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Are Retailers Making It All About Their Customers?

January 24, 2013

Loyalty is one of those words that is tossed about in retail. It is also a rare achievement in the business, so when it appears as though a merchant has figured it out, people tend to take notice.

Marc Giroux, chief marketing & communications officer at Metro, and Marc Fischli, COO international markets at dunnhumby, presented at a breakout session at the National Retail Federation's BIG Show last week to describe how Canada's third largest grocery store operator was able to reshape its business to achieve customer satisfaction levels of 94 percent for its loyalty program, well above the industry average.

"The Canadian shopper now has an average of 14 loyalty cards in their wallet. So how do you drive customers to fully engage with your own loyalty program so that you can build an ongoing conversation that provides opportunities to collect insights that will allow you to transform your business?" said Mr. Giroux.

"Customer centricity is becoming absolutely critical," he added. "Focusing on the customer that you already have is key. Loyalty is not a one-sided proposition. It's just as important that we demonstrate loyalty toward our existing customers ... that we retain our most loyal. Growing their share of wallet and monthly grocery spend is a key strategy."

Mr. Giroux said his company's success was due to "increased employee engagement," which included the development of its "five customer promises" program, training thousands of store employees and giving them benchmarks and tools to measure the customer experience in stores on a monthly basis.

Metro's five customer promises include:
1. Great quality fresh products;
2. People that are great;
3. Stores that are easy to shop;
4. Customers get what they want;
5. Stores are in stock and prices are good.

While admittedly early in the process, Metro is looking to develop an omni-channel strategy using loyalty data, its partnership with dunnhumby and a "fully integrated media platform" that allows the company to communicate with a single voice across all platforms.

"Our primary objective is really to put the customer at the center of one experience. In the past, Metro communicated with customers in the store, through our flyer and website, and through targeted direct mail," said Mr. Giroux. "When we started looking at the efficiency of all those individual channels, we realized that we didn't have a single, unified view of the customer."

According to Mr. Giroux, 99 percent of all communications that go out to Metro customers today are completely personalized. He mentioned a direct mail piece that goes out every three months. "Our customers receive eight to 12 coupons for product that they love and that they buy. And that coupon helps stretch their purchase on a potentially incremental visit, which is our way of saying thank you: 'Thank you for choosing Metro, we are your grocer, we understand your needs and we care.'"

FINANCIALS:     [TSE:MRU]

Discussion Questions:

How close are retailers to developing truly personal relationships with customers today? Where do you see the balance between technological and human resources in achieving the types of customer experiences that create loyalty on the part of shoppers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How effective, in general, are retailers in developing personalized communications to customers?

Comments:

Developing truly personal relationships with customers is a costly proposition. It means gathering and analyzing reams of data. Few retailers have the appetite for this expense. As a result, very few retailers have truly personal relationships with their customers.

A truly personal relationship involves knowing what a consumer buys, helping her save money and, perhaps more importantly, time. The 5 tenets of the Metro program cover all of these areas. The difficulty is consistently executing against them.

Technology can provide, sort and analyze the data. Humans need to bring them to life. Employees need to live the tenets and management needs to reward them for doing so, while accepting nothing less.

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Max Goldberg, President, Max Goldberg & Associates

Apparently Mr. Giroux and Metro have been paying attention to and activating on common sense that is all too often not common knowledge. It's called customer loyalty and not shopper loyalty for a reason.

Recognizing, respecting and serving your existing customers built upon a foundational strategy of increasing your 'share of wallet' from that core customer base is vital and more importantly, as demonstrated by Metro, is absolutely possible! Understanding your customer is an absolute necessary first step. Then design and implement a technology based process to deliver a relevant and personal brand(s) communication experience across all channels that your customer is using—mobile, online, in-store, print, and in-store people!

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

I don't know much about Metro in Canada, but dunnhumby and Kroger proved in the US that personalized communications to customers increased loyalty and Kroger revenue. Spirenow.com is another example of a company doing the same for other retailers in the US.

Loyalty isn't just the card in the wallet. It's about the long-term relationship and that takes effort and investment. My favorite promotions (being sarcastic) are the ones that say "Free loaf of bread this week," and then you read the fine print "*only valid for first time customers." Said another way, current loyal customers do not qualify. If that isn't a slap in the face, what is?. The efforts used to drive new "loyal" customers totally ignored and in fact insulted the current loyal group already shopping.

Kroger does not focus on acquisition as much as they focus on retention and I like the model. You can't help but attract new customers when your loyalty program is strong and drives real value.

Retailers need to stop worrying up ushering in new customers that quickly exit the back door (no real value in store for being loyal)and instead focus on the customers already in the store and make their experience exceptional. That in itself will drive loyalty, new customers and of course stronger profits.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

We can throw around all the big buzz words (ROI, EDLP, SOCIAL MEDIA) we want, and it still boils down to a few things:

1. You better be competitively priced!
2. You better have outstanding customer service!
3. You better have unique product offerings that generate good profits!
4. You better always be seeking continuous improvement!

All the studies we compile will not change the basics of running a business that have been around since the stone age.

I know this is over simplified, but getting bogged down in trying to be the high-tech guru champion will not guarantee you anything without doing the basics extremely well. Turn off the computer, the TV, and your cell phone for a week, and just spend time in your business talking with your employees and the customers. You'll probably gain a ton of insight as to how you approach things, and trust me, it will clear your head of all the high tech acronyms, you think are crucial for your survival. Go ahead, just do it, it will be OKAY!

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Tony Orlando, Owner, Tony O's Supermarket & Catering

This is not a new concept or approach. It is just really difficult. Focus on current customers. Give them products and experience they appreciate. Have employees that support the company, process, and customers. Have technology issued to gather and track relevant information.

However, managers need to maintain focus, track and reward appropriate behavior, and make everything work toward the same goal.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

First a note on Metro's five promises. These ought to be "table stakes" for every retailer. What's the alternative?

Now, as to the question, many retailers are farther away from offering true personal service than they have ever been largely because the tools have taken over as a proxy for relationships. The more reliant companies become on systems the more systematic, i.e., less personal their relationship becomes.

Nobody is confusing a computer generated message with a real human relationship.

Loyalty is like trust—it's something the customer gives to you, not something you can ask for or create on your own. Of course you can encourage it, but not by being one out of fourteen little plastic cards.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Why does it take a Canadian to show us southerners how to do things? The challenge of big data is that you don't get a handle on single view of customer. The reliance on the store experience and store associates to be true ambassadors of the store brand to engage customers in order to engender preference, impact satisfaction and ultimately lift key performance metrics is the secret sauce.

At American Eagle Outfitters, while we had a loyalty program that gave incremental benefits to those deserving "more," we absolutely could not have succeeded as we did without the buy-in, support and effective alignment every business day with our store managers and associates on the floor.

Identified customers will always tell you that they want personalized and relevant communications. The trend to rely exclusively on e-mail and social to deliver impressions misses the one advertising channel that in recent years has seen considerable decline—direct mail. Might be time for retailers to re-look at their budgets, learn from our friends at Metro and leverage direct mail to deliver strong ROI in spite of the higher cost per impression.

David Slavick, Director, Loyalty & Retention, FTD.com

Retailers have come a long way in regards to using the shopper data they collect. With customized offers, coupons and deals based on this data, retailers increase the loyalty of their customers—who will keep coming back for more. Also, this valuable data provides great insights into the purchasing habits of their customers and can be used in a variety of ways from marketing to category management.

More retailers need to apply resources against this information and truly take advantage of it. As long as the lines of privacy are not crossed, and the customer receives a benefit for being part of a retailer's loyalty program, I see no issues. In the end, it's up to shoppers to join loyalty programs and provide their information.

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Zel Bianco, President, founder and CEO, Interactive Edge

When "the Canadian shopper now has an average of 14 loyalty cards in their wallet" I think it's time to re-define loyalty.

'tmlens'

Loyalty programs, in many cases, are just marketing programs. The only connection the retailer has to the consumer is the card that earns them a discount or points for purchases.

True customer loyalty doesn't come from a program. It comes from an emotional tie between the customer and the retailer. When the customer refers to the retailer as:

"My grocery store..."
"My department store..."
"My Starbucks..."

You get the idea. And, the "ownership" the customer has to their favorite stores usually comes from how the employees make them feel. The customer is recognized, often by name, in some of the establishments. There may be one or two employees that have bonded with the customer. The concept is that people don't do business with a business. They are doing business with the people in the business.

The ultimate goal is to have product, quality and acceptable pricing AND a staff that is able to build rapport with a customer. That is a winning combination that has a store that meets the customer's needs and creates a human connection.

The loyalty card, at that point, is just icing on the cake.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

There is no such thing as customer loyalty. You either provide a consistently good shopping experience, or you don't (the more usual amongst your competitors. ;-) ) There is incredible churn in the shopper crowd, but a superior experience week after week will tip the crowd toward your store.

I think the five customer promises delineated here are excellent, but would make #3 the crowning summary: "3. Stores that are easy to shop." I've summarized the significance of that point in "Efficiency & Convenience: An Introduction to 'The Third Wave' of Retailing."

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

Most retailers today are transaction-driven organizations that have almost no view into their customer base. Loyalty programs are 'me too' type items that do not drive innovation into the organization.

What Metro was able to do was create a fundamental shift in perspective, putting the customer at the center rather than transactions. This led to personalized and customized marketing in which the customer feels important.

Kurt Seemar, President, Analytic Marketing Innovations

I can carry a loyalty card for every store I shop that offers one, and I do. Better yet, if they use scanners, I can carry those cards on my phone in an app. So I too question what loyalty really is. I simply want the deal that may go with it, but the loyalty card is not driving me to shop at one store over the other.

As for personal relations; my husband (the shopper in our household) stops by our nearby Kroger a minimum of 4—yes I said 4—times a week. What can I say, he likes food. Does he know a single employee by name? Nope. Do any of the employees know him by name? Nope. Does he care? Not really.

Now what if they did know him and greeted him, asked about his beloved dog Nicklaus, would he be more loyal? Probably not, but he sure would talk about them more. Just sayin'....

Lee Kent, Let's meet share and succeed in Retail, YourRetailAuthority

In general, supermarket retailers are not close to developing truly personal relationships with customers today. Most grocers don't have the time and personnel to invest in programs to duplicate what Kroger does with personalized communications.

Also, earnest retailers tend to cast a wide net on developing loyalty among "all" of their shoppers. The more sensible plan, which some follow, is to focus on the 30% of shoppers who account for 70% of total sales. Or the 10% who account for 40% of total sales. Retailers need to maintain the loyalty of those shoppers. The others come and go, cherry-pick, and shop in several grocery stores with other loyalty cards.

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John Karolefski, Editor in Chief, CPGmatters.com

My loyalty to Safeway is based on their execution of the promises (Ryan called them table stakes) and store location as in, it's on the way. That's true of all brands that I have a weekly relationship with, and obvious.

But upon thinking about location, I wondered about human locations as expressed by Plato's tripartite theory of soul, namely: the Appetitive, or the body and its cravings; Rational, for the mind and intellect; and the Spirited, the desire for love, honor and victory. I think the dunnhumby methods are to tease out the meanings behind engagement on these inner dimensions; it's not just about technology, it's about brand. It's about going beyond table stakes and locations. And while Tony is totally correct, I think his intuitive knowledge is not so easy to find or scale.

So, how does this translate into execution? Paul Henderson (Canadians need no explanation) is celebrating his 70th Birthday on January 28th, he suffers from Leukemia, the best YouTube video simulating his 1972 summit winning goal wins something big, Metro donates to a Leukemia fund, and the winner gets something that speaks to their appetites (Molson's or 50s). True patriot love.

Vahe Katros, Consultant, Plan B

I have posted my view on loyalty multiple times over the years on this site. Just do a quick search for "jacobson" and "loyalty")

Probably one of the more succinct perspectives is if you think of the retailer and CPG Brands that have the largest monetary value. These brands exhibit the essence of loyalty. It is nothing less than a corporate culture.

Loyalty is a position of leadership within the organization. Leading by example. This should trickle down to the stores, led by store management. When customer service is put ahead of all else, loyalty will follow, as with revenue and profitability. Just look at those brands in the study.

This is not just technology, nor simply simply human intervention. It is a differentiated importance put upon the consumer by the merchant/manufacturer.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Most retailers are focused on the bottom line, even when that focus damages long-term relationships with clients. In order to build relationships with customers, you have to measure those relationships and then understand how your actions change/reinforce the retention and preferences of your best customers.

While I am a true proponent of data-driven marketing, I also believe that no amount of targeted personalized marketing can compensate for a bad customer experience in-store. The focus needs to begin with your human assets and then be supported and enhanced by strong customer-centric communication and offers.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

The trouble with loyalty is that it is a feeling we have, not a program we join, or worse yet - are forced into. Survey says, so far that retailers suck at creating truly personal relationships. So we agree, that if personal relationships are desired, loyalty programs do not attain them. How about developing people to develop truly personal relationships for attaining them instead of relying on programs to do the same for them?

Sid Raisch, President, Advantage Development System

When retailers think about true customer loyalty, they should ask themselves how to get great results without offering a discount. That internal dialogue would help focus the company into concentrating on what would really matter to consumers.

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Cathy Hotka, Principal, Cathy Hotka & Associates

The majority of retailers have not yet evolved to having truly personal relationships with customers. While there are absolutely exceptions—Nordstrom for one is top of mind—retailers have under (or tardily) invested in the technology side of the equation. Fortunately for many the human resources side, i.e., customer facing employees, often can make up for the gaps in true customer knowledge.

Yet this results in a disconnected and inconsistent approach to recognizing customers and being truly relevant across all components of the retail enterprise. Therein lies the essence of loyalty in that it is not a program or even contained within marketing, it's a goal and a result of an enterprise being customer centric as a core business strategy. As fundamental as this sounds, it's too often the exception and not the rule.

All that said, retailers are absolutely moving, as Mr. Giroux states, toward becoming more customer centric by investing in new technology and being more aggressive in collecting (via loyalty programs and other initiatives) and using (for marketing, decision support, et al) customer data to support their broader business activities.

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Phil Rubin, CEO, rDialogue

Retail will increasingly make it more and more about the customers. We are able to utilize real-time information on a consumers activities, preferences, and history within any store. It will be interesting in the next years whether retailers or the consumer will win from data usage. It could turn into a competitive bidding system for a customers shopping list before we know it.

Matt Lincoln, IT eCommerce Business Analyst, Quill.com

The beauty of the story is the effectiveness achieved when a retailer can marry available technologies with an authentic senior leadership commitment to customer centricity—not just because it is logical idea, but because it is truly at the core of their personal values. Only then can a retailer build a culture of customer centricity that drives all investment and process decisions.

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

The data exists for personalization to take a step forward, but the evidence is not readily available in many instances to show that retailers are leveraging their data to its potential.

The Metro case is a good one and illustrates that "loyalty" is created not just through one means, but through a holistic approach to serving the customer. The importance of employee training can't be over-emphasized.

I've moved on from talking about Social Loyalty and don't embrace omni-channel as a term as it tends to put focus on the channels themselves rather than the customer. We prefer to talk about the future of loyalty as being contextual and have an ebook just published on the topic.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

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