Posts Tagged 'loyalty programs'

Can low prices alone drive loyalty?

Not for the first (or last) time on RetailWire, panelists engaged in a conversation about whether low prices or compelling sales can make or break retailers’ loyalty programs. I think there’s a lot more to it:

Most retailers’ so-called loyalty programs are little more than extra discounts layered on top of existing sale prices. It’s a transactional approach to the business, if you believe that true loyalty is developed by moving customers from “satisfied” to “committed.” And it’s the easy way out.

A value-oriented retailer will argue that deeper discounts are part of its brand equity — which may be true — but this is not the same thing as building an emotional connection through great content, execution and service. If anybody thinks that Amazon has built brand loyalty (among Prime members and others) strictly on the basis of competitive prices, they are missing the point of everything else Amazon is trying to do.

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Stagnant growth of loyalty programs

RetailWire panelists discussed some new data suggesting that loyalty programs’ growth is slowing at several retailers. Here’s my take on why this may be happening:

Loyalty involves establishing an emotional connection between the retailer and the customer, in order to move that shopper from a state of satisfaction to commitment. But far too often, retailers’ loyalty programs consist of little beyond price incentives. Extra discounts for cardholders may drive more frequency of visit but also encourage bottom-feeding when “loyalists” can apply one sale offer on top of another.

Among many other uses of data science, retailers can do a much better job using predictive technology to tell their best customers about new products of interest — not just when those products are available at the lowest possible margin to the store.

Whole Foods develops a loyalty program

From a recent RetailWire discussion, here’s a comment about the news that Whole Foods is testing a loyalty program. My point is that Whole Foods has a terrific opportunity to redefine “loyalty” for many others in the retail industry:

Too many retailers equate “loyalty programs” with price offerings, overlapping discounts, and so forth. There is very little brand-building (or imagination) involved here. In the case of Whole Foods, it seems like a natural candidate to leverage the pre-existing brand loyalty of its customers, who do not equate “value” with the lowest price. Using data collection to discern shopping patterns and preferences will allow Whole Foods to provide targeted messaging to its most committed “foodie” customers without having to lean too heavily on pricing messages.

Loyalty: It’s not just about the “deal”

This week at RetailWire, contributor Bernice Hurst analyzed reasons why food retailers are losing “loyalty” customers while general merchandisers are gaining. For me, it comes down to retailers’ tendency to equate loyalty with “deals”:

Here’s the most revealing part of Bernice’s article: “Revitalized engagement includes Safeway giving members discounts plus coupons based on past purchases, and Fred Meyer sending coupons based on expenditure.” Perhaps the problem with declining enrollment in grocery “loyalty programs” is that they are purely price-driven. They may be more targeted and data-driven based on purchase history, but they are not likely to engender the kind of customer commitment driven by service, assortments or other relationship-building strategies.

Loyalty programs: Is time worth more than money?

Recently the RetailWire panel ┬áhad a chance to discuss new thoughts about loyalty programs. The article under discussion focused on the value of the consumer’s time, but several of the examples were not specific. The common theme — and a growing issue in rethinking loyalty programs — is how to change the formula from just being price-focused. Here’s my comment:

The examples mentioned in the article are not always about time-saving, but they are consistently good examples of how to delight the customer by exceeding expectations. Some of the benefits are convenience-based, others are based on the idea that frequent customers merit special recognition.

But the common theme is that these are not pricing-based ideas. Many retailers and service providers mistake deeper discounts for true loyalty programs, but price incentives only encourage the customer looking for deals to shop around and cherry-pick. It’s time for more merchants to follow the lead of service providers in rethinking the very meaning of their loyalty offers.

Do loyalty programs work for Gen Y shoppers?

There has been plenty of discussion recently on RetailWire about the nature of store loyalty programs. Most panelists agree with me that most of these incentives really don’t accomplish their aim. The question at hand: Can these types of programs work any better for the Millennial consumer?

As panelists have discussed recently, most stores’ loyalty programs are really discounts by another name. These kinds of incentives will be important to Gen Y shoppers, who outnumber Boomers but do not have nearly the same level of spending power. However, it’s well documented that Gen Y shoppers will also respond to marketers that understand their interest in technology and the emotional connection of community. (“Peer marketing” might be a good way to describe it.) Finally, customized rather than mass media are essential to reaching this target most effectively.

The loyalty debate continues

In a recent RetailWire discussion about food retailers, the panel debated whether newly developed mobile apps are good substitutes for traditional “loyalty card” programs. I applaud the technology but not necessarily the end result:

A mobile app that serves as a substitute for scanning a loyalty card (or entering one’s phone number at the checkout lane) is a convenience but not a game-changer. And, as the panel discussed last week, offering discounts through new technology is not really a driver of loyalty anyway.

It would be interesting to see a food retailer really prepared to think outside the box of convenience: For example, how about entering your grocery list from the store website or mobile app, scanning your barcode upon arriving at the store and finding your order ready for pickup? This would take work to execute in a cost-effective way but might help redefine loyalty.