The loyalty myth: Loyalty member = Loyal customer
Let’s call a spade a spade; Can you really install a loyalty program? The loyalty myth in the grocery industry is that once a customer signs up for a store loyalty card they are now a loyal customer. In reality, we’d argue, the loyalty card is just that, a piece of plastic in their wallet, no more indicative of loyalty than the other 20 it now sits beside.
Retailers must earn shopper loyalty. It requires, yes, enrollment, but a deeper understanding of the shopper’s purchasing behavior and creating a customer-centric experience moving forward. No easy task, but achievable nonetheless.
The aforementioned loyalty myth was one of the reasons why several national grocers made the bold and controversial move to discontinue their loyalty programs a few years ago. Advertising “everyday low prices for everyone” was en vogue.
In fact, in 2013, an executive from Albertsons told Supermarket News, “We found that tracking individual shopping habits isn’t as critical to our overall strategy as knowing what our customers in our neighborhoods are shopping for. Tracking individual purchases can be one way to do it, but it’s not the only way. Getting to know our customers in neighborhoods, learning each store like it’s our only store, and offering best-in-class customer service is as much of a differentiator.”
While this is a valid point, it diminishes the value of tracking individual shopping habits via loyalty and rewards programs, and leveraging that data to provide a personalized experience.
The loyalty reality: Earning shopper loyalty through personalization
A loyalty and rewards program that positions discounts as it’s main advantage may only be attracting bargain shoppers, and can eat away at your already razor-thin margins. The goal of your program should be to improve the shopper’s experience, and ultimately earn their loyalty. A personalized rewards program provides grocers with the ability to gather shopper information and use it to deliver personalized 1:1 communications and special offers. It’s also true that there’s no point in collecting this data if you don’t have the means to analyze and act on it, which was probably the case for Albertson’s in 2013.
Retailers like Kroger and Safeway decided to take a different approach, and invest heavily in infrastructure and strategic partnerships to support personalization and customer-centric pricing and promotions aimed at truly earning customer loyalty. Today, that has positioned Kroger and Safeway well ahead of the pack. Increased competition has even forced Whole Foods to consider following suit. They recently entered into a strategic partnership with data and analytics company Dunnhumby to introduce a loyalty program after several quarters of underwhelming performance.
What does this mean for the independent grocer?
In short, independents must realize that in order to remain competitive, they need to invest in personalization and customer-centric marketing strategies like the big guys. This is no longer a nice to have but rather a need to have.
With so many things to prioritize, this can seem like a daunting task.
Loyalty and Rewards, E-Commerce, Mobile Apps, Pickup and Delivery, Digital Coupons, Circulars … the list goes on and on. What should I do first? Who should I partner with? How do I allocate budget? Do I have the right resources? What does my customer really want?
All legitimate questions that must be asked and contemplated.
The one question I would prioritize over all others: Do I know who my shopper is?
Next, I’d want to validate whether or not I have the means to communicate with them. The good news is that today’s loyalty and rewards platforms are making it easier to achieve this level of personalization that was previously only possible with heavy investments in IT, and teams of data scientists and marketing executives. Most loyalty and rewards providers are also closely partnering with E-Commerce and Digital Coupon providers to ensure a seamless and integrated experience for your shoppers.
So now the ball is squarely in your court: What is the next step you need to take to begin the journey of earning your customers’ loyalty?