Should more brands offer rewards linked to store purchases?

Discussion
Source: Starbucks
May 09, 2017
Tom Ryan

Starbucks and Kellogg are among the few brands that have figured out a way to tie their rewards programs to grocery store purchases.

Last week, Starbucks announced an expansion of its rewards program to include Starbucks K-Cups Packs and ready-to-drink beverages sold in grocery aisles.

The expansion more than triples the number of products in grocery stores eligible for “Stars” through the Starbucks Rewards loyalty program. Previously, only packaged roast and ground coffee, Via instant coffee and Via instant refreshers were available.

To earn credit for a purchase at a grocery store, members can either text a scan of the receipt, upload a digital receipt or mail the receipt. For whole bean and ground packaged coffee and Starbucks VIA Instant, codes on the packages still have to be submitted online for credit.

The amount of stars varies by product. Stars can be cashed in for free merchandise inside Starbucks locations and other special perks.

In 2015, Kellogg became the first consumer packaged goods company to use a combination of retailer frequent shopper integration and receipt scanning to collect points for purchase. Similar to Starbucks, members can take a photo of their receipt with their mobile phones and then text, upload, e-mail or mail it to Kellogg’s Family Rewards to collect their points.

Another option is linking rewards to grocery store cards. Members enter the loyalty card ID number of a partnering retailer on the Kellogg’s rewards site. Once they receive e-mail confirmation that their grocery card has been approved, they can earn points automatically every time they shop.

Kellogg instituted the two options after finding that customers were frustrated having to enter codes found on the inside of packages to collect points and earn rewards.

Huggies, which is owned by Kimberly Clark, similarly last June moved away from codes to a receipt and loyalty card rewards setup. At the time of the change, Huggies said, “You asked, we listened!”

DISCUSSION QUESTIONS: Why aren’t more vendor loyalty programs linking to store purchases? Do stores benefit from such programs?

Braintrust
"Today with the opportunities that technology offers, retailers and vendors must look for more convenient methods to provide proof of purchase."
"They want me to scan my receipt and text it to them? Are you kidding me? That isn’t a reward, that is punishment."
"A far better way to obtain the info from a receipt is to use one of the new-generation cloud-connected receipt printers."

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20 Comments on "Should more brands offer rewards linked to store purchases?"

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Charles Dimov
BrainTrust

Any move that increases buying foot traffic in-store is a good thing. It improves the likelihood of an impulse buy. It means they are there to buy something in person for the loyalty rewards, but many times will end up buying something else they realized that they either need, want or could use. Impulse purchases are a great thing for retailers, grocers and brands.

Should brands be doing in-store loyalty programs? Yes, yes, YES!

Ross Ely
Guest

Vendors need to make it easy for shoppers to participate in their loyalty programs. Asking shoppers to input lengthy codes or scan receipts is just too much work for the consumer.

Rather, vendors should integrate with retailer loyalty programs. Although this linkage requires technical integration, the end result is ease of use for the shopper and maximum data capture for the vendors.

The retailer’s loyalty system should be primary in the shopper’s mind, with both the retailer and multiple vendors automatically receiving the data.

Lyle Bunn (Ph.D. Hon)
BrainTrust

The assumption of loyalty by retailers is a a death knell in the age of the empowered consumer. The marketing paradigm that focuses on generating new patrons falls short of acknowledging the success of advertising and overlooks the lower cost of sales that comes with repeat transactions (i.e. loyalty), and too often repeat customers are considered as second class citizens. Haven’t we all considered that we, as long-standing customers, should get the toaster that is given to someone opening a new account? Repeat customers are the low-hanging fruit of traffic, conversion and word-of-mouth commerce and so all B2C businesses should shift investment to customer retention and their appreciation of it.

Jasmine Glasheen
Staff

I completely agree, Lyle. Since 80 percent of Millennials participate in loyalty programs, it makes sense for brands to offer competitive and user-friendly options. The paradigm shift Lyle advocates towards focusing on customer retention over recruitment could eradicate much of the shopping “fickleness” of younger consumers. Why continue to spend where they aren’t valued? Rewards and recognition equal retention.

Gene Detroyer
BrainTrust

They want me to scan my receipt and text it to them? Are you kidding me? That isn’t a reward, that is punishment.

Lee Kent
BrainTrust

I agree with you Gene. When they can make this easier, I can see more brands linking to stores. And that’s my 2 cents.

Camille P. Schuster, PhD.
BrainTrust

I agree. This is a move to demonstrate a stronger tie with the retailer but is not a move to generate customer sales or loyalty – not when requiring customers to work hard for their reward.

Scott Norris
Guest

The two-foot-long receipts at CVS, et. al, aren’t going to make it any easier. It’s difficult enough to assemble receipts for my expense reports!

Bill Hanifin
BrainTrust

Gene, while I understand the sentiment, I don’t dismiss the range of attempts to connect end-consumer with manufacturer. The reason there is not a universal, elegant solution is that it is an extremely difficult nut to crack. Code-on-pack was the limit of most people’s thinking and receipt capture and validation is a build on the previous generation. Full integration of a grocery loyalty program to CPGs is possible, but there are complex technical and business issues to solve. As you know, some grocers resist the loyalty play, so the vehicle that could connect parties is not available. We’ll all keep working on this challenge and the one who solves it with technical ease and in a way to deliver a great customer experience for the customer will be a big winner.

Gene Detroyer
BrainTrust

I don’t disagree. Just don’t expect me to scan receipts to get my points. The easier it is (i.e., don’t even make me think about it) the more successful it will be.

Art Suriano
BrainTrust

I am a fan of rewards programs when they make sense, are easy to use and provide a benefit for the customer. However, too often today the onus falls on the customer who is asked to provide information to get the offer. When using the program is inconvenient, the customer gets frustrated and often doesn’t bother. When this happens, what was a good idea becomes a failed program. Today with the opportunities that technology offers, retailers and vendors must look for more convenient methods to provide proof of purchase. Moreover, as we talked about yesterday in a different article, there are many other “rewards” a retailer or vendor can offer a loyal customer unrelated to discounts on products. When everyone is providing the same benefit, there is no reason for a customer to be loyal to a rewards program.

Bob Amster
BrainTrust

I have to agree with Gene Detroyer. The real benefit to the consumer is to make it easy (I like to use the word “elegant”) for the consumer to have the grocery store purchase credited to the brand’s loyalty program. That piece is going to take some standardization of data exchange between the supermarket industry and the brands that offer the loyalty programs. There are going to be choices to make, like who wants to participate in the many programs that will sprout. Good idea, still in its infancy. Needs maturity and sophistication.

Ed Dunn
Guest
6 months 13 days ago

Is there a reason why Kellogg could not leverage scan-based trading for their loyalty program? The retailer could have easily sent an customer account as an extra parameter with the SBT, making the vendor-based loyalty program frictionless.

What I’m seeing as a huge bottleneck in retailing is unscalable point-of-sale software unable to support omnichannel or vendors trying to cut out or bypass the retailer at the point of sale, the most critical moment of the purchase path.

Ryan Mathews
BrainTrust

Look, success is defined by what behavior you want to incentivize. As a long term frequent flyer with a billion miles, I’m amused every time I get on an airplane to see all the Platinum card holders back in coach because their upgrades were taken by people who charge their entire lives on their airline credit cards, but only actually fly twice a year. If Delta — my favorite victim since I live in Detroit — is in the business of promoting financial instruments, then it’s doing a fine job. If they want to make flyers happy, well, not so much.

Does Starbucks want to get people to go to Kroger’s more often and drink coffee at home? If so, this is a great approach. If they want people in their stores, again, not so much. So, before a brand extends its loyalty program, it really ought to think about what it wants its most loyal customers to do.

Michael Libenson
Guest

As co-founder of the company that powers new digital loyalty programs for Kellogg’s, Huggies, L’Oréal, and others, I agree with many of the sentiments here. There is a powerful revolution happening that is bringing together consumers, CPGs, and retailers — with the primary connection point being a store loyalty card (or alternative digital ID). Consumers want to be rewarded for their loyalty, assuming it is easy to do. Brands want to build brand equity and develop individual relationships with consumers so that they can make their marketing investments more relevant, measurable, and effective. Retailers want more trips and overall spending — all linked to their loyalty cards.

Historically, this has been very difficult, requiring codes-on-pack or other forms of self-reporting. No longer. With the infrastructure now in place to reward loyalty automatically (with the simple presentation of a card or ID at the register) at 100 retailer banners across the country, we believe this trend will only accelerate.

James Tenser
BrainTrust

Scanning receipts with a mobile phone has been a failed bright idea for more than a decade now. Supermarket tapes, in particular, are too long to snap in a single image, so they must be laid out on a table while the mobile device camera is moved along. People simply won’t make a habit of this. Fuggetaboutit.

A far better way to obtain the info from a receipt is to use one of the new-generation cloud-connected receipt printers. These require no POS system integration and are real-time interactive, so a confirmation or bounce-back offer can be appended within milliseconds — while the receipt is printing out.

Ever get a coupon at the end of your receipt at Subway? That’s how it’s done.

The same cloud data capture mechanism could quite easily be applied to a manufacturer points program, so long as the shopper’s identity is captured.

Ricardo Belmar
BrainTrust

While enabling programs to increase customer loyalty — especially repeat customers who have already proven to be your best customers (hence the repeat purchase!) — is a necessity for brands and retailers, it has to be done in a frictionless way so consumers will adopt it. Asking us to text or email photos of receipts is just too hard. Who even keeps those receipts any more for consumable items? Even email receipts are of limited value in this context. If the purchase data is already there, why not use it to link to loyalty? I don’t have to send Amazon my receipts for them to know my purchase history — retailers take note!

Bill Hanifin
BrainTrust

This is a contentious discussion due to one fact — this is a difficult challenge to solve. As I mentioned in a reply to Gene, I am hesitant to dismiss too readily the range of attempts to connect end-consumer with manufacturer, at least until a clear long term solution is in the market.

Full integration of a grocery loyalty program to CPG’s is probably the best path, but there are complex technical and business issues to solve. As you know, some grocers resist the loyalty play, so the vehicle that could connect parties is not available.

We’ll all keep working on this challenge and the one who solves it with technical ease and in a way to deliver a great customer experience for the customer will be a big winner.

Scott Magids
BrainTrust
6 months 12 days ago

Loyalty programs are winners, but only when they are easy for the consumer and don’t require extra steps. Consider the reward aspect – there is an emotional factor in getting a reward. When consumers have to work too hard to get it – by scanning in receipts and sending them in – the perception of the reward’s value diminishes. It is less emotionally satisfying. Even if a back-end technology does not yet exist for bringing together consumers, CPG vendors and retailers in a transparent manner, it’s likely it will exist in the foreseeable future, and both stores and CPG vendors will benefit.

Franklin Chu
BrainTrust

Yes. Vendors need to make it easy for shoppers to use loyalty programs. One good example is that now in China, many brands and retailers are using WeChat (a social media platform with nearly 850 million monthly users) for their loyalty program. This app combines payment, online shopping and social media functions all together.

For example, if you visit H&M China offline, purchase clothes and check out, you can use WeChat Pay. Once you scan the payment QR code, you automatically link to H&M’s official account where they might offer you an e-coupon. You can register to collect your points and they can push a promotion to you once a week or so. You can then use the coupon to repurchase through H&M’s e-shop and pick up in-store or ask for delivery.

wpDiscuz
Braintrust
"Today with the opportunities that technology offers, retailers and vendors must look for more convenient methods to provide proof of purchase."
"They want me to scan my receipt and text it to them? Are you kidding me? That isn’t a reward, that is punishment."
"A far better way to obtain the info from a receipt is to use one of the new-generation cloud-connected receipt printers."

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