Building Loyalty
By John Hennessy, Vice President, Concept Shopping, Inc.
www.conceptshopping.com
Home improvement chain Lowe’s, in cooperation with GE Consumer Finance, has launched a new Project Card program that should help it increase loyalty among its industrious customers.
Using the card, a shopper can open up a “project window.” This window allows shoppers to make purchases in support of a home improvement project without having to make payments or have any interest accrue.
At the end of the six-month period, interest and payments begin.
The Project Card can be used for major home improvement, such as bathrooms, decks, energy efficient upgrades and kitchen makeovers. And once one project ends, another project window can be opened for a subsequent project.
Moderator’s Comment: What are other life stage, lifestyle and life event opportunity areas for retailers to help their customers and improve their business
results?
Lowe’s surely discovered that its customers completed most projects with components from multiple sources. Like most other retailers, its customers have
lots of options. The Project Card is a clever way for Lowe’s to help its customers finance a major project while simultaneously solving its problem of increasing the share of
major project purchases from the chain.
There are lots of similar situations where understanding and responding to a customer’s life stage, life event or lifestyle need can result in both a benefit
to shoppers and greater share of that need being met by your store or products.
Albertsons’ Ducklings program is one example of creatively meeting a shopper’s life event need – information for new parents, with a solution – a magazine
with information and product offers targeted to new parents. Rather than scatter purchases to support this new need, the Albertsons Ducklings program encourages shoppers to satisfy
that need at Albertsons.
The expansion of wellness or healthy lifestyle choices offers another opportunity to help shoppers help themselves and your business in the process.
Education is a big part of expanding a shopper’s consumption of healthy products. Some are unaware of natural remedies. Others enjoy natural remedies but
have yet to increase their consumption of healthier food products.
Developing a program that combines information about the benefits of healthy choices with incentives to make those choices from a particular store or product
line is an underserved shopper need. –
John Hennessy – Moderator
P&G found significant success in three “life changing” areas: teens – especially those going into junior high school or high school, new movers and newly marrieds, and new parents. At each one of these life events, P&G was able to secure a database of “prospective customers”. Once securing the list, a group of products was sent to the individual or couple, those that would make sense for the particular user.
It might be deodorant, make up, soap and shaving products for the teens, and a whole host of household and cleaning supplies for newlyweds and new movers. New parents might receive diapers, anti-bacterial cleaners and laundry detergent. The goal is to create brand loyalty at critical junctures of a person’s life, and the P&G program is designed to do just that. Additional studies showed that awareness and usage of these products beyond the trial period was significantly greater for these “test group” respondents than a control group who received no additional attention.
Kudos to Lowe’s for rolling out this idea. This is a great example of Consumer-Centric Merchandising and Marketing – developing an actionable understanding of your most important target customer segments, executing merchandising and marketing programs that truly add value for the customer, thereby driving increases in share of wallet and long-term customer loyalty. Competitors should be able to copy this, but if this program is executed well and wrapped in great service it should be very effective.
The effort to “connect” with the consumer and reach out to them to communicate – “I understand what you are thinking/doing/etc.” – is a great way to differentiate or distinguish yourself. A recent advertisement for American Airlines states, “We know why you fly.” A good example of showing that they are not “just” transportation and you are not “just” a paid seat to them (at least that is the attempt being made).
The catch I see is that not EVERY (fill in the blank: new parent, non-traditional household, ethnic, etc.) reacts or responds the same. So, it challenges us as an industry to not be too cavalier and fall into the trap and think, “Well, I put some nachos and salsa out on display, so I am doing what I need to do to meet the needs of Hispanics.” Be aware of the consumer’s needs and mindset and meet it!
I’m guessing GE Cap came up with this great idea. They have been a very good partner to retailers and have been especially successful at big boxes such as Meijer Supercenters, so Lowe’s should see similar numbers.
This is a great way to assist consumers in managing costs and it’s a also a way for consumers to over spend, lose track of their costs and end up disappointed by the expense six months from now when they get the bill long after the project is completed.
While I like the idea from a convenience stand-point – the concept is good – I think it’s flawed to the extent that it encourages consumers to overspend. Sure, that’s good for the retailer but, in the end, it has to be mutually good for the consumer and the retailer.
I also don’t get the connection to loyalty on this one. It’s simply another credit gimmick. Credit alone, doesn’t create loyalty. Customers consistently choosing to shop with you when they have a multitude of choices to do otherwise is loyalty. Indebtedness wouldn’t score high on my list as a mechanism to fit well in to that equation.
I’m in the middle of a kitchen renovation, so this tactic resonates with me, but I have to agree with Scanner that it could backfire. Still, what creates loyalty? It is an emotional connection, and while this promotion isn’t as direct a selling tactic as some others, it is designed to create an emotional attachment between the homeowner and the store. Combine that credit tactic with a little in-store budgeting advice to offset the possible overspending, and maybe you have a program that creates that all-important loyalty connection: “Lowe’s understands me and my needs as a homeowner.”
One life event that strikes me as an opportunity that crosses all sorts of borders and age groups is a new home promotion. People move house for all sorts of reason but almost always want to personalise it in some way. They may not know the stores in their new neighbourhood. Getting them to buy some of their new stuff in a new store might just be one way of at least stimulating loyalty even if you have to do more than just get them through the door the first time to keep them coming back for more.
In my view, the loyalty programs with the most impact are those that help customers meet unmet needs. This may be perhaps what we really mean when we say “add value.” What Lowe’s program seems to do is to make it a bit easier to launch and perhaps finish a home improvement project by delaying payment on the supplies. It is a pretty good idea, on my scale, but not great.
Home improvement customers have a number of significant unmet needs, at least according to our data. These are needs that would not be difficult to meet, and could easily be built into some type of loyalty program. We asked several thousand consumers of home-improvement goods and services: What are the biggest obstacles you meet in making home improvements in general? What are the biggest obstacles to making the home improvement project you are currently involved in? If you patronize a home-improvement retailer, what are your biggest complaints about them? What could they do to make your home-improvement task easier?
There is a vein of gold not yet being mined by the home-improvement retailers. I believe this is where high-impact loyalty programs must turn.
To respond to Scanner’s question: credit is a critical part of many customers’ purchase decisions and it’s a critical element to many retailers’ profitability. Certainly, Home Depot and many furniture stores prominently feature no interest and delayed payment loans for major purchases. Car dealers couldn’t exist without offering loans and leases. For years, Sears made almost all its profits by lending money to its credit card holders. Credit promotions are great purchase levers that often answer the question, “Why should I buy NOW?”
This is a college loan. This is a builder’s loan. This is a reverse mortgage. This is an SBA loan. While far from being a new idea, Lowe’s spin on it is to be commended for creativity. Can other applications be far behind?
Great idea — the proof of this program will be in the way that the Lowe’s consumer values this capability. What we are seeing is that effective loyalty programs need to have sustainable long term value in the eyes of the consumer — by this we mean that just reminding shoppers that they need any number of items to complete a project is not enough — the loyalty program needs to help them actually build and realize their project dream and perhaps even reward them when they complete their specific project. Remember, in loyalty — what is rewarding gets done.