[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[21 comments]

Gen Now: Forget Loyalty Points, Give Us Free Coffee

January 10, 2014

Mark Price, managing director of the British grocery chain Waitrose, thinks many retailer loyalty programs are stuck in the twentieth century and he's having no part of it. Mr. Price has caused a bit of a stir in England by using the myWaitrose loyalty card to attract a broader array of shoppers to the upscale grocery chain. His secret? Give cardholders free coffee on their way in the store and newspapers on the way out — every day.

According to the myWaitrose website, "Nothing says 'welcome' more than a lovely hot cup of tea or coffee, so let us treat you to a free regular tea or coffee every day!" Cardholders simply present their card to enjoy their coffee while shopping or to take out. According to the Telegraph, Waitrose has become the second largest seller of coffee in the U.K. since implementing the offer.

Customers who spend £5 (including the price of select newspapers) automatically get the price of the paper deducted from their purchase price.

"Giving free coffee or free newspapers is disruptive to the market, but I think that is what customers want. I don't think they want a point," Mr. Price told the Telegraph last month. "I mean, what is a point? I think it's meaningless. It doesn't have the affinity you can gauge if you engage with your customers in a different way."

"Waitrose is ahead of the curve; they have tapped into 'generation now'. People are tired of waiting and they are looking for everyday treats and rewards," Zoe Lazarus, partner, global insights at Lowe & Partners, told Advertising Age. "Loyalty points are all about collecting CRM data and [customers] don't get much back."

Discussion Questions:

Are point system reward programs out of touch with modern consumers? What do you think of what Waitrose is doing with its loyalty program?

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:

Do you agree or disagree that point system reward programs out of touch with modern consumers?

Comments:

Absolutely. It's not about points. It is about solving the problems of your frequent shopper. Coffee on the way in and a paper on the way out is a fairly inexpensive way of keeping customers returning to your store. The key is to develop customer intimacy so that you know what problems they have that you would have the permission and capability of shopping.

Still waiting for supermarkets to solve the customer checkout problem. Technology will help here (scan & go, equivalent to the EZpass) but in the meantime, low-tech options could be implemented to solve this customer irritant. We know a couple of things: the longer customers stay in the store, the more they spend; the quicker we get them out, the quicker they return.

Coffee and a paper are a start. Now let's get serious about solving customer food shopping problems.

[Image of: View Braintrust Panelist button]
Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Interesting terminology - free coffee has made Waitrose the largest seller of coffee? That being said I think is a great idea. The cost of a cup of coffee is small compared to a typical supermarket basket.

We are now a sound bite culture. We are used to everything being immediate, if not faster. This is an issue with most loyalty programs as the time lag between collecting the points and redemption is too long. Waitrose has addressed this by saying just for being a member, we will give a reward every time you come in and perhaps one as you leave as well.

[Image of: View Braintrust Panelist button]
Steve Montgomery, President, b2b Solutions, LLC

While point system rewards are still an effective mechanism for building customer loyalty, Waitrose deserves mad props for this innovative strategy that feeds into the instant gratification mindset of Gen X,Y, and Z consumers. Love this!

[Image of: View Braintrust Panelist button]
Eric Chester, Keynote Speaker, Author, Reviving Work Ethic, LLC

Immediate gratification is generally preferable to consumers, but it's all about the value and the relevance of the reward if shoppers are expected to perform over time to earn one.

My personal belief is that "permanent" points programs inevitably lose their punch over the long haul, which means the retailer's expenses to support the rewards continue to increase, while marginal returns decrease. Not good.

A nice mix of immediate gratification rewards and occasional points or continuity programs make sense to both the retailer and the shopper, provided the reward is worthy of the consumer's effort to earn it.

[Image of: View Braintrust Panelist button]
Mark Heckman, Principal, Mark Heckman Consulting

I just watched my friend Larry Winget on Fox News talking about the US having become a society where everyone expects praise whether they've actually done anything or not. Well worth looking up on YouTube. Substitute 'praise' with 'points' and the discussion fits here.

Like the old Sunday School picnic...everyone has to get a prize for every little thing. As has been said many times in this space "it isn't loyalty if you have to bribe/incentivize people to come back to your store!" Provide interesting quality products at an honest and appealing price...and do something nice for people. You love them and they'll love you back.

"Loyalty" from 15th century Old French - "fidelity; legitimacy; honesty; good quality."

[Image of: View Braintrust Panelist button]
Ian Percy, President, The Ian Percy Corporation

You don't even need a card to create these benefits and customer affection. I think about Trader Joe's versus Safeway. There is no joy swiping the Safeway loyalty card. There is lots of joy tasting the samples at Trader Joe's...including the little cups of coffee. Which of these creates actual brand loyalty? The Waitrose example is interesting by combining the two approaches, linking building brand affection and creating a powerful base of data.

[Image of: View Braintrust Panelist button]
Jonathan Marek, Senior Vice President, Applied Predictive Technologies

I don't care anything about the loyalty card business; personally, it's a pain! But I have long advocated ALWAYS providing free coffee or other beverages to shoppers. This is strictly driven by adapting Maslow's hierarchy of needs to physical needs, not just psychological or emotional needs.

In that sense, the #1 need of human beings is air (manage your in-store air quality, including aromas.) You can live only a few minutes without replenishing your air supply - breathing. #2 is water (or liquids) which you can live a few days without replenishing; and #3 is food, which you can live a few weeks without replenishing. Clothing, housing, transportation and all the rest, are optional!

There is a reason that beverages are near the top of sales in any grocery store, and why no serious retailer can mount a global assault on the self-service retail market without getting into the grocery business. Walmart, Costco and Target are ALL prime examples of this fact. Duh!

At the low cost per cup of coffee, it is an obvious candidate for a free draw to the store. I don't know that I would add a cookie, but tea as an alternative would be nice, and maybe just water (always!!!) for a non-caffeine alternative. This stuff is all a no-brainer for any sales person focused on the customer. So check out all the stores who do NOT provide any liquid refreshment and you will have the list of those that I do not consider customer focused. ACTIONS speak louder than words!

[Image of: View Braintrust Panelist button]
Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

Consumers are fed up with all the restrictions and issues with points. Airlines rarely have seats open when customers try to redeem and low cost airfares have reduced the point's value. Catalogs for merchandise have such high point requirements it is not worth overpaying for anything.

Many loyalty programs have the attitude of use it or lose it. Unless one is in the top 5% of loyal customers, your redemption possibilities are very low. For these reasons, customers are less loyal and maybe it is time to rethink loyalty programs.

[Image of: View Braintrust Panelist button]
W. Frank Dell II, CMC, President, Dellmart & Company

Point-based loyalty systems can be used to create repeat buyers, increase traffic, if used properly. The creative use of delightful experiences, as Waitrose has implemented, are great ways to create differentiation in the market. Retailers should look at using a hybrid form of loyalty that combines creative experiential mechanisms and loyalty to create great shopping experiences for their best customers. The technologies and solutions exist to leverage customer data to improve the in-store/online experience - just add creativity (and solid business processes).

[Image of: View Braintrust Panelist button]
Larry Negrich, Vice President, Marketing, nGage Labs

Loyalty is about establishing a mutual investment, and making sure the return to both customer and brand are valuable. It's about helping customers find value in your brand so they choose your brand when presented with alternatives. Loyalty is developed over time. I believe the simplicity and value will work well for Waitrose if their objective is to drive traffic and their program is more than a short-term promotion. On the face, it is a simple, valuable and brand-accretive way to invest in their customers.

Unfortunately, loyalty programs have frequently evolved to become a tactic used for filling a short-term void in a promotional calendar; or just a quid pro quo marketing tactic.

Points are just a currency for measuring the investment in the relationship. So I don't believe it is accurate to claim that points are irrelevant, rather what companies choose to do with those points has become irrelevant.

Justin Tidmarsh, Director, Brand Loyalty, Chico's FAS

I do like Waitrose's approach, but I don't think the problem is with points per se, but rather with how uncreative and poorly executed most point-based systems have been to date.

Particularly in grocery, a retailer who used their loyalty data to send us personalized offers and recommendations based on our purchase history would gain a lot of equity with their customers but very few are doing this well.

That being said, Whole Foods and Trader Joe's offer great proof that a retailer with a great product and service offering can thrive without any formal loyalty program.

[Image of: View Braintrust Panelist button]
Martin Mehalchin, Partner, Lenati, LLC

Sounds to me like Waitrose is providing an outstanding customer experience that will help customers to make an emotional connection to the brand.

Loyalty is earned, not bought.

Tom Smith, Principal, Insights From Analytics

As a long-time non-fan of loyalty programs (too intrusive, no real value other than nuisance) and long-time fan of Waitrose, both the coffee and voucher schemes are big hits with me.

One perhaps unintended consequence of the coffee offer is that I have spotted a local homeless man who was smart enough to get a MyWaitrose card getting his morning drink. Good on him, and them, for enabling it.

As for the voucher, even a singleton like me can manage to earn it by carefully stocking up on non-perishables occasionally to achieve the necessary spend. That said, I am too loyal to Waitrose to be attracted by a similar scheme from AN Other supermarket (especially one that starts with T and ends with o and any that involves Nectar).

[Image of: View Staff button]
Bernice Hurst, Contributing Editor, RetailWire

The free coffee tactic makes customers feel welcomed and appreciated and probably steers added footfall as a result. Maybe we should think of the Waitrose tactic as an engagement tactic rather than a loyalty program. True customer loyalty would result from other interactions that take place while customers are in the store.

I wholly agree that there is a generation of consumers who want things faster and, as often as possible, free. The evolution of data-driven marketing programs will see more programs having impact in the store or on the ecommerce site, something we term "Contextual Loyalty."

[Image of: View Braintrust Panelist button]
Bill Hanifin, Managing Director, Hanifin Loyalty LLC

Thanks to the makers of identity theft mega disasters, security is the new top priority for new card ownership and use. A close second is Annual Percentage Rating (APR) followed by market acceptance and/or useability, then of course rewards and transaction discounts at checkout. These priorities assume a credit rating that allows for consumer credit card selection. This little detail is a very large issue due to the extraordinary effects of the tightening of credit acceptance parameters for companies, individuals and governments.

Many non grocery retailers offer free coffee at the door for consumption in either direction, as in coming in or going out. But that's just here in the USA.

'gjarnoldjr'

I've always felt that many loyalty points programs were simply marketing or discount programs. If you took away the discounts or points, would the customer come back?

However, the "amenities" that a retailer provides to customers for being loyal is a different issue. If a customer is willing to come back because they love the store, the products and the experience (which can include coffee and a newspaper), you have a much better "loyalty program" that others do with points, punch cards, etc.

[Image of: View Braintrust Panelist button]
Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Really? This is something new?

Where I shop there is free coffee, bottled water, and popcorn - no card or purchase required. Does the retailer use a card for clubs, special pricing, rewards, etc.? Sure. However, they provide the coffee, etc., always - every day.

Newspaper? Really? I didn't realize they still existed. Apparently, the green police have not arrived in England!

Sure, the concept says "Hospitality," but I'm guessing the overall experience at this retailer far outweighs the gesture.

In the end, no retailer owns loyalty and no such "program" creates it. Customers own loyalty each time they enter a retailers doors via bricks or clicks. When they do, they have chosen to do so over dozens of other options available to them. When they continue to do so, it is because of the experience and their own perceived value.

'Scanner'

Yes! Yes! Yes! This is a terrific initiative that is aligned to their brand and to what their customer responds to. Each brand/retailer and customer experience is unique and there is therefore no "one best way" to manage loyalty programs. The point is to make your loyalty program benefits understandable, relevant, and easy.

[Image of: View Braintrust Panelist button]
Mike Osorio, Senior VP Organizational Change Management, DFS Group

With a few exceptions points systems have lost their value in creating loyalty.Too many options out there with too many factors coming into play. Shopping at a particular store just to get the points isn't happening.

'seasar'

I don't know that point system reward programs are out of touch with modern consumers, so much as that they are lacking in creativity. Kudos to Waitrose for trying something different, though they will clearly need to do a cost/benefit analysis to determine how well it is working. All that said, I think the perceived benefit of the reward is highly subjective. For example, I do not drink coffee, and offering me a free one as an enticement to enter the store would have absolutely no impact on my behavior; if anything, it might actually dissuade me from entering the store. I think it is incumbent upon the retailer to come up with ideas and offers that will appeal to their customer base, or whichever segments of it they most want to attract.

There are other options that may be just as effective but potentially less costly to the retailer. The Starbucks App, for example, gives you the instant gratification of seeing your Rewards and watching a star drop into the bucket right away. This may seem trivial but think of the current popularity of gamification and what people will not do to earn a little badge on their smartphone app.

Finally, I absolutely agree that loyalty is earned not bought, and I look forward to retailers' continued efforts to earn their frequent shoppers' loyalty.

[Image of: View Braintrust Panelist button]
Alexander Rink, CEO, 360pi

I love this idea. Everyone loves something for free, and if it doesn't cost much to implement, it's a win-win for the retailer. Point systems; who has the time and energy to keep track? One local supermarket here offered me their rewards card. I asked about the benefits. They explained after you spend $250 you get a $5 certificate. Really? A whopping 2% return in exchange for my contact info? No thanks. Offer me something appealing, something of value. The consumer notices instant, tangible gratification.

'gafpromise'

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters