If you've got one of those blue-green-yellow "Fresh Values Frequent Shopper" cards in your wallet, you are part of a growing trend in the fiercely competitive grocery industry to target certain customers, give them what they want and keep them coming back.

Smith's Food & Drug Centers began the promotion earlier this month. Customers fill out brief questionnaires to get a plastic card and two small key chain cards that offer discounts on a variety of products. The savings are spelled out in advertising fliers, in-store signs and the checkout stand receipt.An example? This week, bananas that cost 49 cents a pound are 29 cents for cardholders.

Notoriously thrifty Utahns are signing up eagerly. But a few wonder whether this is just another sales gimmick and whether their privacy is being compromised.

The promotion is different from regular sales, says Shelley Thomas, vice president of public affairs for Smith's.

"This is what is called loyalty marketing. The concept is being developed in all sectors, the most noticeable of which is the frequent flier program, although it is not exactly that. We want to thank and offer more shopping incentives to our loyal customers," Thomas said.

One way is to offer price reductions on more than 3,000 items on Smith's shelves, she said. Another is through mailing "special incentives" to shoppers that can include manufacturer's coupons, gift certificates and even discounts from non-grocery businesses in partnership with Smith's. These partnerships currently are being negotiated and will be announced later.

There are two industry phenomena at work. For Smith's, this is loyalty marketing to keep customers shopping at Smith's. For manufacturers, who cut wholesale prices for Smith's, which in turn cuts retail prices for customers, this is a "continuity program" to keep customers buying their brand.

One example: "A manufacturer would come to us and say, `Here are X number of dollar-off coupons. We would like you to thank any Smith's shopper who has purchased our product in the last year with a coupon.' And we would mail them out," Thomas said.

She wants to make one thing clear: "We are not selling the list. We are getting more concern about the privacy issue in Utah than in any other state. We are not going to violate anyone's privacy."

Thomas said this is simply efficient target marketing. "I don't mind that someone knows what I'm buying if they're going to thank me and reward me for it," she said.

"The response to Fresh Values has been tremendous because the savings are apparent," Thomas said. "I saved $10.58 on my shopping order, which was $200, and I didn't alter my shopping - that was just the normal stuff I wanted to buy. I never did that well with coupons. This program appeals to people who don't have the time to survey, organize and clip coupons."

Many supermarkets have used frequent shopper cards in recent years to do everything from building customer loyalty to figuring out what size cereal boxes are the most popular.

"Grocery store marketing is absolutely a science," said Jim Olsen, president of the Utah Food Industry Association.

Many customers know that certain things are displayed at eye level and that stores are laid out so that fetching a gallon of milk means hiking to the back of the store past aisle after aisle of tempting buys.

But what many customers may not know is the level of sophistication in the grocery industry. Smith's and other companies watch trends, track spending habits to get occasional shoppers to become frequent shoppers and employ a variety of overt and subtle marketing techniques to get people to buy things.

One reason for this is that the grocery industry is extraordinarily competitive and at the same time is regulated by what generally are known as "minimum mark-up" laws.

"The profit in the industry is approximately 1 percent net," Olsen said. "After paying all your expenses, the costs of doing business and your taxes, in the end you're left with 1 cent on the dollar in profit for grocery stores. That's why it's a science - the margin of error is so small."

Additionally, all retailers are bound by law not to undersell products. They can either document the exact price of each item or they can use a general 6 percent mark-up figure spelled out under the state's "Unfair Practices Act," according to Francine Giani, director of the Utah Division of Consumer Protection.

Giani said the law was enacted in 1937 to prevent giant corporations from first wiping out mom-and-pop stores by underselling and then jacking up prices once the competition's gone.

So how tough is competition in the grocery world?

Well, people can buy food at a lot more places today than in previous decades. Gigantic "super-stores" with grocery sections have sprung up throughout the nation. Discount stores have added food shelves. Video stores sell snacks. Convenience stores carry fresh fruit. Dual-career couples and single parents rely heavily on restaurants.

Industry experts say grocery stores have moved beyond competing just with each other and now face a potential erosion of their customer base by other companies. That means building customer loyalty is more important than ever.

Richard Shulman wrote in "Supermarket Business" in 1966 that grocery store frequent-shopper programs need to do something different to succeed: "This new retailing initiative is predicated on gathering as much information about your customers as possible and using that information to keep a loyal customer and make a satisfied customer loyal."

Shulman wrote that store information about customers can be cross-referenced with Census Bureau data, mapping data from specialty software providers and syndicated market research.

So what's the response from Smith's biggest direct competitor, Albertsons Food & Drug Stores?

One of its latest promotional flyers reads: "When it comes to saving you money, Albertsons holds all the cards! No games, no gimmicks, no cards . . . Just everyday low prices!"

Jenny Enochson, Albertsons media relations coordinator, said the chain is not launching its own card. "We have looked into this kind of option but have no plans to do so at this time.

"Our philosophy is based in providing everyday low prices to each and every one of our customers rather than selecting certain individuals, for example a cardholder, to receive additional discounts," Enochson said.

She said Albertsons offers discounts through in-store promotions. "When we make a special wholesale purchase, we pass the savings along to our customers through our `Bonus Buy Program.' If shoppers walk through our stores, they will find signs alerting them to the bonus buy items.

"It lets all customers capitalize on the savings rather than a select few."