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Retailers

Making Loyalty Programs Work Harder

Stores need to capture data and use it wisely
data
Illustration: Shutterstock

As competition abounds from all sides, grocery retailers need to up their game. A promising option to that end is loyalty programs, which need to do two things to be effective: offer advantages to the customer along with a better shopping experience. They also need to feed data back to the store so the company can improve just about everything, from pricing to promotions and product assortment to store flow.

Coborn’s, based in St. Cloud, Minn., launched its loyalty program More Rewards in fall 2016 and expanded it to all Coborn’s, Cash Wise and Marketplace Foods locations by February 2017. “It offers guests a variety of value propositions intended to drive loyalty and engagement,” says Coborn’s spokesperson Dennis Host. The program is based on a fuel rewards program but includes digital coupons, weekly personalized offers, occasional “surprise and delight” offers and a mobile shopping app.

But the real key to the program is that each customer’s experience with it is personalized “to help us serve our guests in a much more personal, relevant way,” Host says. “Through intense analysis of shopper data, we’re better able to understand our shoppers’ preferences, shopping frequency, items they’re purchasing, migration, loyalty and much more.”

Coborn’s manages to be connected to every one of its customers because it actually uses the data it collects from them to provide a “significantly more relevant shopping experience through targeted offers that reflect that shopper’s interests, and we’re using the data to drive our item selections for our weekly ads,” Host says.

All of this data, he says, helps drive pricing decisions, to feature the items that most resonate with the primary shoppers in its weekly ad—especially the front page—and help home in on which items and promotions are most effective. It helps with shelf planning and product assortment management, too.

Over the past couple of years, Host says Coborn’s has “entered a whole new world. [This data] enables us to be much more relevant. Today’s consumers want to be engaged, they want to have a personalized experience and expect that retailers today ‘show me that you know me.’”

Focus on Top Shoppers 

Gary Hawkins, CEO of the Center for Advancing Retail & Technology (CART) says the world today is all about the customer “and most retailers are effectively blind.”

The problem, he says, is most retailers are not leveraging the data they capture, and if they are, they’re not using it to anywhere near its potential. “They need to understand the world of retail needs an immense amount of data, and the most important is the customer purchase data,” Hawkins says. “Without that, you can’t provide relevance [or] personalization; you can’t understand who your customers are and what product you should have on the shelf.”

For example, he says, most retailers today promote a product on the front page of their ad, often because a vendor is paying for it. But the product that needs to be on the front page is one that will really draw in customers, especially the most loyal customers.

“Grocers lost the essence of what loyalty was about,” says Michael Schiff, managing partner with Partners in Loyalty Marketing, Chicago. “It’s about taking your strongest customers and making them more loyal. It could be that you know what they’re purchasing so you align your offers that way; it could be experiential, giving them a first look into things; higher tiered offers, special days—anything that makes them feel special.

“That’s where things started and what some retailers have got away from. How do we make these customers feel unique?”

Take, for example, Cincinnati-based The Kroger Co., which has worked with Dunnhumby for more than two decades and recently expanded its program with a new debit card and seamless mobile payment program that gives shoppers double loyalty rewards.

“Kroger has grown the proportion of its premium loyal shoppers as a proportion of its total customer base,” Hawkins says. “As they’ve gotten more business from their loyal customers, it helps strengthen their gross margins because those customers are more profitable.”

David Ciancio should know. He’s a senior customer strategist with Dunnhumby, also based in Cincinnati, and 22 years ago led the redesign of the big retailer’s loyalty program. “Kroger is improving shopping experiences,” he says. “What Kroger and other stores with great loyalty programs are doing is using the data well, to make better promotional decisions, better pricing decisions, better assortment, better flow, and making things fit better for certain stores.”

But, Ciancio says, it’s not all about data. “If you build the most interesting loyalty program but the stores haven’t changed and the shopping experience hasn’t changed, you still won’t gain loyalty,” he says. “Stores know that. Stores like Kroger understand that translation back into the shopping space.” Grocers need to make tangible changes customers can feel, such as making locations easier to shop, offering a more personalized experience and faster checkout, he says.

“Loyalty is something a retailer has to give to its customers,” Ciancio says. “It’s about experience, about one more item in the basket. Every retailer understands shoppers are shopping multiple locations, so the idea is to get them to buy more in your store.”

No Loyalty Program? Big Problem 

Not all successful companies have loyalty programs. Are they at a disadvantage? Yes, Hawkins says.

Publix, H-E-B, Walmart, Target, Aldi and Trader Joe’s are all doing nicely, offering value or an excellent shopping experience, and generating loyalty through their specific proposition. “But they don’t have data,” Hawkins says. And though he acknowledges the aforementioned retailers can gather it through digitally engaging with customers via online shopping, it’s risky and will “only give them knowledge about a very small piece of their business.”

And in a day and age when Amazon dominates the playing field more and more, gathering data on every customer, eventually those grocery stores—no matter how great their proposition—are going to fall behind.

“They’re missing out on data and they make up for it with personal service,” Ciancio says. “But it’s essential for them to keep up and expand.”

Food City, which is owned by Abingdon, Va.-based K-VA-T, started personalizing its loyalty program, ValuCard, about 10 years ago and is drilling down into further personalization. It tailors the email advertisements each shopper receives, showing people the top six to eight items they’re interested in.

“That’s really going to drive them to the stores, and it makes it easier for them to shop,” says spokesperson Kevin Stafford.

The problem, he says, is how do you hit all your customers with your advertising but personalize it and draw them back into the store? And once they’re in the store, you have to give them targeted offers to get them buying more, and then coming back more.

K-VA-T puts its customers in different buckets and talks to them differently. The weekly ads are for the masses; it then uses email to reward its best customers. It looks at the different ways it can reward its top shoppers and uses those, from direct mail to email and receipt offers.

“The key is understanding your customers and meeting them with the offers they want, when they want them,” he says. But you’ve also got to keep it simple and show them things they specifically buy, along with some digital coupons or direct mail coupons for those things.

“The power of loyalty to help you understand the business is incredible,” Hawkins says. “The battle is over who can get the biggest share of the customer’s wallet. The only way a store can do that is if it knows who you are, what you’re purchasing and how can it better serve you.”

St. Louis-based Schnuck Markets recently expanded and enhanced its loyalty platform, which enables customers to earn Schnuck’s Rewards. The goal of the retailer’s enhancements, says spokesperson Paul Simon, “allows us to establish a one-to-one connection with each customer so that, based on his or her shopping habits, we can offer the shopper special offers and savings specific to each individual.”

Schnucks personalizes it even more. The Schnucks Rewards app now includes a “For You” feature designed to offer exclusive savings customized for each member. “This new feature pulls together personalized items that are on sale, have a digital coupon or feature bonus Schnucks Rewards points to create a unique shopping experience offering even more ways for customers to save,” Simon says.

Doing It Wrong

Retailers typically make four mistakes with their loyalty program, according to David Ciancio of Dunnhumby:

1. Not returning enough value, enough generosity “for the gift of the customer’s personal information,” Ciancio says.

2. Asking for too much information. Every question on an application is a promise that you’re going to give something back, but stores too often don’t return anything. Shoppers are weary of those kinds of things.

3. Not engaging their own employees in their loyalty program, so those retailers are not putting employees first. Instead, they could give them previews of some offers before they go to guests.

4. Thinking discount offers alone grow loyalty. “Recognition and content are more important than discounts, which are transactional in nature and do little to grow emotional loyalty,” Ciancio says.

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