Customers Hold All the Cards

By George Anderson


Just about every retailer today (at least it seems) has some type of loyalty/discount card program. Drugstores, department stores, grocery stores, book and music stores, etc.
all offer them and consumers have a wallet, purse or keychain filled to prove it.


A report on the Knoxville News Sentinel Web site, said retailers are really beginning to offer personalized shopper programs based on an analysis of the data they receive
from the cards.


Russell Palk, president of the Tennessee Retail Association said, “It’s solely a way to provide better customer service.”


Even with high profile reports of thieves stealing personal financial information from stores and financial services businesses, most consumers today are comfortable with stores
collecting information based on their purchase histories.


Karl Snyder of Knoxville, who buys groceries at Kroger, Bi-Lo and Food City using each store’s loyalty card, said it’s all about saving money. “There are things that I show a
tendency to buy and if it generates an extra coupon for me at the register, I’m OK with that,” Snyder said.


Debbie Spearman, Kroger’s assistant loyalty manager, said one of the main benefits of the data collected is it helps stores to stay stocked with the products consumers want.
“Not every store is the same and not every shopper is the same,” she said. “It allows us to provide targeted marketing and targeted products to certain stores.”


Moderator’s Comment: How can retailers use shopper cards to differentiate in a market where so many others also offer similar programs? What retailers
have impressed you with their card program?

George Anderson – Moderator

BrainTrust

Discussion Questions

Poll

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M. Jericho Banks PhD
M. Jericho Banks PhD
18 years ago

Credit Card 101: Remember when we used to have as many as twenty credit cards in our wallets? Or more? Especially gas and department store plastic? Made guys sit on lumpy wallets and boosted the chiropractic industry.

Those days are gone. Today, we rely on a single credit/debit card for most of our purchases because they work anywhere. Retailers with loyalty/FSPs (Frequent Shopper Programs) need to learn from this. Why make shoppers carry an extra card when they can program their software to see customers’ credit/debit cards as loyalty/FSP cards? It’s all in the software, and can be protected for privacy.

Tactically, that’s one way retailers can differentiate their loyalty/FSPs.

Strategically, we’ve got quite a discussion going on. Lots of touchy-feely “experiential/relationship” comments. COME ON! It’s all about saving money. If we have to lick stamps (ugh!) and stick ’em in a book, we’ll do it. We’ve proven that. Flush the esoteric definitions and data-rights hoo-haw and get down to brass tacks. Shoppers seek a bargain. If they have to drive a few more miles or sign up for a membership, they will. One only has to look at the largest retailer in the world and ask, “do they have a loyalty/FSP program?”

Karen Kingsley
Karen Kingsley
18 years ago

The issue, as I see it, is that retailers are not using the aggregate of information obtained from the cards. I may get a Pepsi coupon when I buy Coke, but the register (and, consequently, the store) aren’t registering, for example, that I never bought soda before and respond accordingly.

Amazon pays attention, in the loosest way, to the genres of books I buy, but not much in the way of specifics. They do not apparently combine information from the variety of stores that fall under the Amazon brand.

The single most important thing retailers can do is pay attention to patterns of buying behavior, rather than in-the-moment behavior.

Ian Percy
Ian Percy
18 years ago

What a strange definition of “loyalty” there seems to be in the retail world. Is someone “loyal” because they take advantage of a discount or reward afforded by a customer card? The origin of the word speaks to a “legal obligation.” Clearly that’s not what we have here. The dictionary says it’s a “feeling or attitude of devoted attachment and affection.” That’s not what we have either. Stories where customers have devoted attachment and affection are rare.

I suggest these cards are about nothing more than ‘opportunism.’ When the shopping experience is so positive that we’d shop there, discount or not – then we’re onto real loyalty.

Al McClain
Al McClain
18 years ago

As the technology gets better and retailers get smarter about what shopping data means, they should be able to offer increasingly targeted promotions. If you combine that with better customer service in-store, and even personalized customer service for top shoppers, retailers may really be on to something.

Todd Hale
Todd Hale
18 years ago

The work that we did in a joint ACNielsen/FMI Study on “Winning Strategies for Your Most Important Shoppers” illustrated the tremendous opportunity that Grocery retailers have in leveraging the wealth of information in their frequent shopper databases. Top shoppers (i.e., the big spenders per year) in the various Grocery channel formats (hi/lo, edlp, specialty, Supercenters) are so important because of the number of trips they make and the amount that they spend per trip. We also know that top shoppers have different demographics and different attitudes about shopping. Top traditional “hi/lo” Grocery shoppers do find benefit from frequent shopper card programs. Unfortunately, most programs today do nothing more than allow all types of shoppers to receive the same benefit simply by showing their card at check-out. Grocery retailers need to start using the wealth of information at their disposal via targeted communications and/or promotions against shoppers who exhibit different behaviors in their stores. The key message is that Grocery retailers need to reward their top shoppers differently. I receive e-mails from Wal-Mart, Target, Parisian and a host of other retailers just about every week. Not once have I received an e-mail from a Grocery store – not even from the one where my family and I religiously show our card on each and every shopping trip. It is more than a bit frustrating to have to look at your cash register receipts for hidden messages for how to save money. Are Grocery retailers too concerned about the money that these programs cost and less interested in leveraging them to build loyalty?

Warren Thayer
Warren Thayer
18 years ago

Wow! Did Ian Percy ever spike this one. I’d never quite thought of it in exactly that way before, and he’s totally on target. I’ve come to see loyalty cards, as they are used (for the most part) as mere green stamps. (When I was a kid working the front end at a First National store, I hated it when nuns came. The store manager was very, very Catholic, and he’d have me spinning that little dial for 20 minutes straight to give the nuns what must have been 100 yards of green stamps every time they came through the door. We used to joke that if a cardinal or bishop ever came, S&H would go bankrupt.) I think CVS has a fabulous loyalty card program. They very obviously track my purchases, and give me offers that are meaningful about every time. They always have a short-term deadline for use, and often they are for significant amounts (recently $6 off whatever I wanted in the store). I normally pitch offerings because they are not targeted to me, are good for six months, and they go into the “maybe someday” debris pile in the kitchen, then are forgotten. But not with CVS.

Mark Burr
Mark Burr
18 years ago

Ian is absolutely correct. Retailers have been misled into believing that a card based program can create loyalty. What it actually represents is a one way street relationship between the retailer and the consumer. Basically, it says, shop this way or we’d prefer you didn’t at all. Or, if you don’t you’ll be penalized.

You, see Mr. or Ms. Consumer, it’s your data we want and there’s really nothing in it for you that we might have given you otherwise. You see Mr. or Ms. Consumer, we can’t really do anything with your data, but it seems like the thing to do to gather it. Someone told us we should. After all, we invested millions in consultants, computer systems and software, and imagine what it cost us to give you this card. You see Mr. and Ms. Consumer, it’s the thing to do. After all, everyone else is doing it.

As Ian points out, by definition it’s a “feeling or attitude of devoted attachment and affection.” I would argue that no card or its benefits have ever created that type of emotion. That’s what those attributes call to my mind – emotion. Emotion, devoted attachment and affection are not created by or enhanced by a card. They are created and enhanced by the experience that is created through a relationship between the consumer and the retailer. Relationships are between people, not cards and systems.

Ask a Saturn owner about emotion, devoted attachment, and affection. They will likely explain it to you. In many cases, for Saturn, it’s less about the product and more about the experience of ownership.

If you must use them, call them something else. Call them card based discounting, forced discounting, restricted discounting – pick a name. But, please quit using the word ‘loyalty’ with this misdirected activity by retailers.

Loyalty is created by experience, not by a card or its discounts. Those discounts were there before the card and should be there without it. The card simply makes it more inconvenient to get them for those that have the card. And, imagine the feeling of the consumer who chose to walk through your door whom didn’t have one.

Try changing your experience. Simply making life more inconvenient has driven your consumers elsewhere or left them feeling very un-emotional about their relationship with you as a retailer. It’s about the experience and the relationship, not the distraction.

Carolyn Clark
Carolyn Clark
18 years ago

My grocer has a wealth of knowledge on me… And I gave it to them for free. But beyond getting a discount here and there (that I would have gotten anyway from the cashier swiping her card), I have little relevant return on my “loyalty.” Instead, what I have gotten is stack of coupons for products that I don’t buy.

For example, I am a loyal purchaser of International Delight’s French Vanilla coffee creamer; when I check out, my local grocer spits out a coupon for Carnation’s competing product. I don’t WANT another product and, if my grocer paid attention to my purchase patterns that I so freely give them, they would understand this. Much like I am loyal to them, I am loyal to International Delight. What would be of real VALUE to me would be to know when this particular product is on sale the next time I return to the store or that a product I “usually” buy has a new variant available.

Grocery loyalty cards need to take the next big leap, beyond deal redemption, and bring true increased value to the users. Casinos have been doing this for years, Harrah’s being the leader and gold standard. The guest walks in, swipes their card and can print out coupons that can be immediately applied to their visit that day. My grocer knows I buy Folger’s ground coffee, Tide detergent, California Pizza Kitchen’s frozen four cheese pizzas and Ritz crackers… So how about telling me when I walk into their store that these items are on sale, or maybe just remind me I LIKE and USE THESE ITEMS and maybe I forgot to put them on my list, or take it further and tell me that Ritz has a NEW flavor offering I might like to try?

My grocer can even determine that I like to try new products when they first come to market, based on my past purchase behavior, (e.g. I bought a Schick Quattro the first week it debuted). So why not tell me when another new product is available and where I can find it in the store? I would appreciate the information and the end result can only be my increased loyalty to their store and more products in my basket.

Real loyalty lies in the recognition that my retailer KNOWS who I am; what I Like, Want and Need and is willing to converse with me about it when I am inside their store.

Bernice Hurst
Bernice Hurst
18 years ago

Big transatlantic differences here, folks. There was a piece on television last week about British attitudes towards loyalty cards and basically there ain’t no card ever seems to have bought a single customer’s loyalty. That isn’t the way to go. I don’t think it’s resistance to being tracked and having stores know what people buy so much as a feeling that the cards’ offers are worthless. Either give everyone discounts or cut prices – there was widespread recognition that prices could be lower if only retailers weren’t spending so much trying to buy loyalty. No one was interested in spending enough to gather enough points to get any of the tacky gifts available. Tempting they were not.

Loyalty is inspired by quality products, quality service, value for money and, maybe, convenient shopping (or, heaven help us, at the very least a successful and pleasant shopping experience). I don’t know what the precise statistics are on redemption but I know that many people who have had loyalty cards foisted upon them often don’t even bother to collect their points. This is apparently not unusual behaviour.

How to differentiate? Give gifts for real loyalty, don’t try to convince shoppers that allowing their purchases to be tracked is actually going to benefit them in any way. Every third or fourth or whatever visit, give a voucher to be spent on goods of the customer’s choice, perhaps varying the amount depending on spending bands. Don’t try to foist your own choice of brands or products on them. Don’t make them collect things and redeem them later. Don’t try to gather more information than you can use. Gather and use wisely, customers will come.

Don Delzell
Don Delzell
18 years ago

Loyalty cards, in most cases, are precisely what they’ve been identified by other contributors as: one-way reward programs which act as essentially promotional discounts.

However, some programs DO reward loyalty. Book chains, for example, are in fact rewarding loyalty. Books are for the most part commodities. The choice of where to purchase is a loyalty decision. The question one has to ask is who determined that a free book, or a net discount, or some other form of price reward is what that particular consumer is really responsive to?

We have PHD’s on this panel….let me ask you guys: isn’t there data which determines the length of impact and relative value of different kinds of reward structures? And aren’t those answers different for different test groups based on age, gender, etc? My undergrad psych degree was a really long time ago!

Grocery store loyalty programs are a joke. The check out clerks regularly swipe their own keys or are supplied a key so that even if the customer doesn’t have the card, they still get the discount. What’s up with that? My personal response is that grocery loyalty programs are just another form of in-store discount, which make me feel marginally better about the high prices I pay. But the reality is that I choose my store based on location convenience, assortment fit with my market basket and, to some degree, on perishables quality. But that’s just me. The price discounts I get don’t keep me coming back or send me away. They’re kind of a nice “gift” but one I’m accustomed to and have an entitlement feeling around.

The best loyalty programs I’ve ever seen were the initial mileage programs with the airlines. They worked. They were expensive. They had real perceived value.

Connie Kski
Connie Kski
18 years ago

“But the reality is that I choose my store based on location convenience, assortment fit with my market basket and, to some degree, on perishables quality. But that’s just me. The price discounts I get don’t keep me coming back or send me away.”

Ah … but if you get a surly clerk that insists that you have to have their little card in your fat little fist to get $6 or more dollars off the $16 paper towels, it creates a negative shopper experience. When she cattily responds that she will swipe her card for you just this one time but you have to get your own … it tends to make one not want to return.

I would say, therefore, that the card has created a negative shopping experience and if I can buy my paper towels elsewhere, I will! And I am not even that price sensitive about it!

Bob Bridwell
Bob Bridwell
18 years ago

Regrettably, most retail grocers got into the me-too syndrome when loyalty cards first started. The problem is they are not able to use the mountains of data they have. They really have not employed the right IT people with any marketing savvy to say “here’s an idea”. They can tell you 1,000 ways to parse the data but not how to increase rings at the register.

I like the so-called pump perks: you use the card on specific items and get ¢-off on you gasoline bill at the pumps. I recently saved 62¢ per gallon on up to 15 gallons. The savings were 2-6¢ per item I bought, including Kraft cheeses. So they are not relegated to the Clabber Girl Baking Powders, but high velocity items. If you got to the store, you probably drove and that means you use gas. I can savor the tank of gas all week and have a nice feeling about my grocer. So I look forward to shopping to see “what I can save money on this week.”

Ken Robb
Ken Robb
18 years ago

It would seem that these comments on the value of supermarket card programs reflect their observations on some or most, but would not apply to all card programs.

I have heard others estimate that about one-third of retailers have effective CRM programs that effectively target and deliver meaningful value to the customer. Perhaps these commentators live and shop in markets served by the other two-thirds.