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[13 comments]

Do loyalty programs need to be more flexible to succeed?

June 30, 2014

According to a survey of 1,000 shoppers from PwC (PricewaterhouseCoopers), shoppers do not want their loyalty programs at grocers to go away. In fact, they want them to evolve to offer more flexible and tangible benefits.

Overall, 83 percent of respondents want loyalty programs to offer flexibility in how they earn and spend points, according to the study. For instance, shoppers indicated they want rewards for buying healthier foods — earning points for buying apples over apple pie, for example. PwC said such loyalty incentives could help increase fresh food sales and also boost a store's reputation as a health-conscious grocer.

Survey respondents also indicated they want loyalty to work in a similar way to other businesses (i.e., points for continuing to give their business to the same store). Most also want the option to choose whether they spend points on groceries or convert them to cash. Wrote PwC in the report, "Tying in a reward system that offers this flexibility and control can keep future shoppers spending with your store and raise the costs of switching."

PwC also suggested offering shoppers loyalty points for purchasing promotional items in the store, which can help push new products at higher price points.

Millennials may look at grocery loyalty programs "more like a game in the future," with points earned by inviting and competing with friends, the report said.

"Loyalty in the future will be focused on value creation and shopper relevance," PwC concluded. "So ensure your loyalty program of the future generates revenue and keeps your margins intact. The secret? Personalization, relevance, and clear messaging of the value of being a member."

The report arrives as personalized offers based on purchase data have been hyped by Safeway, Kroger and others as the next evolution of grocery loyalty. The further embrace of digital coupons also offers potentially new ways to give shoppers incentives.

Last week, Publix revealed it is launching a new website to help people register for special offers, according to the Tampa Bay Times. Based on customers' profiles, customized notifications arrive about deals and coupons on shoppers' smartphones as they enter a store.

Discussion Questions:

Should points for buying healthier foods, promotional items or other strategies be a larger component of grocers' loyalty programs? Can a points-based system complement the trend toward personalized offers at supermarkets?

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 much more or less successful would retailer loyalty programs be if they incorporated more points-based incentives?

Comments:

I don't think it's any surprise that consumers want more flexibility and control over their relationship with any kind of retailer, including grocery. "Personalization" doesn't just mean guessing what a consumer wants and then giving it to them. It can also mean letting consumers create for themselves the kind of experience they want to have.

I think, in navigating loyalty programs and how they're structured, retailers would do well to find ways to get consumers to tell them objectives: is your objective to eat healthier? Is your objective to save money? Is your objective to be gluten-free? That's an important step in creating more personalized offers, where there's less guessing and more support and enablement of a customer's objective.

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Nikki Baird, Managing Partner, RSR Research

The goal of personalized offers has been around since The One to One Future was published in late-1996. Here we are, almost 20 years later, and it's still in just the second/third inning of the game.

Consumers always want flexibility to do what serves them best, no surprise there, it's whether grocers can enable this and justify whether its worth the effort. At some point there has to be an ROI, so being able to measure that is a necessary first step in determining what grocers are able to do.

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Bill Davis, Director, MB&G Consulting

Tesco's recent annual general meeting, plus the growth of Aldi and Lidl in the U.K., have indicated that shoppers here prefer low prices to promises. This is apparently without asking questions about how people feel about giving away their privacy, which is a whole other ball game altogether.

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Bernice Hurst, Contributing Editor, RetailWire

Shoppers today want supermarkets to be more than just a place to get groceries; among other things, they are looking for the industry to be a source of information and nutrition and healthy eating. Retailers who begin to build that bond with customers will reap the rewards of loyal shoppers for many years to come.

In the same way, promoting around healthy eating and buying choices makes perfect sense for shoppers seeking to improve their lives. Whether it is simply providing clear, easy-to-understand nutrition guides, or age-targeted promotions to educate and encourage healthy eating by children, everyone needs a little motivation and encouragement to improve their food choices.

Andy Casey, Senior Partner, Loyalty Resources

People like incentives. So what's my incentive to buy at a particular grocer? The answer, not surprisingly, is value—be it value for money or value for experience. A point system is again an incentive aimed at tying together goals of a customer (and possibly the retailer for that matter). Yes, flexibility and simplicity will help.

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AmolRatna Srivastav, Asst. General Manager, Analytics and Insights, Tata Consultancy Services

I challenge the results of this survey in that I don't believe any consumer was asked if they would prefer to receive all discounts and benefits without having to be a member of a loyalty program. I am sure that they were asked how a current program could be improved.

I shop at four grocers: Winn-Dixie, Harris Teeter, Publix and Walmart. The two latter retailers do not have a loyalty program and both do very well. The first two have loyalty programs and spend countless hours adjusting pricing and paying for labor to manage programs that irritate customers. The loyalty program should be outlawed because it discriminates. Well you say, anyone can join for free (but it isn't free in that you have to provide personal information) and if it's free, why do you want people to join to receive discounts provided by suppliers? The fact is, these programs are instituted to skim supplier discounts to prop up profits for poorly managed operations.

A point based system is a horrible idea. All anyone needs is another nanny. And when any retailer gets into making personalized offers they lose my business. Why should anyone get a better price/service/quality than I do? Is my dollar somehow worth less than my neighbor's? Who is running a business and has time to worry about this stuff? Worry about your customers, and how to provide the very best for the very least. Or even less, just try to find a way to keep product in stock that is advertised on sale. This would not seem to be rocket science, but I haven't seen the two "loyalty club" retailers manage it very well.

Ed Dennis, Sales, Dennis Enterprises

The research from PwC is encouraging towards the idea that grocers are willing to consider customer marketing approaches beyond coupons, discounts and two-tier pricing models. It is surprising that there is consistent talk of using points based currency in future programs, as that has not been traditionally high on the grocer's marketing list.

The two nuggets that I take away from the article are these:

1. Millennials want to make their future loyalty programs more of a game
2. Personalization, relevance, and clear messaging are the desired pillars of program design

These two nuggets are valid to use as guidepost for loyalty program design for any business over the near term and the survey results from PwC are encouraging validation of our thoughts about making loyalty "contextual" to be successful in the future.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

It would be nice for food retailers to reward shoppers for healthier, greener and or more profitable choices, but we must remember that most deals are funded by the brands, not the retailers. Who puts up the cash for a TPR on organic blueberries or tilapia fillets?

Using analytics to fine-tune offer relevancy is a fine objective, but I'm not a great fan of points programs, which add annoying complexity and distract shoppers from understanding value received. Bad enough that I may have to join more than one frequent shopper program to cover the stores I like. Don't make me work even harder to game the system.

Personalized pricing is an idea whose time is finally at hand, I believe. Shoppers are already accepting individualized deals through e-coupons without worrying that the next person in line may be paying a different price. Shelf tags will still persist as in-store reference prices, but many shoppers will work from a digital list they use to optimize trips and baskets.

On the positive side, sending higher value offers to just a few targeted shoppers may be a game that even smaller brands and local suppliers can afford to play. Retailers should embrace promotions like these, as they can provide shoppers with compelling reasons to visit their stores more often.

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James Tenser, Principal, VSN Strategies

Since consumers are sharing increasingly more data, they must receive value in return. Those organizations who use consumer data and don't provide value in exchange will lose trust with their consumers. See my post, "Will Trade Data for Food," in a recent Huffington Post.

Jane Sarasohn-Kahn, Health Economist, THINK-Health

Anything that helps "loyalty" programs become something more than mass, untargeted discount programs is a great thing. Incentives to deepen the consumer relationship with the merchant can provide far greater benefits for both the consumer and the merchant. Points programs are a good start.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

LoyaltyOne's recent shopper survey found that consumers want to be rewarded for their loyalty to their local grocer and they don't feel that grocery retailers provide sufficient value back to shoppers in exchange for the data that they share. Grocery loyalty programs predominantly have a two tier pricing structure, which is very simplistic, especially when compared with leading edge loyalty programs. Grocery retailers need to evolve their loyalty programs to reward truly loyal behavior and become more customer-centric.

With some customers splitting their grocery spend between multiple retailers, there is a great opportunity for grocers to reward their customers for spending a larger portion of their wallet with them. Loyalty rewards should also be targeted at satisfying specific customer needs like healthy eating, they should be disproportionately allocated to the most loyal customers and they should be used to deliver a more personalized experience. Perhaps most important, a loyalty program should be viewed within the context of a broader strategy with the ultimate goal of consistently earning the loyalty of customers

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Graeme McVie, VP & GM, Business Development, LoyaltyOne

I think most customers just want lower prices. Millennials don't seem very interested in the conventional grocers with loyalty cards and seek many alternative channels for their food purchases. The first thing is to stop forcing use of the loyalty card for all sale prices. Many customers do not like being forced to do something. Give the customer other reasons to use a loyalty card. See how many people actually use the card. Looking at merchants with that set up in place of a points based loyalty card but sale prices automatic without the card at Raleys and Fred Meyer in the west, I think most customers do not care to use these cards and only do so out of being forced to in order to get sale prices at most major grocers. They need to make customers want to use the card... Like the travel industry.

Meanwhile the stubborn card required grocers continue to lose share to the card free alternative channels.

'storewanderer'

It wouldn't hurt. It can help customers make a concerted effort to maintain a healthy lifestyle, a green lifestyle or streamline their budget.

Any program that makes purchasing easier will be welcomed by consumers. The customer is using smart technology everyday. A loyalty program that that fits nicely into their lifestyle will be adopted.

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Carlos Arámbula, Managing Partner, MarcasUSA LLC

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