Why customers carry shoppers cards - and why not

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By: Wise Marketer Staff |

Posted on February 6, 2007

Despite a few protests at the very beginning, most supermarket customers have accepted - or even actively embraced - the use of frequent shopper cards and loyalty programmes. But some of those programmes that were set up to build customer loyalty are failing their members, according to research from the Hartman Group.

The research report, entitled 'Loyal to Loyalty cards?: A Consumer Perspective on Supermarket Shopper Card Programs', written by Blaine Becker, David Wright and Brent Baxter, Ph.D., warned that the supermarket loyalty card - whether it's called a frequent shopper card, a club card, a reward card, a loyalty card, or a preferred card - may not be serving loyal customers as well as was originally intended.

Loyalty cards as 'the norm'
Such card programmes have become a retail industry staple. As conventional supermarkets look for ways to differentiate themselves, however, shopper card programmes are being re-examined as to whether or not they are as effective a device in building lasting relationships with consumers. And, given that shopper card programmes are now so prevalent, many retailers have even questioned whether or not frequent shopper cards play a major role in creating a unique, differentiated shopping experience for customers.

From the outset, supermarket card programmes were well-intentioned: Retailers wanted to use the card as the means to better understand their customers. That way, product assortment and selection could be optimised to match consumer preferences and behaviours, and that would help the retailer to differentiate from its competitors and enhance the customer's overall shopping experience.

It was all about data - or was it?
But shopper card programmes were all about the data and, while the data may have linked a shopper with their transactions, it has often had little to do with understanding consumers' true motivations for shopping. Sadly, what started out with the aim of being a one-to-one relationship marketing tool often ends up with the consumer having to decide whether they feel they want to be loyal or not.

According to the report, the general thinking behind a loyalty card programme started out being that, because of the card and the changes a store could make with its new-found insight, consumers would shop at the store more often and buy more from the store that issued the card. But a fundamental flaw has appeared in many programmes (or perhaps in the minds of many consumers): The loyalty card is so common a feature that it is now much harder to use the card to give consumers a meaningful reason for consolidating their spend, or even for coming back to the same retailer.

Supermarket loyalty card ownership
Hartman Group's Pulse Report, entitled 'Reward or Ransom: Shopper Cards from a Consumer Perspective', found that 5 out of 6 consumers now have at least one supermarket card, and the percentage of consumers having at least two such cards standards at 59%.

In that survey, shoppers admitted to owning and using as many as three (and sometimes more) grocery store shopper cards, in addition to the various other reward cards that they had taken from a variety of other retailers.

Where did it go wrong?
But while frequent shopper cards represented a way for supermarkets to track consumer purchases and shopping patterns, Hartman Group found that very few grocers were prepared for the challenges of processing their massive volumes of data in ways that made their loyalty programme either useful or meaningful to shoppers (other than obvious discounts or savings at the check-out).

The report also highlighted that shoppers have no particular frame of reference for the benefits of shopper cards, other than discounts or what they usually view as distantly related offers (such as fuel discounts, points, or product give-aways).

In fact, it's an issue of engagement - something the loyalty marketing fraternity is increasingly having to focus on: A common myth among retailers is that in-store marketing, promotions, coupons and affinity programmes strongly influence how consumers behave once they enter the store.

In-store behaviour drivers
The Hartman Group found that the opposite is currently the case, and that the key drivers of purchase behaviour in-store are the cultural occasions in consumers' homes, rather than what happens in the store.

For example, imagine a working mother with two children under four years old. To satisfy her family's diverse needs for dairy products, as well as her own personal needs for energy and health, her shopping trips on a given weekday might include stopping in a grocery store near her place of work early in the morning (after dropping her children at the day care centre) to pick up a soy-based energy drink for her own consumption during the day. After work, she might stop off for some supplemental shopping at the same store to get organic milk for her children, regular milk for her husband and herself, and also a baked chicken, bagged salad, and a loaf of fresh bread for dinner. At check-out, the shopper is asked for her card, which she shows, and because of a lack of corresponding SKUs (and the relatively small volume of items in her purchase), she gains little or no saving from the transaction, other than perhaps an instant coupon based on her current purchase.

In other words, not much in the store has the power to influence her rapid, short shopping trips, except for whatever fresh and prepared items might catch her attention as she moves through the store as quickly as possible. The instant coupon may have corresponded, for example, to her 'health purchase' (the organic milk) but it does not reflect her long-term purchase history of organic milk or soy energy drinks. And this is often where such programmes go wrong: most of the loyalty's card special offers are keyed to packaged goods that do not necessarily correspond to the shopper's reasons for being in the store. That's the kind of insight that stores need today, rather than more simple basket analysis over time.

According to the report, the disconnect between the woman's reasons for visiting the store and the various reward programmes offered to her highlights the dilemma many grocers find themselves in as shoppers make more and more specialised visits to a wider range of shopping channels. Such retailers are in danger on not understanding their customers' motivations for shopping, and that means they can't change and adapt the shopping experience to be more rewarding.

Discounts aren't the key
Simply presenting savings or discounts does not earn a shopper's loyalty, the company warned. In fact, the playing field of discount buying has been levelled by card-free discounters such as Wal-Mart, Target, and 'dollar stores'.

So the question becomes one of what to provide shoppers with, beyond a paperless coupon system - how the retailer can provide a programme that links with how customers live their lives and experience the various aspects of the store they use most (or at least have an emotional connection with).

The way ahead
The report questioned whether or not shopper card programmes can realistically be used to enhance the overall shopping experience. The conclusion is that they certainly can, if the programme includes maintaining a meaningful dialogue with shoppers, based on a deeper understanding of "what makes them tick" - and as long as it also extends beyond reciting the name printed at the bottom of a receipt.

Retailers must therefore understand that they cannot expect consumers to blindly pledge their allegiance to the store, and that they must instead earn their shoppers' devotion. And this, according to the report, begins by examining the various lifestyle attributes that include such things as interests in cuisine, travel, health and wellness aspirations, and the presence of children in the home. As grocers and food manufacturers look to foster relationships with consumers, it is this holistic approach to experiential marketing and recognising the fundamental role of changing and evolving consumers, that is the hallmark of retailers on the cutting edge.

The complete report is available directly from The Hartman Group - contact Blaine Becker on +1 (425) 452-0818, or by e-mail at blaine@hartman-group.com.

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