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12.06.2006

“HartBeat” is The Hartman Group's FREE online newsletter, providing insight, analysis, information and strategy to give business leaders the knowledge and vision to build sustainable brands.

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Pulse Report
SHOPPER CARDS FOR A CONSUMER PERSPECTIVE

This Pulse Report documents how well consumer attitudes and behaviors align with industry intent and practice. Shopper Cards from a Consumer Perspective looks beyond transaction size and shopping frequency patterns to begin to unravel the mystery surrounding who holds the key to loyalty: the consumer or the retailer.

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For more Hartman Group articles on RETAIL EXPERIENCE, click here...

11.15.2006 "Simplicity at Retail"

07.19.2006 "The Role of the Exit Experience"

10.27.2005 "Retail Experience on the Front Lines"

08.25.2005 "Costco vs. Wal-Mart: Getting Beyond Utility"

05.19.2005 "The Myth of One-Stop Shopping"

05.12.2005 "Building Community: the Lost Art of Hanging Out"

04.07.2005 "Trader Joe's: Cracking the Code of Lifestyle Brands"

05.06.2004 "Beware of Self-Checkout and RFIDs"

11.01.2002 "Mom & Pop: What's in a Memory?"

08.02.2002 "The ABCs of Experience"

07.26.2002 "The Retailer as Brand"

06.28.2002 "Experience, Expectation and the Shopping Trip"

04.26.2002 "Sometimes an Experience is Just an Experience"

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Loyal To Loyalty Cards?

A Consumer Perspective on Supermarket Shopper Card Programs

At the dawn of the implementation of supermarket "loyalty" card programs (a.k.a., frequent shopper, club card, reward card, preferred card, etc.), does anyone recall the consumer's reaction at the mere hint of such a program? At the time, consumer protestations were largely ignored as grocers marched on in their belief that savings-oriented affinity programs, would develop throngs of devoted followers.

Now, years later, it would seem that few remember there was ever any fuss in the first place, as consumers have largely accepted a card as just another aspect of shopping life.

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Shopper Cards from a Consumer Perspective

For important insights on the opportunities that exist for card programs to differentiate stores in ways that resonate with consumers.

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To be sure, card programs have become a retail industry staple. As conventional supermarkets look for ways to differentiate themselves, however, shopper card programs are being reexamined as to whether or not they are as effective a device in forging lasting relationships with consumers. And, given that shopper card programs are now so prevalent, do shopper cards really play a role in creating a unique, differentiated shopping experience for a supermarket's customers?

From the outset, supermarket card programs were seemingly well-intentioned: use the card as the means to better understand consumers. Thus, in theory at least, product assortment and selection can be optimized to match consumer preferences and behaviors to differentiate and enhance the shopping experience.

In reality, shopper card programs were all about the data and while the data may have linked a "shopper with the transaction," it had little if anything to do with understanding consumers' true motivations for shopping. Therefore, under the guise of one-to-one relationship marketing the onus of loyalty fell on the consumer in the end.

Failure to understand why consumers shop in the first place

From the outset, the thinking behind a shopper card program (often referred to by industry insiders as a "frequent shopper card") was that because of the card consumers would shop the store more often and buy more from the store that issued it. Given that shopper card programs are now so prevalent the fundamental flaw in shopper card programs has been exposed: a shopper card no longer (if it ever did) gives consumers a meaningful reason for shopping a particular store.

According to our Pulse Report, Shopper Cards from a Consumer Perspective, about 5 in 6 consumers now possess at least one supermarket card and the percentage of consumers with at least two cards is 59%. (Figure 1)

Shoppers today freely admit that they own (and use) as many as three (or more) grocery shopper cards; and this is in addition to the various "reward" cards carried from a variety of other retailers (such as drugstores, pet and office supply stores). Unfortunately, while shopper cards have represented an open gateway for supermarkets to track consumer purchases and shopping patterns, very few grocers were prepared for the challenges of rigorously processing the massive volumes of data in ways that make affinity programs meaningful for shoppers beyond the function of merely ringing up "savings" at the register. The report also points out that shoppers have no available lexicon for shopper card benefits beyond associating them with discounts or what they view as distantly related programs (such as gas discounts, points or turkey give-aways) that they rarely have an opportunity to capitalize on.

A common myth among retailers is that in-store marketing, promotions, coupons and affinity programs strongly influence how consumers behave once they enter the store. Interestingly enough, and counter to this common industry perception, we found through our groundbreaking study on Shopper Insights the opposite is true today. Precisely, it is the cultural occasions of what happens in shoppers' homes and much less what happens in the store that drives consumers' decisions on where to shop and what to buy.

For example, imagine a working mother with two children under four years of age. To satisfy her family's diverse needs for dairy products, as well as her own personal needs for energy and health, this mother's shopping trips on a given weekday might include stopping in a grocery near her job early in the morning (after dropping her children at day care) to pick up a soy-based energy drink for her own consumption at work during the day. After work, she stops briefly to do supplemental shopping at the same store for a trip that includes buying 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), garners no savings from the transaction except for an instant coupon based on her current purchase.

To reflect on her tale, not much of anything in the store is influencing her rapid, short shopping trips except for whatever fresh and prepared items might grab her attention as she moves rapidly through the store at night after work. The instant coupon corresponded vaguely to a "health" purchase (because of the organic milk) but did not reflect her long-term purchase history of organic milk or soy energy drinks. Most, if not all, of the store's "reward card" specials were instead keyed to packaged goods that did not correspond to her occasions for shopping, both of which were driven from needs linked to her home and work life.

The fundamental disconnect between this woman's reasons for visiting the store and the various affinity programs offered to her highlights the dilemma many grocers find themselves in today as shoppers make more and more specialized visits to a wide range of channels: These retailers fail to understand consumer motivations and desires for shopping before they leave the confines of the home.

Savings and discounts are not the gateway to loyalty

Simply presenting savings alone does not earn a shopper's loyalty - the playing field for discount buying has now been leveled by the presence of card-free discounters like Wal-Mart, Target, the dollar store segment and the myriad of other retailers in food retailing. The dilemma lies in what to provide to shoppers beyond a paperless coupon system; that is, programs that link to how customers live their lives and experience aspects of the store that they utilize (or have an emotional connection to).

Can shopper card programs be used to enhance the overall shopping experience? Yes, if the affinity program includes maintaining a meaningful dialogue with shoppers that is based on a deeper understanding of "what makes them tick" and extends well beyond reciting back the name printed at the bottom of a receipt.

Retailers must understand that they cannot expect consumers to blindly pledge their allegiance to the store; they must earn their shoppers' devotion. This 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 forge and foster relationships with consumers, it is this holistic approach to experiential marketing and recognizing the fundamental role of changing and evolving consumers that is the hallmark of those retailers on the cutting edge of exciting, as opposed to underwhelming, shoppers.

Eh, you see those everywhere...

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