EXPERT ANALYSIS
SECTION ONE
SECTION TWO
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Are Supermarket Loyalty Programs in Trouble?
The 2013 COLLOQUY Loyalty Census reported that in 2012 there were 172.4
million memberships in supermarket loyalty programs, down 1% from 173.7 in
2010. Until recently, loyalty program totals have generally only gone upward.
Several retail chains -- Abertsons, Shaw's, Acme Markets and Jewel-Osco -
recently announced the elimination of their loyalty programs. Shaw’s has been promoting the change as "Card Free Savings" with everybody getting a low price whether a member of the loyalty program or not. In fact, Shaw's announced on its website: "The card isn't so special anymore. Everyone has one."
KEY QUESTIONS:
Will other chains be getting rid of their loyalty programs soon? By eliminating loyalty programs, aren’t chains also giving up access to important data about shoppers that is valuable for marketing and pricing purposes? Won't it be difficult for chains without loyalty programs to compete against retailers like Kroger that have robust programs and true personalization?
EXPERT ANALYSIS:
Jewel certainly made an interesting choice. On the one hand, a frequent shopper card (FSC) certainly doesn’t create a point of differentiation anymore. In many cases it is a cost of doing business. So, by dropping the card, Jewel gets the good PR of offering discounts to everybody (which was happening anyway with the cashier card) and they lose the overhead of having to manage a database.
What they lose (and what we love) is all the rich data. Now, if a retailer is not mining the data for insights or putting together any programs, they may very well conclude that a FSC are not worth the hassle. But I guarantee you that you will not see Kroger, CVS, or Meijer drop their cards as they do a lot of their own segmenting, targeting, and programming based on this data.
What I personally think Jewel, and potentially other retailers, might be overlooking is the manufacturing companies themselves who use that data to run programs and target their own consumers. The few I have spoken to so far are not necessarily pulling back any in-store or trade activity at Jewel, but are not putting any incremental funds in either.
It may eventually boil down to those retailers who mine the data and see its value versus those who have been collecting it but not using it. For those who fall into the latter bucket, if they see the value in allowing their manufacturing partners to mine it on their behalf, they will most likely keep the cards. No matter, it is certainly something I am keeping an eye on.
Michael Schiff, Managing Partner, Partners in Loyalty Marketing
I admit I’ve been one of the voices declaring we have reached the “post-loyalty era” in retailing. However, sound programs for segmenting, targeting and delivering relevant offerings to shoppers are in no danger of going away soon.
Walmart has never had a frequent shopper card program, yet it is actively engaged in analyzing shopper behavior and tailoring store offerings. It analyzes behavior derived from in-store and online POS data, its Scan & Go mobile app, as well as on its individual store Facebook pages and other “Big Data” flows external to the store itself. You might say it has “leapfrogged” the card program stage altogether.
Kroger’s new smartphone app is claimed by some observers to be a potential replacement for its widely-held loyalty card, but card-based or card-less, it’s still powered by dunhummby shopper analytics.
Perhaps it’s more accurate to say that loyalty marketing is being displaced by data-driven segmentation and targeting. Retailers may be finding they no longer need the inducement of deep card-member discounts to convince shoppers to sign up and participate. They just need a method to conduct active surveillance and monitor the data flows. Simple, right?
James Tenser, Principal, VSN Strategies
The number of loyalty programs (everyone has one) has diluted the importance and sense of value for the customer. In fact, many retailers don’t even require a loyalty card and will provide the discount whether or not the card is presented. Perhaps it’s marketing positioning (that is, we don't need to provide discounts since are products are already at a deep discount).
Some retailers are looking for more cost-effective ways to promote loyalty, such as through social media. Some of the recent uses of social media are much more “creative” than providing point-of-purchase discounts. Loyalty programs can be expensive to operate. Data is only valuable if a retailer can provide a cohesive marketing strategy based upon that data. The smaller retailers know they can’t compete with Kroger on such a large scale, so they are looking for new and different ways to promote customer loyalty.
Loyalty isn’t just discounts and loyalty programs don’t have to be only about savings. It’s about a relationship with customers where they prefer and choose you over someone else.
Robin Newhook, President, Newhook Marketing Solutions
Some loyalty programs are no doubt outdated. Shoppers today are less willing to jump through hoops to save a buck here or there. However, our research shows that loyalty programs that are shopper-driven, customized and focused on a real value exchange can be incredibly valuable when new technology (big data, digital platforms, advanced analytics) is used to power them. In this regard, there's never been a better time to be in the loyalty business.
Forget plastic card and points. Loyalty programs enable brick and mortar stores to give shoppers new levels of data and service that rivals the experiences they have become accustomed to on Amazon. Loyalty programs really are a way for a retailer to "recognize" the shopper in its checkout lane - keeping track of that "known" shopper in a way
that improves customer service. A loyalty program in the analytics age should look much more like Netflix's recommendation engine, and less like a green stamps program.
Loyalty 1.0 involved shoppers signing up, buying a lot of product and getting some sort of reward. In Loyalty 2.0 check-ins and social media enable more of an exchange, as retailers and brands began to value engagement vs. simply the buying of “stuff.” Loyalty 3.0 continues to build on this changing shopper behavior and begins rewarding with more than just "stuff" - instead offering cool content, exclusive first-looks, a voice in brand, etc. Ultimately, the ability to use loyalty programs to better track shopper behavior, improve customer service and provide meaningful content to shoppers will have an enormous impact on a retailer's ability to maintain shopper engagement and loyalty.
Devora Rogers, Senior Director, Retail Marketing Insights, Inmar
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SECTION THREE
