Automatic Loyalty

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While the concept of subscriptions has long driven the newspaper and magazine businesses, there is some evidence out there that the same concept can be used to drive and capture retail sales. That evidence, while hardly statistically conclusive, can be found in how I shop. And I believe my behavior reflects a pattern that can offer retailers a new opportunity to foster customer loyalty—but could threaten them if they ignore it.

One recent week, I managed to stock up on a number of products that I use regularly, even frequently. I never left the house; I ignored all the local purveyors of these products, and I never even thought about the act of purchasing them.

First of all, a shipment of concentrated laundry detergent showed up from Amazon.com —nine bottles that I know will last our household about three months. I know this because I’ve kept track, and have a subscription with Amazon for this amount—every three months I get the same shipment. And, in addition to the usual price break, I get an additional discount for being a subscription customer. Plus, free two-day delivery under Amazon’s “Prime” system.

This has worked out so well that I’m using the same system to order other household products, such as shampoo and dishwasher detergent.

At the same time, I’ve gotten my quarterly wine shipment from the vineyards of Francis Ford Coppola, which usually consists of wines that you can’t buy at retail here on the East Coast. Being a member of Coppola’s wine club means that I also get access to other special member-only deals, like the excellent 2005 Director’s Cut Pinot Noir. And, I like Coppola’s products so much that I also belong to his pasta-of-the-month club, which sends a shipment of unusual pastas, sauces and recipes to the house on a regular basis.

I must confess that Coppola’s wine club is one of three that I belong to. I also get regular quarterly shipments of Mosaic wines, as well as belonging to a local retailer’s wine-of-the-month club that has three unusual and relatively unknown bottles of wine showing up at my front door each month.

This latter example is particularly interesting. It always is an adventure, and rarely have I been disappointed by what he’s sent—even when the wine had screw tops. And here’s the real benefit on the retail side: It used to be that I’d rarely spend more than $10 on a bottle of wine, but by engaging me with the product through the wine-of-the-month club, he’s actually gotten me to raise my price-tolerance level. Now, I think nothing of spending up to $20 for a bottle of wine, and even occasionally have gone higher than that. (Heaven help me if my wife reads this!) My local wine retailer is very smart—he’s gotten me to increase my wine spend and he’s being extremely competitive about not losing the local shopper.

I mention all this not because you need to know about my specific shopping habits, but because I want to make a larger point about creating loyalty, which essentially is about making sure that the customer doesn’t go down the street to patronize the other guy. In each of these cases, I’ve been largely taken out of the market for laundry detergent, shampoo, wines, pastas and sauces—and the retailers from which I used to buy many of these products don’t even know it.

It seems to me that there are different impulses working here. In the case of the detergent, for example, Amazon appeals to my desire for routine; in the case of Coppola and my local wine merchant, they are appealing to my desire to be surprised and tantalized. Same basic programs, but the different products cater to different need states. But the result is the same—I’m buying products from them, not from someone else.

I’ve long felt that canny supermarket retailers ought to be analyzing their “top customer” lists to see what those people buy on a regular basis, and then creating delivery programs that provide a kind of automatic replenishment. It makes sense from a business point of view and I’m proof positive that customers—some of them, at least—might find it appealing. And I can’t believe I‘m alone in my use of these kinds of services.

It goes even farther than that. I’ve got a Starbucks card in my wallet that is programmed so that whenever it dips below $20, it automatically adds another $20 to the balance from my debit-card account. Now, some would argue—quite rightly—that this gives Starbucks use of my money and that I would be far better off either paying cash or using a credit or debit card when I want a cup of coffee. But I feel that it is like a security blanket—that even if I’m out of money, at least for a while, I’ll always be able to get a venti skim latte.

But it also works like a loyalty card, because not only have I received thank-you gifts from the company, but if I’m walking down the street and see a Starbucks across the street from a Dunkin’ Donuts or any other coffee shop, I’m almost always going to choose Starbucks because I’ve got the card.

Too often, retailers define “loyalty marketing” as just new ways to offer the same old discounts to consumers. But that’s short-term thinking. By cultivating a relationship with consumers—in part by appealing to their desire for routine replenishment and in part catering to their desire for culinary adventure—retailers can create a much stronger and even profitable connection to the shopper.

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