Many retailers who have established frequent-shopper programs are realizing that such programs represent not the end of their customer-loyalty efforts, but just the beginning. Simply providing electronic discounts or establishing a points program is proving ineffective if several competitors are doing virtually the same thing.
BR> SN: Have supermarkets done enough to analyze the data gathered via customer-loyalty programs and use it for targeted marketing programs?
MIKE HUBERT: I would say probably not; I guess the industry is scratching the surface. If retailers analyze customers who spend between $20 and $30 a week, they can offer them a $2 discount on a $40 purchase. This stretches them to spend more, and is the most cost-effective way to get new business.
BOB SCHOENING: It varies widely. There are a lot of companies that are extremely close-mouthed on this subject, probably rightly so. They don't want to share their successes, so we're more likely to hear about the failures.
JACK SCOTT: The point is there are many ways to do targeted marketing. At some of our member retailers' stores, customers can bring in their grandmother's favorite pecan pie recipe and they'll bake it for you. No card is going to provide that value. Once that happens, [the retailer] knows that customer likes that kind of service, and they can begin providing opportunities for the customer to connect with other offerings.
Or say a cashier notices someone buying flowers and hears that it's for an anniversary. The cashier can hop to another window [within the point-of-sale system] and put the date into the customer profile. Next year, at the anniversary time, the retailer sends them the flowers. Those kinds of programs melt the heart -- a lot more than discounts on the price of a T-bone steak.
SCHOENING: A retailer can have a database marketing program without a loyalty program. As retailers develop their marketing plans, they'll have some idea of what they're intending, and as they pull data into data warehouses and examine it, and have it flow into and create reports that show what the performance has been, they can measure it against expectations. Then it becomes a closed-loop process.
HUBERT: Right now all we want is to target customers based on the day and time they shop. For example, certain customers may shop on Friday, and could be buying a filet mignon for dinner that night. It is interesting to see when customers are in our stores as close to the minute in detail, and then make sure that we have on our shelves what they are looking for.
SCHOENING: Linking what customers bought with demographic information about them has some advantages that will be very useful, as we spend more time integrating selling information with category management programs.
JOHN GRANGER: I think offering specific items based on customers' actual purchase patterns is where we can make a connection with customers.
SCOTT: Retailers that have been doing this for some time, at least here in California, are [using loyalty programs] to manage the category and the gross margin of the market basket, not just the gross margin of the item. Frequent-shopper data helps them make that type of decision, not in a vacuum as we've done in the past, so the programs are actually improving the retailer's margins.
SN: How do you see customer-loyalty programs changing in the future?
SCHOENING: I think we'll start focusing on key performance indicators that will have to be supported by data derived from POS systems. As retailers feed that data back, they can have category managers define the program based on what is, in fact, happening at the selling locations.
SCOTT: With the aging of the baby boomers, mainstream grocers have an obligation and an opportunity for another form of loyalty program, which is providing nutrition information. Say someone has just been diagnosed with diabetes -- they could say to the retailer "You've seen my food-buying habits over the last two, three, four years, what do you suggest? How do I change my buying habits to be more diabetic-conscious?" What a great added-value partnership for the grocer to be able to do that with the customer.
SN: Isn't that somewhat intrusive? Wouldn't it raise some privacy issues with customers? SCOTT: It doesn't have to be. The customer can say, "I don't want the information, don't tell me I eat too much chocolate, I don't want to feel guilty."
What if the grocer could give some suggestions, provided as a service, as a joint effort between the medical profession and the nutritional consumer goods profession. Those kinds of alliances will potentially be very profound.