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NGA Research Key Insight: Retailers Urged to Reinvigorate Frequent Shopper Efforts

Independent retailers are known for generating customer loyalty, but they should revisit frequent shopper programs to further boost loyalty efforts.

That’s the view of a longtime shopper loyalty expert, Gary Hawkins, chief executive of CART (Center for Advancing Retail & Technology), who sees the need for retailers to recommit to loyalty programs. He offered perspectives in response to recent NGA-Nielsen research on the frequent shopper topic.

The research, based on a nationwide consumer survey, found that food retail store customers weren’t always aware of the existence of frequent shopper programs, and some had mixed views about participating. Some 46% said their primary store has a frequent shopper program, and of that group, 93% said they are members, which represents solid participation. However, many shoppers appeared confused about whether their store has a program, with seniors and rural shoppers the most uncertain. Millennials, GenXers and urban consumers showed the most interest in joining these programs.

These insights are part of the NGA report called “The Independent Consumer,” which outlines shopper preferences based on the consumer survey. The report compares attitudes of those who shop different types of stores, such as independents and chains. The research piece, conducted for NGA by Nielsen, was introduced at The NGA Show in Las Vegas earlier this year.

“In general, excitement and creativity are missing from a lot of the frequent shopper programs,” Hawkins said. “On the one hand, I’m encouraged by the number of independent retailers talking about the importance of loyalty programs. However, there are a lot of basic programs, including fuel initiatives, with points based on spend. While these can be beneficial, they aren’t necessarily creative.”

Hawkins, the former CEO of an independent retailer in upstate New York, said that loyalty programs were all the rage in this industry some 15-20 years ago. At that time, retailers emphasized special treatment for best customers, including closing stores for exclusive parties or holding outdoor celebrations in parks with bands. That period was marked by a drive for creativity that appears to have waned more recently, he added.

“In my mind, independent retailers should be blowing it out of park with loyalty, and letting their creative juices flow around customer recognition,” he said. “Loyalty isn’t just about price and the economic equation. Let your best customers know who they are. Give them a free cup of coffee. Offer services specifically for these customers. Invite them to bring their knives into meat shop for sharpening. People love to be recognized, and this can take many forms.”

Loyalty programs need to appeal to the widest possible base of targeted customers in order to succeed, he added.

In addition to the customer-facing side, the other part of equation is how retailers use the resulting data from programs to analyze customer patterns and make decisions on assortments, promotion planning, and other strategies. This aspect is increasingly crucial for retailers facing heightened competition, he emphasized.

“Loyalty is the only way that independent, mid-market retailers will survive going forward,” he said. “Independents need to provide customers other reasons for shopping with them. Loyalty, recognition, services, and economic value play big roles. Extend more value to your best customers.”

These efforts need to embrace personalization and relevancy in offers, he asserted.

“That is the new value proposition and the incentive for customers to be part of programs. It’s what customers expect today.”

Among independent retailers, he cited Coborn’s as doing a good job in this regard, and Kroger as a leader among larger retailers in leveraging customer data.

The NGA research was sponsored by The Shelby Report. The consumer survey was conducted online last November within the United States.  It surveyed 1902 U.S. adults 18 and over to explore their food shopping habits. NGA is further spotlighting insights from the research throughout the year, including in key insight pieces, and case studies of independent retailers that exhibited best practices. The focus is on obtaining takeaways and action steps from the insights.

Amazon may be generating all the buzz lately around online grocery, but the fact is, retailers across the industry have expanded their e-commerce capabilities in recent months. And no wonder, judging by the growth figures highlighted by Brick Meets Click’s research.

Publix, Wegmans, Smart & Final, Schnucks and Sprouts Farmers Market are just a few grocers that have taken part in what’s seemed like a mad dash to upgrade e-commerce capabilities. This is in part a defensive move, considering the rapid growth of Kroger and Walmart’s click-and-collect programs, along with the looming threat of Whole Foods under Amazon. But it’s also a move to capitalize on shopper demand, and potentially profit off the venture down the road.

Right now, profit is elusive in grocery e-commerce thanks to high overhead costs and the inefficiency of last-mile delivery. But the increase in basket size and order frequency indicated by BMC’s research are good signs. The firm also found that high-margin perishable products are on many ordering lists, which goes against the current conventional thinking that shoppers want to see and touch their meat and produce before they buy. Certainly, retailers have stepped up their “freshness” messaging in recent months, and some even put customers in touch with their order fulfillment staff so that they can issue special instructions and even see items before they’re selected.

Even with the recent movement, early e-commerce adopters are the ones benefiting most, as BMC’s study shows. Walmart and Kroger have raced ahead to claim shoppers, and may profit handsomely in the long run by solidifying loyalty and new business. Even these top performers, though, face operational hurdles to growing sales.

“One element to winning in the marketplace these days is convenience, and Kroger has really done a nice job with ClickList,” Ben Bienvenu, a research analyst with Stephens, told Food Dive.  “But I think it is putting pressure on operating margins, at least as they build that capability.”

It will be difficult for other grocers to stand out in a crowded market, meaning e-commerce for now is mainly a customer retention strategy. But as demand increases, innovation could fuel bigger baskets and deeper customer loyalty.

Reprinted from https://www.nationalgrocers.org/blog/blog-detail/nga-blog/2017/09/19/nga-research-key-insight-retailers-urged-to-reinvigorate-frequent-shopper-efforts

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