Albertsons CEO Vivek Sankaran in a 2020 promotional video – Source: Albertsons
NRF 2022: Albertsons’ CEO sees frequency driving grocery loyalty
Vivek Sankaran, CEO at Albertsons Cos., believes that, while consumers may become loyal to a grocery store because of the proximity to their home or the values being offered, the steady stream of repeat visits are often the biggest loyalty builder.
“To me, you visit a grocery store more often than you see your doctor or accountant,” said Mr. Sankaran at a session at the NRF Big Show. “In many cases, more often than you go to church.”
The regular visits, he said, position the local grocer to become part of the “biggest moments” in their customers’ lives.
“It could be a graduation. It could be somebody’s birthday,” said Mr. Sankaran. “Some of those moments are sad. Sometimes it’s somebody who’s sick and you want to give them flowers or balloons. But I think that there is just so much potential for that kind of relationship that goes beyond the transaction side. That’s the fun of it, because it’s so human.”
Grocers have to deliver on the experience. During the pandemic, Mr. Sankaran said Albertsons had to quickly adjust to the way customers wanted to shop and for what. He said, “We had to lean on understanding where the customer is going.”
Mr. Sankaran believes loyalty is the “true measure of our value,” rather than metrics such as transactions, as those steady visits nurture the relationships that strengthen customer bonds.
As an example, Mr. Sankaran noted how he was working a few weeks ago in the produce department in a store in downtown Dallas alongside the produce manager. In the four hours he was there, the produce manager was given three Christmas cards from customers.
Said Mr. Sankaran of the experience, “It just struck me that my notion of relationship over time, over many years, is true at that very fundamental human level. On top of that, we’re putting in a lot of technology — whether it’s loyalty programs, personalization, and e-commerce delivery to your home — that build up this notion of loyalty and creates a lot of stickiness. I really think that’s the long-term value of the company.”
Discussion Questions
DISCUSSION QUESTIONS: Does customer loyalty work differently in grocery than in other retail channels? Is relationship building easier for grocers due to more frequent shopper visits?
Poll
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Mr. Sankaran makes a very good point about grocers playing a role in so many special moments and events in people’s lives, and I agree there is an opportunity to build loyalty through store experiences that support those moments. Engaged, empowered and personable store associates can go a very long way to delivering the types of experiences that bring people back, much as they have done in grocery stores for the better part of 150 years.
The frequency of visits and transactions positions grocery differently than most channels. I love that Albertsons is thinking about loyalty as a holistic concept and not a program. Oftentimes grocery retailers think they have “loyalty covered” with a frequent shopper program and that’s short-sighted. The customer experience is what will drive loyalty — or not.
Yes it does, as we go shopping for groceries much more often than shopping for clothing and other necessities. The loyalty either builds quickly or it doesn’t. Once you find “your” grocery store has the best produce, meats and fish, that pretty much does it, especially in a market like NYC where we don’t have the big beautiful Harris Teeters and Wegmans that are found in other markets.
Customer loyalty works differently in every category, depending on a number of variables: frequency, occasion, product type, and typical consumer profile. However grocery is especially unique in that there’s a comfort zone that gets created in the shopping process by nature of the category being such a habitual vertical. Grocery shopping is a routinized behavior, so it’s a grounding experience for many. I don’t know if grocers need to reward frequency in their loyalty strategies because frequency is pretty much a given. Instead, I think grocers should focus their loyalty strategies on rewards that will cause a bigger basket, or expanded trial into new aisles and products.
Yes. We tend to stay loyal to our favorite grocery retailer, even if we spice things up with new CPG brands.
Loyalty to a grocer pays off as we get to know the associates, store layout and the best times to shop. Exclusive private labels also keep us loyal.
Grocers whose systems ensure consistency and quality build stronger relationships by delighting us more often.
This goes back decades, but is relevant today. When my mother made her shopping list, she was so familiar with the store that she would list the items by the way she shopped the aisles.
Want to drive a loyal grocery customer crazy? Change the store layout!
How about, while consumers may become loyal as a measure of the steady stream of repeat visits, often the biggest loyalty is to the grocery store because of the proximity to their home or the values being offered.
But once you get them there, you better give them the experience. That experience is wrapped nicely in the Christmas card story. There is always another grocery store a stones throw away. The one that builds a “Cheers” relationship will be the winner. And this goes for any retailer.
Every class of trade in retail has a unique value proposition and different loyalty drivers. In grocery I believe it’s primarily about convenience and assortment.
I think Mr. Sankaran is spot on in his focus on loyalty and long term relationships with his customers. For sure frequency helps in the grocery business, but relevance matters as well. Food is a very personal category; it has cultural preferences, local brand affinities, health and wellness considerations and more. And, as is pointed out, food is part of family gatherings, good and bad. Technology helps with insights about those preferences and with the execution of strategies that personalize customer experiences. I really love that Mr. Sankaran has articulated tying company value to individual customer experiences. I think he’s 100 percent right, that is exactly what creates loyalty and keeps customers engaged and coming back.
Yes, loyalty works differently in grocery. Especially because consumers need to visit a grocer as often as they do (no consumer has all the groceries that they are going to need for the entire week), it is extremely important that the customer feel comfortable and satisfied with the shopping experience whenever they have to shop. It is emotionally difficult to repeatedly do something, or go somewhere where one does not enjoy the experience.
I agree with the sentiments of Mr. Sankaran. In fact, he underscores the real meaning of any loyalty program, namely, “adjusting to the way customers wanted to shop and for what.” Loyalty is not about customers. It’s about retailers being loyal to the promises they make to their customers. How did Albertsons do it? Simply by adjusting to the way customers wanted to shop and for what. Christmas cards are anecdotal measures of how successfully they adjusted to meet customer needs and delivered on their promises.
I have published numerous peer reviewed papers on this subject. Share, repeat rate, and penetration are measured outcomes of the same underlying generating process. It is the shopper’s probability of choice vector towards all alternatives. This can be broken down so there is a vector for each shopping mission or each trip driver, etc. Once you know this vector, you can estimate share, repeat rate, etc. using a Beta probability distribution. The keys to growth are to move people towards higher underlying probabilities of choosing you and to activate those probabilities through properly targeted performance marketing. So loyalty, or penetration or even footfall are not drivers, they are important outcomes however.
When done right, a grocer does play an important role in the lives of its most loyal customers. It’s where they shop for many of life’s biggest moments from birthdays to holidays to buying flowers or chocolates for that special someone. The fact that everybody needs to eat all the time gives grocers an inherent frequency advantage, but that advantage can only be converted into loyalty if the grocers are doing everything right and providing a reason for shoppers to keep coming back. Shopper experience, proper staffing, great assortments, great pricing and promotions are all fundamental to keeping shoppers loyal at a time when loyalty is at an all-time low. The investments in technology to drive all of these initiatives and increase loyalty and personalization will help Albertsons moving forward. Using analytics to know your customer and delight them is always a great path forward.
Grocery absolutely works differently than other retail categories because of frequency and basket size. Customers tend to build a close association with one preferred grocery store/supermarket – because of convenience, experience, perceived value, or the benefits of the loyalty program (or a combination of these). As grocery stores have modified their business model in the past 10 years to also be relevant for lunch or to quickly pick up three things that were missed in the last big shopping excursion, the frequency has even increased. In addition, many customers care a lot about the food they eat and will choose a supplier (partner) that delivers the desired level of breadth and quality in selection. So, while the loyalty is built based on cumulative experience with all brand touchpoints, as well as perceived value, I believe grocery retailers can go further in engaging customers by building more partnerships in a dynamic ecosystem that can serve more of the needs customers have each month – to influence where that discretionary spending takes place. The result of such an online/offline/hybrid ecosystem (virtual and physical marketplace) is much greater customer insight based on spending across many categories, and the ability to deliver much more interesting rewards for the customer behavior exhibited.
I agree in that frequency is but one key measure of loyalty. A frequent shopper may be a heavy splitter and thus selectively buying at your store as well as others. Share of market is a much more important measure along with margin on goods sold. The key to grocery marketing and loyalty success is leveraging data, analytics and insights to influence depth of store shopping experience – in HBA, Rx, organics, baked goods, deli and more. Living in Chicago and shopping an Albertsons brand – Jewel – frequency is borne out of necessity and not preference. Come to Chicago and visit the stores, they are woefully inadequate!
To nurture and foster brand loyalty from the customers, grocers must show loyalty and care from corporate to their store associates which are then paid forward to their customers. We see this in many food retailers but most notably from Costco.
No doubt that proximity has a factor in the grocery industry. If two stores are similar in size and product/merchandise, the closer one will typically win. And once the store has that consumer, they must keep the consumer. That can be supported through relationship building. A loyalty program that captures the customer’s data can be used for building relationships. It can also be used to provide personalized promotions. Tracking the behavior, which includes frequency, spend, and what is bought, can combine to create a “relationship strategy” that connects with the consumer and keeps them coming back.
People are creatures of habit so, yes, if they visit a store frequently they will become loyal and continue to shop there. That is not something that is unique to grocery shopping, it’s just that you visit a grocery store more frequently than other stores.
What is very important in what Mr. Sankaran says is the experience he had with his produce manager. Shopping is also a social event and people like to feel they associate with the store and, more importantly, its people. This is one of the reasons why physical shopping will continue to be the primary channel. If retailers forget this, they do so at their peril. Replacing all the tasks currently undertaken by people will result in a soulless store environment people will not enjoy and will not want to visit repeatedly.
Loyalty is interesting. I purchased seven cars from the same car dealership, but had absolutely no relationship with the dealer. I didn’t drive a Toyota, I drove a Licata – my salesman’s last name. When he left the dealership, I did too.
My experience with our chosen grocery store is similar. Visits to this Albertsons-owned grocer happen multiple times a week. There is no loyalty program, and I don’t use curbside, so there aren’t many reasons to be loyal other than I like the quality and assortment, and I know the layout and cashiers. And it’s convenient.
And that’s a wasted opportunity. With all this talk about data, I would think that when you have customers who have shopped with you for years, retailers would look for ways to harness that loyalty.
When you think of it, when tigers at the zoo in large cages know it is food time, they pace back and forth until the groceries arrive. Every day I think the same way. I certainly agree with Mr. Vivek. We’re all the same in so many ways.
Loyalty absolutely differs by segment, line of trade and location/channel. Grocers are uniquely positioned to connect with consumers because their products are essential, perishable, and often local.
Grocery brings several factors to the loyalty game that other retailers don’t. Grocers have higher frequency of engagement, more essential product purchases, more immediate product purchases, and more consumable/perishable product purchases. Grocers also have close proximity to customers, can have more personalized services, usually higher in-store traffic, and usually more employees in the store than most retailers.
Frequency of engagement is certainly a critical piece. Grocers have more opportunities to succeed or fail with a customer, and given the essential nature of products, more second chances. Unlike many retailers, grocers with a poor experience may still have customers returning because of proximity to their home and the essential nature of products to buy. “Relationships” can be formed with the brand, with the store, with the deli or bakery, with associates, even with a parking space in the lot for regular customers.
Too often however, brands squander this potential or take it for granted and a new grocery store down the street can quickly sap business (and loyal customers) away. It’s great that Albertsons’ is thinking about the customer and their life cycle with specific moments. Customer-centric thinking will give Albertsons a substantive market advantage — servicing the customer when they need to be serviced.
Excellent insight from this CEO. Grocery is heavily a people business and that connection is what creates loyalty for many customers. But not necessarily all customers.
Some customers want to be loyal and look for a deeper connection, while others simply want the most convenient store.
I think more frequent shopper visits are a gift and a curse for the grocery chains. In one regard it gives more chances to build a connection. On the other hand it makes consistent execution that much more important.
This got me thinking of a business that seems to have even more customer visit frequency than grocers and historically did a great job with the customer connection: Starbucks.
It’s hard to be loyal to business you don’t like (not impossible, just hard). So, if Albertsons is banking on loyalty then, consumers have to first like shopping in their stores. Next, would be all the other cool things like personalization, experience and of course, value.
It is refreshing to hear Sankaran think of loyalty in terms of value vs transactions. He’s right. Grocery stores cannot build loyalty based on proximity, that’s just convenience. But enjoyable, meaningful experiences over a sustained period of time can create the best kind of loyalty. I like where Albertsons is heading with this.
Frequency and nature of purchases makes supermarkets natural for fostering loyalty, however how you define and measure loyalty is critical.
For example, most retailers would consider shoppers in the top 10 percent of spending highly loyal. While only 10 percent of shopper count, their spending would represent multiple times their count in percent of sales. Supermarkets would assume this high spending level translates to high loyalty.
If you compare top shoppers across several supermarket chains, the overlap of top shoppers is astonishing. In the mid-90 percent. Simply put, nine of 10 of one supermarket chain’s top shoppers can be the other chain’s top shoppers and visa versa.
Each chain would claim these top shoppers as loyal shoppers because their spending levels and visits are among the highest. But the the spending levels and visits of nine of 10 of these shoppers could be similarly high for their competitors. Big families with big lists that spend big wherever they shop.
Instead of focusing on increasing sales among these top shoppers, the assumption is that the supermarket has full share of wallet of these top shoppers. The focus is on increasing sales among lower tier spenders assuming that’s where the spending gaps are that can be closed.
The error in this thinking is that a high percentage of spending by top shoppers is spent at competitors. Any of retailer who serves these top shoppers know the most about them of any of their shoppers thanks to their high spending levels and visit frequency. Yet these top shoppers are largely ignored as sources of potential for spending growth.
Are these top shoppers loyal shoppers? Maybe. Maybe not. A closed view of spending level against other shoppers at a chain says yes. A broader view of share of wallet says no.
Are these top shoppers valuable shoppers whose loyalty should be cultivated? Absolutely. The challenge is to identify them, take actions to serve more of their requirements, build true loyalty, and capture more spending.
Don’t assume loyalty is given based on simple metrics. Verify loyalty and work to earn greater loyalty.
There’s no denying that consumer loyalty in grocery retail is different. Grocers have a more personalised relationship with their customers than other retailers because grocery shopping is a more frequent routine. Despite the high frequency of interactions, establishing relationships can be tricky for grocers. In addition to excelling at product, pricing, and promotion strategies, grocers should provide consistent brand experience and interactions. They are also expected to be more personal and empathetic with their customers all the time. One failed interaction and your customer is lost forever.