PARIS (FNS) -- Retailers must stop enticing the least desirable shoppers to their stores with endless price promotions and instead concentrate on rewarding their most loyal, and profitable, customers.
In addition, retailers who already offer customer loyalty programs must differentiate them more effectively to be successful against their competitors.
That was the message delivered by Brian Woolf, president of Retail Strategy Center, Greenville, S.C., at a conference here titled "The New Power in Loyalty" and sponsored by CIES: The Food Business Forum, here.
Woolf, in particular, criticized the U.K.'s top three food retailers for a failure to differentiate their loyalty card programs.
"Tesco, J. Sainsbury and Safeway are all too close together. They seem like clones. Tesco is the leader, but none of them is using the cards to their full potential. They are just scratching the surface," he said.
It's well documented that 20% of shoppers account for 80% of sales, yet retailers continue to cater to unprofitable customers, he said.
"We must treat different customers differently because they are not equal. Customers are [disloyal] because that is the behavior the industry encourages. Our actions reward promiscuous shopping behavior because of the ads and promotions we run," Woolf said.
"We suffer from retail schizophrenia -- we are the enemy, not the customer," he added.
Customer-specific marketing programs, on the other hand, are designed to reward a retailer's best customers by using information, pricing and marketing -- all of which can provide a competitive edge.
As the industry embraces new technology, it must embrace new business practices to use the information such technology generates, Woolf said.
"The key is how much better can we understand our customers than our competitors do," he said. Retailers with customer loyalty programs find that 60% of transactions, on average, are captured on the cards and account for 80% of sales.
Many retailers hesitate to differentiate among customers for fear of alienating some. But the more retailers skew their operations toward their best customers, the more profits will increase, he said.
"Customer-specific marketing is about economics, not loyalty. By rewarding your most loyal customers you get the best bottom-line results. Retailers today have limited resources and have to decide where those resources can best be allocated. It's easier to get your best customer to spend more with you than the least-frequent shopper."
There are three keys to success in customer-specific marketing, he added -- it must be at the core of a retailer's strategy, the program must differentiate between various customer segments and traditional marketing programs must be abandoned, Woolf said.
