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[16 comments]

Loblaw does personalization right

January 20, 2014

In most cases, when marketers and retailers try to ascribe loyalty to their card-carrying customers, they're delusional. When they demonstrate their commitment to those customers through good acts — by providing relevant values and experiences — they embark on a golden path.

Supermarket chains so regularly miss this distinction with their frequent shopper card programs that it is a small revelation to encounter one who seems to have it right. At the National Retail Federation Convention and Expo last week, Loblaw Companies, Ltd., the leading grocery operator in Canada, shared insights about its PC Plus shopper program, launched last May, that suggest it belongs in that exclusive tier.

"From our best customers we capture 55-60 percent of their share of wallet. That leaves so much opportunity just with them," said Peter Lewis, senior director, customer analytics & loyalty at Loblaw.

That's an insightful way of looking at the return from a frequent shopper program that truly distinguishes highest-value relationships and cultivates them accordingly. Best shoppers deserve our best efforts because they are our best prospects too.

Loblaw has embraced this approach with PC Plus, its digitally-enabled frequent shopper program, said Lewis. On a year-over-year basis, enrolled customers who used the targeted offers changed their behaviors in desirable ways:

  • They increased their number of visits by 12 percent;
  • Their average basket size increased by five percent;
  • The number of categories they purchase increased by seven percent.

Lewis also shared some statistics from the first six weeks of the program that indicated rapid acceptance:

  • 40 percent of sales were made using the card;
  • More than 6,000 members were signed per store;
  • The email open rate was 50 percent;
  • And there was a 35 percent click-through rate on those emails.

PC Plus uses analytics to deliver relevant, highly personalized offers. With thousands of offers available across the store, the mix is tailored down to the individual level, based on each shopper's history.

"How big is the prize from personalization?" said Graeme McVie, VP and GM at LoyaltyOne, the company which helps Loblaw create and operate PC Plus. "Even with best customers, opportunities exist to grow share of spend."

He shared an analysis of the 50 store categories across the top 20 percent of customers, which indicated a 50-70 percent share of spending, a finding which underscores the present value of best shoppers, but also their upside potential.

McVie added that the design of PC Plus is oriented toward "democratizing shopper insights." Its strategy is two-fold: understand the needs of individual customers and consistently execute actions to satisfy them.

I've stated previously that we are entering a "post-loyalty" era, but intelligent personalization is far from dead. In fact, it may just be hitting its stride at Loblaw.

FINANCIALS:     [TSE:L] [ ]

Discussion Questions:

Is it time we replaced "loyalty" with "intelligent personalization" or is this not a meaningful distinction? Does a program like Loblaw's PC Plus provide meaningfully better experiences for shoppers and a competitive advantage for the retailer in the process?

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 important are personalized offers to shoppers?

Comments:

I believe personalization is and will continue to bring gains to the relationships between retailers and customers. But I also believe some of the lowest hanging fruit still revolves around the idea of better communication on loyalty programs. All too often it seems that retailers with loyalty programs aren't providing a clear message or communications on what value a customer is getting from joining a program, and what/when/how they can get value from it on an ongoing basis.

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Matt Schmitt, President, Chief Strategy & Innovation Officer, Reflect

Results count! ... everything else is conversation. With so many so called "loyalty programs" there is very little in terms of results outcomes, or the data reported is focused primarily focused on "interactions" (clicks, likes, etc.).

James Tenser has done a great job of reporting real results outcomes for Loblaw's PC Plus program. Metrics like increasing basket size and measuring increased purchases in other categories are "hard" numbers that show up on the retailer's bottom line. In summarizing Loblaw's program, Tenser makes a very salient point about loyalty programs going forward. To be successful, future programs will have to deliver "intelligent personalization."

Personalization will require "big data" and a lot more proactive analytics, which in turn requires much more infrastructure and expertise than the passive tracking of loyalty cards of the past.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

By all means let's drop "loyalty" and call it what it is: "Opportunism." But it sounds like Loblaw's is doing something totally different than reworking the same old stuff. Every once in a while some brave entity actually does "reinvent the wheel."

Loblaw's was a client many years ago when I lived in Toronto and even back then they seemed to think differently...I believe being one of, if not "the" first into the "No-Frills" category of food stores.

My comment may belong on the bottom shelf, but - assuming the PC stands for President's Choice - I've got to say that one of the drivers for 50-70 share of the food wallet is that the PC products are just so good. Having now lived in AZ for 16 years and even with the joy and comfort of Trader Joe's, we still talk about wishing we could get PC products.

The better the product and shopping experience the lower the influence and importance of incentives. The poorer the products and experience the more incentives are needed.

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Ian Percy, President, The Ian Percy Corporation

No, we should not replace the term "loyalty" with the term "personalization." Loyalty is what a retailer or manufacturer seeks to engender in its customers, personalization is one of many implements to help accomplish this objective.

Loyalty can also be measured by a number of metrics, and share-of-wallet is one of these metrics. Other, equally valuable, facets of shopper loyalty include: absolute size of basket (as measured in volume, revenue, or margin), frequency of store visit, persistence of store visits, resistance to competitor enticements, and promoting the quality of the store or chain to others.

We are learning that there is no single implement that best advances all of the many facets of loyalty. Our mindset should be of objective-based loyalty programs. That is, each program, or instance of a program, should be customized for the particular objective it is meant to accomplish. These remarks apply equally well to brand loyalty as they do to store loyalty.

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Dr. Paul Helman, Chief Science Officer, KSS Retail

I agree with James that there are different paths retailers have taken with "loyalty programs" - one that is at best benign and the other (Loblaw's example) that integrates proactive personalizing through communications and offers.

In a world where technology is easily available to deliver the latter, it will indeed become a significant and competitive advantage.

Two other interesting examples of "loyalty programs" are Costco's membership fees and Amazon's Prime membership. Both cases are pay-to-play and through that commitment process, they create both an emotional and economic connection that makes those retailers the shoppers' destinations of first resort.

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Todd Sherman, CMO, Point Inside

It is a critical distinction. Most customers know loyalty cards are discount cards or - better said - cards that get you to the "real," as opposed to inflated, price. It's hard to build true loyalty around a scam.

Demonstrating to a shopper that their participation in a program actually causes a company to - at least appear to - think about them as individuals is obviously the first step toward building true loyalty. The key is to move away from a transaction view of the customer and toward building an actual relationship with them.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I just finished commenting on the JCP discussion. I could make the same comment here. Just exchange "salesperson" for "loyalty program." It is all about orientation. If the loyalty program is customer oriented, both parties win. If the objective of the loyalty program is just to get people to buy more, in the long run, the retailer will lose.

The stats tell the story. Do I want to sell one more something now or do I want to increase store visits by 12%? Any retailer that doesn't want the latter can call themselves JCP.

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Gene Detroyer, Professor, Independent

Any time you can personalize the experience is an opportunity to create stronger "loyalty." Customers think or say things like, "They really understand me," or "They know exactly what I need/want." (And more.) The advantage to Loblaw? The numbers speak for themselves. The key is to always support this type of program with an amazing customer experience. It is a winning combination.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

If you want me to be truly loyal, then use Amazon's mind reading patent and predict what I want then predict what price will make me buy it now. Voila! Loyal customer.

Other than that, I'm loyal because you sell a brand that works for me or you are convenient. Personalize an offer when I'm not in the market, I'm not likely to buy it.

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

It's often hard to tell what some marketers think they are accomplishing with their loyalty programs. Some clearly are me-too efforts lacking a strategy, while others cost more to operate than they can hope to generate in increased profits. In reality, the objectives with existing customers should come down to: 1) Retention (persistence of store visits, resistance to competitor enticements, etc.), 2) Increase category share of wallet spending with the store, and 3) Generate positive word of mouth.

Based upon some of the comments here I assume that Loblaw's provides quality and good customer service that has allowed them to retain a loyal customer base. It appears they have done their homework, quantified individual spending, and made the strategic decision to focus on increasing share of wallet spending of those current customers they have already worked to win and keep. Using direct communication to those valuable customers and personalizing offers to gain share of wallet can give them a competitive advantage. It should allow them to provide individuals with special offers and services that can increase purchases without discounting items that those individuals have already proven that they will buy at full price. It sounds like a cost-efficient approach that hopefully will deliver added bottom-line results.

Doug Pruden, Principal, CustomerExperiencePartners.com

Changing the name is irrelevant. Changing how you use the data is pertinent. Historically, loyalty programs have been implemented in a vacuum. Data wasn't shared or integrated with other applications. The problem, is, without leveraging it against other data, it can't do anything more for you. By integrating loyalty with actual sales and even social media, you can do so much more.

One thing I'm assuming is that Loblaw's program is seamless to the customer. As a consumer with a slew of loyalty cards, the one thing that is annoying is scanning the card and never seeing any results from taking the time to scan it. Mailing me a coupon doesn't work. I throw out anything that looks like junk mail.

I don't have a Loblaw's near me, but there are a few retailers near me who I think do a great job of this. Over the holidays, Macy's just automatically gave me a credit on my credit card. Giant Eagle's clerks tell you how much you've earned off food and gas. They make it simple.

Making the program easy and noticeable so that it actually benefits both the consumer and retailer should be the first goal. Changing the name? We're doing a dozen things today that had different terms for them 10 years ago. It's bound to happen.

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Janet Dorenkott, VP & Co-owner, Relational Solutions, Inc.

Loyalty cards have not been about loyalty. Just because the term has been used inappropriately in the past does not mean that the concept is dead or does not exist. Replacing "loyalty" with "intelligent personalization" does not add any value to the discussion.

What is interesting is the fact that Loblaw is measuring results, could identify potential with its best consumers, embarked on a program, and could measure results. In addition, those results identified repeat purchases, repeat visits, increased basket size, etc., many of which are indicators of increasing loyalty. Mixing measurement, strategy, and consumer insight is a good approach toward developing consumer loyalty.

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

A few comments: first my proprietary shopper research for clients indicates that brand loyalty is stronger and more important, not less so. Second, I don't think personalization is what shoppers want, I think they want simplification and value. If personalization is a way to simplification the process of a shopper getting to the offers they want, that is a great benefit but I'd guess that personalization is a means to an end for the shopper.

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Joel Rubinson, President, Rubinson Partners, Inc.

It's no secret that I keep harping on loyalty card programs to make a rhetorical point. There is such a thing as brand loyalty of the "affective" kind, but many repeat patronage behaviors are "spurious" in nature, motivated by short-term benefits, ingrained habits, or high switching costs.

At its best, personalization is a way of sending a message confirming the firm's loyalty toward the customer.

As several commentators point out here, Loblaw's PC Plus story stands out in part because it is willing to share some particulars about its approach and early results.

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James Tenser, Principal, VSN Strategies

Even best customers have incremental value they can generate for organizations and if a leading grocer like Loblaw can see this as an opportunity, then maybe others should consider mining their existing best customers before always defaulting to acquisition tactics.

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Bryan Pearson, President and CEO, LoyaltyOne

See more information on Loblaws loyalty program in this just-published article.

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Bryan Pearson, President and CEO, LoyaltyOne

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