The US-based loyalty marketing consultancy and publisher Colloquy has launched a national Retail Loyalty Index, with the first report ranking Costco as American consumers' favourite choice for loyalty in the grocery, personal care and mass merchant categories, and Macy's as leader among department stores.
The company says that it launched the new index to help discover which retailers engender the deepest consumer loyalty, and why.
The index is based on the results of a survey conducted among 3,000 US consumers in November 2007, covering six demographic segments (affluent household heads, young adults, seniors, women, Hispanics, and a 'general population' control group).
Consumers were asked to reflect on personal experiences with retailers at which they shopped most often during the previous three months. They then rated (on a scale of 1 to 10) their loyalty to individual retailers, with 1 meaning "not loyal" and 10 meaning "very loyal".
Across five geographical regions (Northeast, Southeast, Midwest, Southwest and Northwest), Costco was the clear winner in the grocery category, and was cited as the first choice in two of the five regions (Southwest and Southeast). Publix was a close runner-up, followed by H-E-B.
Costco also was consumers' loyalty favourite among personal care retailers, winning in three of the five regions and being among the top three in the remaining two regions. Wal-Mart followed Costco in this category, suggesting that consumers are currently more price conscious in this sector than in others. The highest-rated standalone pharmacy in this category was Rite-Aid.
Out of the department stores that operate in all five geographical regions, the index revealed that Macy's has the most loyal shoppers, followed closely by Wal-Mart, with Target and JCPenney tied for third position.
In the mass merchant category, the discount club Costco garnered the most loyalty from bargain hunters across the nation, followed by Target and Wal-Mart.
However, drawing a distinction between actual loyalty and shopping frequency, the index showed that Wal-Mart remains the dominant US retailer for frequency, as consumers in all categories reported shopping at Wal-Mart more often than at any other retailer.
But Wal-Mart did not register as highly in the customer loyalty ratings. While Wal-Mart's EDLP (every day low pricing) tactics have made it a major retail force worldwide, Colloquy warns that other retailers that try to emulate that approach are likely to find that the EDLP model comes at a significant cost.
Among the various retail categories, consumers were found to be most loyal to grocery stores, where purchases are tied closely to home and family life. Colloquy suggests that this is because shoppers attach emotional importance to this category, despite the ongoing importance of low prices.
"A key trend to be discerned from this research is that loyal consumers recommend their favourite retailers," said managing partner, Kelly Hlavinka. "One attribute of brand loyalty rose above all others, regardless of store category: specific retailer or demographic segment likelihood to recommend a retailer. This attribute more often than not had a strong correlation with consumer loyalty."
"The survey results demonstrate that the traditional marketing mix has taken a back seat to a relentless focus on price," said Rick Ferguson, editorial director for Colloquy. "A marketing strategy focused solely on sale prices and promotions not only faces diminishing returns, but can also actually breed disloyal customers. Our research results show that retail marketers have an opportunity to shift their focus from EDLP toward loyalty drivers that build true customer engagement, larger transactions and improved margins."
A white paper covering the company's latest retail loyalty research, entitled 'The loyalty marketing mix: Introducing the Colloquy Retail Loyalty Index', has been made available for free download from Colloquy's web site - click here (free registration required).