May 23, 2008
Cards Offer More Than Discounts
For some time, loyalty cards in grocery stores were largely a means to capture share of a consumer’s purchases by offering discounts on promoted products.
Today, while the broad discount aspect remains true in many stores, card programs are becoming more sophisticated: tailoring offers to individual consumers based on actual purchase history; linking in-store and online purchasing histories; delivering relevant offers through a variety of communication channels; and sending out alerts when product recalls happen.
Last month, Price Chopper in New York State sent out recorded phone messages to roughly 12,000 holders of its AdvantEdge cards who had purchased Sam Adams beer. The brewer issued a recall over concerns that bottles might contain glass defects or small fragments of glass.
“We are able to isolate the folks that need to know when it comes to food safety and security,” Mona Golub, a spokesperson for Price Chopper told The Daily Gazette. “We feel an obligation to help customers know the information they need to know and the response on the part of customers has been quite grateful.”
The purpose of the card, said Ms. Golub, “is to give people more of what they want.” In the case of a recall, she added, “it’s a way to provide people with valuable information at lightning speed.”
Discussion Questions: How close are retailers today when it comes to tapping the full potential of loyalty card programs to drive sales and meet the needs of consumers? What card program capability offers the greatest opportunity to deepen the relationship between consumer and retailer?
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The data insights available to retailers are robust, and generally, woefully underutilized. Grocery retailers have tremendous potential to build lasting relationships with consumers. How many other outlets have 40+ trips per year, and sales of $3,000+ per household annually? Grocers can and should execute differently than other retail outlets.
Direct marketing typically has meant direct mail, which requires a lead time of weeks and a cost approaching $1.00 per home. Typical response rates can not justify this investment. The alternative has been email–which is low cost for distribution, but requires resources to continually generate and update content. And with a 1% open rate, email does not often drive great results.
But consumers (and some retailers) are changing. Voice and text messaging can reach consumers quickly, and campaigns are easy to execute. Forward looking retailers will use quick-hitting media to micro-target and reach consumers with exclusive information quickly and efficiently.
Timely, targeted, engaging communication from a trusted retailer will drive both sales and loyalty.
The potential is there in grocery, but meaningful targeted execution is generally lacking today.
The retailers are only scratching the surface with respect to their use of loyalty cards. They will be better served if they make the loyalty card a smart card, potentially with RFID technology. It would be idea if when the loyal customer walks into the store, and grabs a shopping cart with an LED screen attached, and the screen welcomes the customer by name, now you have a loyal customer. Take it a step further. On the same screen, the retailer offers specials that are meaningful and anticipated to the shopper, and the loyal customer will continue to come back, because now the store is recognizing him/her on a one-to-one relationship.
We are at the infancy of utilizing loyalty cards properly.
From a market research standpoint, we geo-code customers and the dollars they spend. From there we can calculate market share by small neighborhood, the percent of sales within various mile rings, and then compare this over time.
Sometimes when store sales are dropping off, we can isolate the decline to a specific neighborhood and then simply target market that neighborhood rather than the entire trade area.
This use of the consumer network is only putting a toe in the ocean of possibilities for networked communication among brand tribe members. C2C as well as B2C will become part of the equation as we ramp up into the new ‘networked’ economy of the 21st century.
Susan really hit the nail on the head with her comments. Just to add to her statement, it’s interesting to note that all these programs are actually just management software developed by a third party. This means that any retailer looking to take their loyalty or customer communication programs to the next level simply needs to write a cheque.
That means it’s very possible that in a short time, every retailer can be offering their own unique, high quality in-store program. At that point, what really makes one any better than another?
At the end of the day, I believe it still comes down to good old fashioned service combined with a positive buying experience. Are the staff friendly and knowledgeable? Is the store clean and well laid out?
In the end, no amount of loyalty cards or discounts will compensate for a poor customer experience.
Most retailers are utilizing about 20% of the capability of their loyalty cards. Yes, the cards can be used for one-off promotions and to reach consumers in an urgent situation, like the Sam Adams recall. But there is so much more they could be doing with the data.
To be truly effective, utilizing the cards require a retailer to get very granular: looking not only at what consumers buy, but when they buy it, how frequently and in what quantity, what else was in her shopping basket and the total value of the basket.
This will allow retailers to target specific, valuable offers to consumers, offers that will provide useful information to consumers while driving retailer goals. When coupled with the internet (and most loyalty card programs do not aggressively try to capture email addresses), the cost of delivering custom offers to individual groups of consumers decreases dramatically.
Retailers have a long way to go to effectively use their loyalty card programs. It will take time and money to build these programs but if done correctly, will yield significant dividends.
Adding services to the loyalty card program is a great way to really connect with your customers. The Sam Adams recall is a prime example of connecting with the customer beyond offering them a discount. Safeway’s calorie counting program is another excellent program for its loyalty card holders. Shoppers Drug Mart’s Optimum program tailors coupons to individual customer’s buying habits and alerts card holders to upcoming promotions before the general public.
Loyalty is the way to go in years to come. I don’t think we as an industry have really tapped the potential that loyalty cards can give us. There are so many ways to communicate with the customer when they sign up that we should be doing more to connect with them on all levels.
Retailers are only scratching the surface of what they could do with loyalty cards. Most of the retailers who get my business at best make me offers based on past purchase history. But even then, they make a lot of mistakes because they’re using generic heuristics rather than any real insights.
I mean, if I’ve been purchasing diapers for two years and then stop all of a sudden, does that mean I need an offer to buy more diapers? No – it means my kid is potty trained! But it’s also an important insight into where I am in my life’s cycle, and based on other people who are ahead of me in that cycle, retailers should be able to anticipate things that I might need or like coming up – but that seems to be a bit advanced for today’s loyalty programs.
And I’ll say again, what’s so wrong with giving consumers control over what offers they want to receive? Is it really such a bad thing to let me log that I never want to receive offers for Pepsi products? Doesn’t that increase the value of an offer for Pepsi products when you can guarantee that it goes in front of only people who are receptive to such offers? When we see that kind of consumer control over how their loyalty data is used, then I think we’ll be in a truly “next gen” loyalty paradigm.
First of all, let me say that Price Chopper is doing the exact right thing. Using CRM to directly help the consumer–such as with their targeted recall alerts–is precisely what is needed to generate more loyalty for loyalty.
Now, back to your question. How close are retailers to leveraging the full potential of CRM? Not at all close. We just wrote about an NCR effort where they will be using loyalty cards to accelerate self-checkout processing by allowing the customer’s favorite foods to pop on lists first, to default to their payment specs and their language.
But retailers have for years treated CRM programs as little more than basket analysis, due to a combination of fear of privacy invasion accusations and a lack of time and incentive to do anything more.
Hopefully, that tide is now turning as retailers are generally leaving a LOT of money on the table. (Sorry for the multiple cliches in this post, but I’m tired and that’s how the ball bounces.)
The potential is tremendous. Most retailers are not using or capturing data to maximize the potential. This program gives the retailer an excellent opportunity to build an intimate relationship with the consumer and offer the capability to personalize the experience. The first hurdle has been overcome: getting the consumer to fill out the information to get the card. Other benefits include:
- Special birthday discount–drive them in to spend their birthday cash;
- Purchases and complimentary product specials;
- Special VIP sales–make me feel important, I’ll spend more;
- Email address with special coupons;
- Last year’s purchases to promote this year’s–pool supplies, etc;
- Special focus group users/advisor.
Data is king! If you know your customers you can target a marketing program that will increase sales and branding.
We are the company that provides the quick-response auto recall application which Price Chopper used to communicate the recall to their customers. This is just one small example of how a grocer or retailer can use their loyalty program database to add value to the lives of their customers. It’s not always about discounts.
I believe you will eventually see the demise of wallet busting plastic cards and most major retailers will go to full digital loyalty programs keyed off their customers’ cell phones. The customer doesn’t need to reveal any personal information (other than cell phone number), it’s 100% opt-in, and the retailer can track, measure and promote specific products based off of real customer preference and purchases. The cell phone resides in the pockets of almost 90% of their key buyer segments and offers can be delivered based around the lifestyle of the consumer, i.e.: prepared food specials at dinner time on the way home from the office, etc. There are several grocers, QSRs and specialty retailers testing what in reality is exactly as described above.
There dynamics of consumer behavior are rapidly changing and they expect retailers to adapt to their lives, not the other way around. Combine that fact with the current economic conditions and increasing media fragmentation and loyalty programs are in its infancy–morphing from the die cast age into the digital age.
Most loyalty card programs aren’t. They’re just discount cards. The data gathered is largely ignored. The retailer wants the grocery manufacturers to pay for the discounts given. End of story. End of vision. End of the line. Full stop. No analysis. No further thought. That takes time and money. Most grocers assume that any time and money spent (other than their suppliers’ time and money) can never be recovered. And if something smart was gained, it would just be copied in 6 weeks or 6 days. No additional profit. So why bother?
Having worked with retailer “loyalty” card data for over 20 years, it still amazes me that most grocers do essentially nothing with the data they collect while Wal-Mart continues to take their business. As I see it, the shopper data grocers collect is one of the few effective advantages they have over Wal-Mart (who doesn’t collect this kind of data).
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The data insights available to retailers are robust, and generally, woefully underutilized. Grocery retailers have tremendous potential to build lasting relationships with consumers. How many other outlets have 40+ trips per year, and sales of $3,000+ per household annually? Grocers can and should execute differently than other retail outlets.
Direct marketing typically has meant direct mail, which requires a lead time of weeks and a cost approaching $1.00 per home. Typical response rates can not justify this investment. The alternative has been email–which is low cost for distribution, but requires resources to continually generate and update content. And with a 1% open rate, email does not often drive great results.
But consumers (and some retailers) are changing. Voice and text messaging can reach consumers quickly, and campaigns are easy to execute. Forward looking retailers will use quick-hitting media to micro-target and reach consumers with exclusive information quickly and efficiently.
Timely, targeted, engaging communication from a trusted retailer will drive both sales and loyalty.
The potential is there in grocery, but meaningful targeted execution is generally lacking today.
The retailers are only scratching the surface with respect to their use of loyalty cards. They will be better served if they make the loyalty card a smart card, potentially with RFID technology. It would be idea if when the loyal customer walks into the store, and grabs a shopping cart with an LED screen attached, and the screen welcomes the customer by name, now you have a loyal customer. Take it a step further. On the same screen, the retailer offers specials that are meaningful and anticipated to the shopper, and the loyal customer will continue to come back, because now the store is recognizing him/her on a one-to-one relationship.
We are at the infancy of utilizing loyalty cards properly.
From a market research standpoint, we geo-code customers and the dollars they spend. From there we can calculate market share by small neighborhood, the percent of sales within various mile rings, and then compare this over time.
Sometimes when store sales are dropping off, we can isolate the decline to a specific neighborhood and then simply target market that neighborhood rather than the entire trade area.
This use of the consumer network is only putting a toe in the ocean of possibilities for networked communication among brand tribe members. C2C as well as B2C will become part of the equation as we ramp up into the new ‘networked’ economy of the 21st century.
Susan really hit the nail on the head with her comments. Just to add to her statement, it’s interesting to note that all these programs are actually just management software developed by a third party. This means that any retailer looking to take their loyalty or customer communication programs to the next level simply needs to write a cheque.
That means it’s very possible that in a short time, every retailer can be offering their own unique, high quality in-store program. At that point, what really makes one any better than another?
At the end of the day, I believe it still comes down to good old fashioned service combined with a positive buying experience. Are the staff friendly and knowledgeable? Is the store clean and well laid out?
In the end, no amount of loyalty cards or discounts will compensate for a poor customer experience.
Most retailers are utilizing about 20% of the capability of their loyalty cards. Yes, the cards can be used for one-off promotions and to reach consumers in an urgent situation, like the Sam Adams recall. But there is so much more they could be doing with the data.
To be truly effective, utilizing the cards require a retailer to get very granular: looking not only at what consumers buy, but when they buy it, how frequently and in what quantity, what else was in her shopping basket and the total value of the basket.
This will allow retailers to target specific, valuable offers to consumers, offers that will provide useful information to consumers while driving retailer goals. When coupled with the internet (and most loyalty card programs do not aggressively try to capture email addresses), the cost of delivering custom offers to individual groups of consumers decreases dramatically.
Retailers have a long way to go to effectively use their loyalty card programs. It will take time and money to build these programs but if done correctly, will yield significant dividends.
Adding services to the loyalty card program is a great way to really connect with your customers. The Sam Adams recall is a prime example of connecting with the customer beyond offering them a discount. Safeway’s calorie counting program is another excellent program for its loyalty card holders. Shoppers Drug Mart’s Optimum program tailors coupons to individual customer’s buying habits and alerts card holders to upcoming promotions before the general public.
Loyalty is the way to go in years to come. I don’t think we as an industry have really tapped the potential that loyalty cards can give us. There are so many ways to communicate with the customer when they sign up that we should be doing more to connect with them on all levels.
Retailers are only scratching the surface of what they could do with loyalty cards. Most of the retailers who get my business at best make me offers based on past purchase history. But even then, they make a lot of mistakes because they’re using generic heuristics rather than any real insights.
I mean, if I’ve been purchasing diapers for two years and then stop all of a sudden, does that mean I need an offer to buy more diapers? No – it means my kid is potty trained! But it’s also an important insight into where I am in my life’s cycle, and based on other people who are ahead of me in that cycle, retailers should be able to anticipate things that I might need or like coming up – but that seems to be a bit advanced for today’s loyalty programs.
And I’ll say again, what’s so wrong with giving consumers control over what offers they want to receive? Is it really such a bad thing to let me log that I never want to receive offers for Pepsi products? Doesn’t that increase the value of an offer for Pepsi products when you can guarantee that it goes in front of only people who are receptive to such offers? When we see that kind of consumer control over how their loyalty data is used, then I think we’ll be in a truly “next gen” loyalty paradigm.
First of all, let me say that Price Chopper is doing the exact right thing. Using CRM to directly help the consumer–such as with their targeted recall alerts–is precisely what is needed to generate more loyalty for loyalty.
Now, back to your question. How close are retailers to leveraging the full potential of CRM? Not at all close. We just wrote about an NCR effort where they will be using loyalty cards to accelerate self-checkout processing by allowing the customer’s favorite foods to pop on lists first, to default to their payment specs and their language.
But retailers have for years treated CRM programs as little more than basket analysis, due to a combination of fear of privacy invasion accusations and a lack of time and incentive to do anything more.
Hopefully, that tide is now turning as retailers are generally leaving a LOT of money on the table. (Sorry for the multiple cliches in this post, but I’m tired and that’s how the ball bounces.)
The potential is tremendous. Most retailers are not using or capturing data to maximize the potential. This program gives the retailer an excellent opportunity to build an intimate relationship with the consumer and offer the capability to personalize the experience. The first hurdle has been overcome: getting the consumer to fill out the information to get the card. Other benefits include:
Data is king! If you know your customers you can target a marketing program that will increase sales and branding.
We are the company that provides the quick-response auto recall application which Price Chopper used to communicate the recall to their customers. This is just one small example of how a grocer or retailer can use their loyalty program database to add value to the lives of their customers. It’s not always about discounts.
I believe you will eventually see the demise of wallet busting plastic cards and most major retailers will go to full digital loyalty programs keyed off their customers’ cell phones. The customer doesn’t need to reveal any personal information (other than cell phone number), it’s 100% opt-in, and the retailer can track, measure and promote specific products based off of real customer preference and purchases. The cell phone resides in the pockets of almost 90% of their key buyer segments and offers can be delivered based around the lifestyle of the consumer, i.e.: prepared food specials at dinner time on the way home from the office, etc. There are several grocers, QSRs and specialty retailers testing what in reality is exactly as described above.
There dynamics of consumer behavior are rapidly changing and they expect retailers to adapt to their lives, not the other way around. Combine that fact with the current economic conditions and increasing media fragmentation and loyalty programs are in its infancy–morphing from the die cast age into the digital age.
Most loyalty card programs aren’t. They’re just discount cards. The data gathered is largely ignored. The retailer wants the grocery manufacturers to pay for the discounts given. End of story. End of vision. End of the line. Full stop. No analysis. No further thought. That takes time and money. Most grocers assume that any time and money spent (other than their suppliers’ time and money) can never be recovered. And if something smart was gained, it would just be copied in 6 weeks or 6 days. No additional profit. So why bother?
Having worked with retailer “loyalty” card data for over 20 years, it still amazes me that most grocers do essentially nothing with the data they collect while Wal-Mart continues to take their business. As I see it, the shopper data grocers collect is one of the few effective advantages they have over Wal-Mart (who doesn’t collect this kind of data).