CHICAGO -- Retailers experimenting with innovative frequent shopper strategies are finding their programs are successful -- or sabatoged -- based on the enactment of one key component: differentiation.
"We are losing customers all the time," said Brian Woolf, president, Retail Strategy Center, Greenville, S.C., citing average shopper defection rates of 25% to 50% over the course of a year's time.
In a presentation titled, "Frequent Shopper Programs: Winners and Losers," at the Food Marketing Institute's annual convention here last week, Woolf told a standing-room-only crowd that the way to keep and build their customer base is to treat shoppers "equally, but differentiate the way you reward them."
The more successful frequent shopper practitioners are cutting back spending on advertising and realigning funds to support frequent shopper initiatives.
As a result, such retailers are enjoying as much as a 6% boost to the bottom line, thanks to offers that distinguish between members and nonmembers and, even more important, between different classes of shoppers within the program.
"Our customers are not equal. Unless you understand that, please don't touch a [frequent shopper] card program," Woolf said.
To elicit any degree of success, he said, retailers must commit to getting customers heavily involved, with at least half of the
shopper base enrolled in -- and 80% of total sales derived from -- the program. Woolf said the best frequent shopper program he's seen constituted 82% of all transactions and 93% of all sales.
Further, creative offers extending beyond product discounts serve to further differentiate the retailer in the eyes of shoppers, he said. Woolf cited a host of inventive approaches that retailers are using to reward their best customers. Among them:
At Ukrop's Super Markets, Richmond, Va., program members receive customized mailings featuring specific offers tailored to the household based on previous spending patterns.
Gregerson's Foods, Gadsden, Ala., has "hidden prices," unpublicized specials reserved for only the very best customers.
Pick 'N Save stores operated by Roundy's, Pewaukee, Wisc., feature kiosks whose on-line technology allows program members to swipe their card in order to print a list of 24 special offers that are effective for three hours.
At Food Lion, Salisbury, S.C., shoppers receive tiered discounts of varying value that increase with the size of their total transaction.
Big Y Foods, Springfield, Mass., conducts a million-dollar lottery and offers weekly prizes to card holders. "A red light in the ceiling goes off when someone gets a prize," Woolf said. "Who says retail has to be boring? This can be fun."
Other interesting components of Big Y's program include the quadrupling of coupons for card holders and a special toll-free "homework hotline." The educational service is available from 4 p.m. to 7 p.m. during the week, and is reserved for children whose parents are enrolled in the frequent shopper program.
An independent retailer in Michigan which sends program members birthday cards with special offers on cakes saw its cake sales increase tenfold in a year's time.
Superquinn, Dublin, Ireland, has a "goof" program that rewards foible-spotting shoppers with points that can be redeemed for gifts. For example, Woolf said, frequent shopper program members can earn 200 points if they report a wobbly shopping cart or a checkout line with more than three people waiting. In the bargain, the 17-store chain obtains a high degree of continuous quality control services.
Effective frequent shopper strategies not only incorporate new initiatives, but require the elimination of some traditional programs. "We have to abandon existing practices," Woolf said. "Some retailers are abandoning double coupons. I know that's heresy to some of you, but that's what they are doing."