no newspaper would charge newsstand buyers more on a big news day than a small one. That would discourage new readers at the very time they might be most inclined to buy.

Although club cards in the grocery stores seem widely accepted, they are not universally so. I've received occasional letters objecting to them on grounds that they breach privacy because they allow stores to chart purchasing patterns, or sometimes that they discriminate against non-cardholders.

One such letter came from Yolanda Salas of Los Angeles, who said she has quit using the cards.

"I now find them grossly unfair to those consumers who do not use them," she wrote. "This method of doing business penalizes those consumers who refuse to divulge personal information [to get cards] and are not allowed the discounts.

"The management of the supermarkets, and all businesses for that matter, should be required to state their duplicitous intention of selling personal consumer information, just as the banks are required to."

But Salas seems mistaken on two counts. The banks have successfully lobbied in Washington to reduce restrictions on peddling customers' personal information. They are often selling such data with impunity.

Meanwhile, the grocery stores deny breaching customers' privacy.

Ralphs says it does not require people to give personal information, other than their name, to get the card, if they don't want to.

Those giving information can forbid Ralphs to mail them sales promotions.

Vons, too, allows customers to refuse mailings and says it does not sell cardholders' information.

The Food Marketing Institute has issued its own privacy guidelines for grocery stores, declaring in part, "Personalized data should be transferred, rented, sold or exchanged . . . only with the written consent of the customer."

This is a stricter privacy policy than observed by most banks.

Maybe the club cards are a fad that won't last.

Albertsons stores have never used them, and when the chain recently acquired about 200 Lucky markets, it promptly did away with the Lucky card.

Albertsons spokeswoman Jenny Enochson says, "We believe our 'bonus buy' program is superior in delivering low prices to all customers with the least hassle."

Such items are marked with yellow and orange tags, and at the end of every customer receipt, an amount appears showing exactly how much the shopper has saved.

"We've found in our market surveys . . . that customers don't like to carry a card, but they do want to know immediately how much they saved," Enochson said.

Vons, on the other hand, is happy with its 11-year-old card.

"It's a way for us to provide thousands of products for discounts, a way to reward our most loyal customers," said spokesman Kevin Herglotz. "Ours is the only club card that has a charity provision. Two to 4% of the total purchase, depending on the amount, we give to charity."

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