Why grocers need to adjust their loyalty strategies to deliver the goods: Part two
During times of inflation and economic uncertainty, customer loyalty is, perhaps, tied more directly to price than ever before. But there are factors at play beyond blanketed discounts, incentives and rewards. It’s increasingly important for grocers to understand their customers on a more granular level and engage them with personalized messaging and on the platforms of their choosing.
We recently chatted with Joel Percy, regional director, Canada for Eagle Eye, a digital marketing tech company, about the risk of not having a robust loyalty program in place, and why grocers shouldn’t build those programs on “warm fuzzy feelings.”
The interview has been edited for clarity and length. Read part one of the interview here.
How can grocers level up their rewards programs?
Personalizing on dimensions other than the product is a good one – time of week, channel of communication, or sending a value message to one customer versus a product discovery message to another customer. We know a lot of people are going to be driven by savings, but there are other customers who would be less interested in that. Their question is, “Can you inspire me with some ideas about what's for dinner?” Understanding that is a great way to start building that one-to-one connection.
Where we see an opportunity for grocers to take the lead is what we call “marketing in the moment.” When I add the word “near me” in a Google search, I can find coffee shops open near me. We think there's a similar transformation coming in marketing. With everybody walking around with phones in their pockets, we can understand where customers are and what they're doing. We think, in the coming years, grocery shopping is going to become a phone out experience rather than a phone in the pocket or phone in the purse experience. Then the lines between e-commerce and physical stores start to blur, because now I have a digital way to talk to you as you shop in the physical store. But, you must be careful how you use that. People don't want to be spammed while they walk around the grocery store. If you can find a way to make it useful and valuable, customers will engage with it.
READ: As prices soar, Canadians find new ways to save
As cost-conscious consumers look beyond brand and focus on the best price, is loyalty the next battlefield for grocers?
It’s not the next battlefield, but the current battlefield. I think customers today are obviously very price conscious. But, even heading into the pandemic and then in the current inflationary environment, the reality for most groceries is that loyalty has taken a more central place in the organization. It used to be a little bit of a sideline thing that marketing did and the real business was run by merchandising. I think that's been changing and it doesn't make any difference now that customers are a little more value conscious than they were. I think the organizations that have the digital channels to talk directly to their customers about that value they're providing have the advantage in today's market. The message might be a little bit different, but it's that ability to talk one to one with customers that creates a real advantage for grocers.
Is loyalty still considered a marketing function?
Sometimes you see it sitting in marketing but, to be honest, it's been elevated in the organization. Often it will fit today with a chief customer officer, whereas maybe 10 years ago loyalty wasn't controlled by someone at that C-suite level. I think retailers have been learning and seeing the benefits of putting into action this idea of having a conversation with their customers as an essential part of what they do. So, it's certainly an evolution, but I think if we were to go back five or 10 years, we would find that it played less of a central role than it does today.
READ: Grocery leaders share how they’re helping shoppers save
Which grocers are doing a good job of this?
I think in Canada, PC Optimum leads the way. They started out the gate with real one-to-one personalization and they continue to innovate in a lot of ways. If we look globally, we're seeing some interesting things also in Australia with Woolworth and they're everyday rewards program. They've got some innovative loyalty offerings happening there. For example, there's a subscription program where, as part of your monthly subscription fee in sort of an Amazon Prime style program, you get one shop to the store per month where you get 10% off everything. And it's driving this interesting behaviour among customers as they save up for this one day a month to shop and load up the pantry, and maybe buy some things that are indulgences that they might not normally purchase because they're getting a savings.
The other one that comes to mind in the U.K. is Asda, which was formerly owned by Walmart. They've created a great loyalty program around what they call “missions” – they'll give customers personalized missions that might span multiple trips and you'll get a cash reward you can use for dollars off the bill. So, it's not down to a specific item and price. You're not getting 10 or 20 unique SKU offers every week, but you have these missions you're working on and then the rewards are rich if you achieve them. And, of course, they're designed to maybe stretch you a little bit here and there beyond what you might normally spend. So, great customer uptake. I think those are a couple of examples that come to mind where we're seeing some innovation and maybe a twist on the traditional loyalty model.
What is the benefit to being part of a coalition?
There's an interesting trend in Canada in terms of the loyalty coalitions. I think we have a couple of very strong coalitions coming out of businesses that for obvious reasons would've struggled during the pandemic. You've got Scene+, which originally was anchored in movie theaters, and you've got Aeroplan. If you think about movie theaters and air travel, those would be two businesses hit hardest by the pandemic. Both programs have been making aggressive moves to expand their coalition and bring in partners. I think the advantage of the coalition for sure is that it puts in the customer's hands the control of how they want to receive their value and so they can focus that on things that are meaningful to them. To one customer, dollars off their monthly grocery bill might make all the difference in the world. Another family may want to be saving up for that special trip through a travel partner. So, it puts the control in the customer's hands in terms of how they get that value and what motivates them.
What’s at risk for grocers who don’t have a robust loyalty program in place?
If you don't have a loyalty program, you're flying blind on what your customers are doing. You don't have data that says, when I make a change here, what happens? How do customers behave differently? Do they visit more frequently when I do this? Are their baskets bigger or smaller? It's depriving yourself of some data that could help the business in a much better way.
And then, in terms of the shift from mass to personalization, I think the reality is that mass marketing is inefficient. You are giving money to people who either don't know they're getting it or would've done the behaviour anyway.
One of the big advantages of personalization is it allows you to focus that investment in a way that's going to be meaningful to the customer, and therefore move the needle on your business rather than this sort of blanket approach that says everybody gets the same whether they need it or not, or whether they know it or not. It just becomes this big cost hanging around your neck. It's very hard to get rid of.
READ: 'Retail has nine lives' in Canada as 2023 consumer spending strong – for now
How can grocers utilize loyalty programs to counteract price increases?
The biggest tool is this ability to give customers a deeper discount or a bigger reward on things that matter to them, or in areas they might be feeling the pinch. For example, I can identify a small set of customers whose trips seem to be largely driven by diaper purchases. I can give them a discount on that category that I can’t afford to give as a blanket discount for all my customers. Laser focused, targeted promotions on things that matter to specific customers is probably the way to win their hearts and win the price battle, rather than having to fight it at the shelf with mass pricing.
Anything else?
I think the industry is waking up to the fact that there isn't a one size fits all approach to this. It’s not the old days of a mass value proposition of 1% cash back and moving towards personalized offers. Retailers are starting to build loyalty programs that have more of a menu. It makes them a little more complex for a customer to digest, but it also allows each customer to find something in there that's meaningful to them. Whether it's earning points or getting discounts, for some people it's the ability to donate to charity and make a difference in their community. For some people, they love a gamification element that gives them a target to hit it to earn badges and those kinds of things.
And, I think our tendency as marketers is we find something that works and then we just want to double down on it and do it for everybody. Whereas the reality is that people are different. That's the fundamental thing that's under your personalization. And so we have this menu of options, and you let customers choose how they will interact with you. They will find the things that are meaningful to them and help them feel connected to you as a brand. More and more we're seeing retailers understand this. Customers will find their way through the program and make it fit them, rather than us trying to push the same thing on everybody.
