Differences in Value Perception
By John Hennessy, Vice President, Concept Shopping, Inc.
(www.conceptshopping.com)
The results of the Vertis Customer Focus 2006: Grocery Study reveal different consumer preferences for different types of loyalty program rewards. Some adults (49 percent) prefer an immediate discount on a specific product during the current shopping trip. Others (34 percent of total and 42 percent of Hispanics) prefer to accumulate points for a larger reward.
According to Jim Litwin, vice president, market insights at Vertis, “From the results of our study, we have noticed a shift in reward programs and an increase in usage among younger demographics.”
Another interesting finding of the survey is ad circular use. Eighty-four percent of grocery insert readers use the insert to compare prices. Fifty-two percent use the circular to decide where to shop.
Moderator’s Comment: How can this survey help retailers improve their own loyalty programs?
Listen to the customer feedback. Offer both reward options.
Some shoppers prefer to accumulate for a larger, more valuable reward later. Others prefer immediate rewards. That there are differences should surprise
no one.
Rather than ignore either group, offer a program that incorporates both components. You wouldn’t offer only one brand of cereal. Why offer only one way
to reward your shoppers?
Make sure both components offer relevant and valuable rewards for shoppers that simultaneously improve your business. –
John Hennessy – Moderator
My rough estimate is that the specific variety of my favorite brand of cottage cheese is on “club card” promotion 100% of the time at 100% of the chain grocers in my area. To their credit, the creative marketing geniuses do keep it interesting (and avoid violating FTC regulations) by rotating the sale between the 8 oz and the 16 oz sizes.
As I type my phone number into the keypad and listen to the cashier say, “You saved $1.79 today,” I smile, I nod. I think to myself, “I was just forced to go through this silly, time-wasting charade for the privilege of paying full price as opposed to a price that has been grossly inflated so that they can think I that I think I saved money.”
If the grocery chain executives believe that anyone with a double digit or greater I.Q. isn’t insulted by this scheme, I would venture to say that they are mistaken.
By contrast, American Airlines’ loyalty program provides genuine, cumulative benefits that make a difference in my life (faster lines, more likely upgrades, club membership, free travel) and motivate me to continue to give them all of the business that I can.
The best loyalty programs are those by Whole Foods, Trader Joe’s and Wal-Mart: none. Loyalty programs add overhead and reduce margins in a profit-challenged industry. It costs money to administer them and they can be copied very easily, so they offer no unique leverage. Of course, the customers want a choice. They aren’t paying the cost. The problems: once a program starts it’s hard to cut it back and once your competitor has one, it’s hard not to respond. If the store’s assortment or pricing is really special, no program is needed. If the store isn’t unique, there is no choice. The store has to copy the competition.
Genuine loyalty is the definitive goal. If sales and discount loyalty programs truly worked, major supermarket chains and discount retailers wouldn’t be vanishing. It’s interesting that Hispanics have a higher preference level for accumulating points. Hispanics had traditionally in the past been a good barometer for discount shopping.
Providing a one size fits all solution is a major reason why loyalty programs have not created “loyalty” with consumers having and using 3.2 grocery loyalty cards. Finding a way to use the data to create real loyalty is still a worthy goal.
Awww shucks, John, you said what I wanted to say the minute I read the intro paragraph. Give the people the choice. Some days they may want instant gratification, others they might be more willing to save towards some irresistibly tempting reward. Either way, I think choice of loyalty reward is more likely to bear loyalty fruit than having the retailer make the decision.
John’s comments were on point. Whether it is a loyalty program or a desire to improve customer service or a desire to enhance the customer experience, the retailer should always listen to the customer. By listening to the customer and then delivering, the retailer makes the customer feel good and important and creates a loyalty.
While retailing is a tough business, it boils down to giving the customer what they want at a fair price with excellent service. What better way to accomplish that than to listen and deliver?
It is a shame we use the word “loyalty” so loosely, and then suggest price builds loyalty.
The previous commentators who stated “talk to
the shoppers” do bring us to a starting point. If we don’t engage our shoppers to find out what loyalty isn’t,
we will never get it right.
By the way, loyalty is and should mean a ‘faithfulness’. I am sure not going to commit to a retailer until I receive a distinguishing shopping experience; gain knowledgable from associates
answering my questions; and, by all means, service!
One might say, thanks for neighborhood meat, produce, and food
shops; and the likes of Ukrop, Publix, Wegmans, WestPoint markets, Harmon’s, Sunset Markets, Gelson’s, Nugget, Dean ‘n DeLuca,
Molly Stone, Eatzi’s, etc. Hmmmmmmmm
Recently, most Shop ‘n Save stores (Supervalu) in the Pittsburgh market dropped the Greenpoints version of their rewards program, offering instead instant savings. This action alone, I feel, warrants special attention.
Shoppers there and elsewhere were tired of accumulating millions of points for savings not truly reflecting the redemption value. These shoppers would rather see instant savings, much like those offered by the A&P family of food stores. Seeing savings of over half the food total from such promotions as “everything in this ad one-half off” and combining double couponing, these consumers see their rewards instantly reflected on their grocery receipts. This is real time savings gratification.
Having been involved in supermarket loyalty programs almost since their inception, (fifteen years ago or more); I find it interesting that we are still debating whether the customer’s wants and needs should be driving the reward structure.
While customer surveys can be enlightening in the fine-tuning of these programs, the basic tenets of building loyalty are well documented and already in practice in the hotel, gaming, and travel industries. Even without surveys, the customer is communicating with the retailer through their purchase data. But in most cases this is a one-way communication stream.
To engender loyalty, retail “frequent shopper” programs must provide their members relevant benefits not easily duplicated by other retailers. This is far from being the case especially in today’s supermarket loyalty environment. In fact, most supermarket loyalty programs are a misnomer. They are merely pricing and merchandising programs that require the use of a card. Yes, a few sprinkle in an occasional “free turkey” or a continuity program here and there, but they have never graduated to the level of understanding the data they have and using it to craft rewards and benefits…tailored to the key customer groups.
As with most rules, there are exceptions and congratulations to those retailers who have made the commitment to mine their data and truly craft their business around their customer’s needs…based upon the rich purchase data that these programs deliver.