NEWS & SOLUTIONS 1997-04-07

ADAM BLAIR

NEW YORK -- An increasing number of retailers will be looking for their frequent-shopper programs to produce benefits beyond rewarding their top customers in the coming year.

Many hope such programs will be successful at drawing new customers into the store, as well as boosting gross profit margins, according to SN's Third Annual State of the Industry Report on Supermarket Technology.

These greater expectations reflect the general satisfaction with frequent-shopper programs, and are likely to be representative of the thinking among attendees at this week's Global Electronic Marketing Conference in New Orleans. The GemCon conference is sponsored by Retail Systems Consulting, Naples, Fla., and the Grocery Manufacturers of America, Washington.

Despite frequent-shopper programs' high profile in the industry, companies with such programs are still a minority: only 45.5% of retailers and wholesalers have launched a card-based frequent-shopper electronic marketing program.

However, more than one-third of survey respondents plan to launch such a program this year, and an almost equally high percentage plan to expand an existing frequent-shopper program.

These were among the key findings of SN's sweeping report based on a nationwide survey of supermarket chains, independent operators and wholesalers and includes responses from 143 senior executives at companies representing more than $221 billion in total sales.

The survey was developed and conducted by SN Retail Systems and Marketing, Supply Chain and Operations and IS Solutions editors at Fairchild Publications here, which publishes SN and IS Solutions. The confidential mail-in responses from participating executives were tabulated and analyzed by a third-party research firm.

Card-based frequent-shopper programs are being offered by 45.5% of all respondents, with the percentage virtually the same for retailers and wholesalers. Among those who do offer such programs, just over half -- 51% -- pronounce them "highly successful." Retailers were more likely than wholesalers to rate such programs this positively: 56.4% of the former did so, vs. 35.7% of the latter.

Among overall technology priorities, frequent-shopper programs ranked high in this year's survey, with 19.1% of all respondents identifying them as a high priority in 1996. A slightly higher percentage, 19.7%, say they will be a high priority in 1997.

Significantly, 40% of independent retailers (those with fewer than 10 stores) responding ranked frequent-shopper programs a high priority for this year, compared to 21.8% of chain respondents. Smaller operators may see such programs as an effective means to maintain customer loyalty in the face of competition from larger chain retailers.

Those who offer frequent-shopper programs have been successful in enrolling significant numbers of their customers, the survey finds. More than one-third of respondents, 34.7%, indicate that 75% or more of their eligible customers are frequent-shopper enrollees. Nearly one-quarter of respondents have enrolled 51% to 75% of customers, and only 4.1% of respondents indicate the enrollment percentage is in the 1%-10% range.

Asked to identify what percentage of shoppers actively participate in such programs, 29.8% of respondents said that 75% or more of customers do so, while 31.9% indicate 51% to 75% of customers are active participants.

Respondents are becoming more adept at tracking customer transactions via their frequent-shopper programs. In 1996, 31.4% of all respondents said they collected data on 75% or more of total transactions. Retailers outpaced wholesalers in this area, 35.9% to 16.7%.

Those who track point-of-sale data via their frequent-shopper program indicated that frequency of customer visits was the most important information to be gleaned, with 26.1% of respondents citing it. Other activities identified as important to track include response to targeted promotions, at 19.6%; market-basket margins, at 17.4%; market-basket size, at 15.2%, and category and/or brand-specific purchases at 15.2%.

The maturing of frequent-shopper programs is encouraging respondents to reassess and expand their goals for such programs. While retaining their best customers remains the primary goal of a majority -- 57.4% -- of respondents in 1997, it is down significantly from the 71.7% of respondents who said it was most important last year.

At the same time, those indicating their primary frequent-shopper program goal is "to win new customers" increased nearly 10 percentage points, from 13.2% in 1996 to 23% in 1997. Nearly as dramatic an increase was reported in the goal of boosting gross margins, which was the primary objective for 9.4% of respondents in 1996 and 18% in 1997.

Targeting Shopper Loyalty

While frequent-shopper programs generate enormous attention, more than half of retailers and wholesalers still have not launched a program.

Do you currently offer a card-based frequent-shopper electronic marketing program? (pie chart)

Total

Yes 45.5%

No 54.5%

Retailers

Yes 45.6%

No 54.4%

Wholesalers

Yes 45.0%

No 55.0%

Rating Frequent-Shopper Success

The vast majority of survey respondents who have launched frequent-shopper programs rated them highly or moderately successful.

If you offer a frequent-shopper program, how would you rate its success in meeting your expectations?

Retailers

10.3% -Not Successful

33.3% -Moderately Sucessful

56.4% -Highly Sucessful

Wholesalers

35.7% - Highly Sucessful

64.3% -Moderately Sucessful

Total

51% - Highly Sucessful

41.5% -Moderately Sucessful

7.5% - Not Sucessful

Expansion

More than two-thirds of survey respondents plan to expand or launch a frequent-shopper program in 1997. (pie chart)

Do you intend to launch or significantly expand your frequent-shopper program in 1997?

Retailers

37.1% Yes, intend to launch program

32.6% Yes, intend to expand program

30.3% No

Total

37% Yes, intend to launch program

35.3% Yes, intend to expand program

27.7% No

Wholesalers

36.7% Yes, intend to launch program

43.3% Yes, intend to expand program

20% No

Goals

A majority of retailers cited retaining best customers as the top goal of their frequent-shopper programs for 1997, but a growing percentage are targeting winning new customers and looking to boost gross margins.

What was the primary goal for offering a frequent-shopper program in 1996? What will be the main goal in 1997? (pie chart)

1996

Retain best customers-71.7%

Win new customers-13.2%

Boost gross margins-9.4%

Other-5.7%

1997

Retain best customers-57.4%

Win new customers-23%

Boost gross margins-18%

Other- 1.6%