By Jundong Song, email@example.com
In mid-June, Safeway, the number three U.S. food retailer after Wal-Mart and Kroger, capped two years of testing in selected markets and rolled out its enhanced reward program, “Just for U,” chain wide.
It’s a key move in loyalty card programs that all retailers should be watching.
Already a pioneer in loyalty card programs, Safeway is using the program to add a tier of personalized coupons and pricing to its existing reward structure, requiring shoppers to earn the deals by signing up, downloading to a Club Card account, purchasing online or in store, and redeeming the downloaded savings for the purchased items at checkout. The program is enabled over Safeway’s Club Card platform with the addition of a web portal and a smartphone application.
Loyalty card programs carry a big promise with a great rationale – trade discount for data, mine data for insight, apply insight to offer customers what they want, the way they want it. Customer loyalty and profitability should follow. But most grocers have run their program into fatigue or inertia as they struggle to move beyond data collection and coupon promotions. These practices have little to no impact in revealing relevancy and desire – two key elements for a loyalty program to succeed.
With JFU, Safeway has hurdled those limitations and taken a big step forward in loyalty card marketing. Sooner or later, competitors will follow its suit. They had better.
Moving up the loyalty ladder
Retailers have been well aware of the 80/20 rule that the top 20% of customers contribute most of store revenues, and have been using coupons and weekly specials as the major ways to encourage and reward that important loyalty. But manufacturer and store coupons are available to everyone via newspaper insert, coupon sites, store circulars, and neighborhood saturation mails. Promotional coupons are mailed to member households segmented with reward card data, but can be redeemed by anyone without issues. Cardholders love weekly specials for members, but soon find out that not only do all the cardholders have the same deals, but membership is free. Meanwhile, cashiers are mostly ready and happy to swipe a magic card for everyone and anyone who forgets to carry the card or may have never signed up. There is little differentiation in its reward structure, which leads to no special feeling and no aspirations toward loyalty.
By adding coupons and pricing that reflect personal shopping history and habit, JFU institutes three clearly defined reward tiers – coupons for everyone from “Coupon Center”, “Your Club Specials” for members only, and “Personalized Deals” unique to individuals. The “Personalized Deals” adds 10 to 20 percent more savings on top of “Your Club Specials” and the possibilities of customization for everyone are only limited by a marketer’s imagination, providing incentives and aspirations for shoppers to climb and claim along a loyalty ladder.
From discount to engagement
By incenting shoppers to add deals to member cards prior to their store trips and providing them with an enabling tool via online portal or mobile apps, JFU builds innovative pre-shop engagement for marketers to influence shoppers’ decision-making and to promote online purchase. It also creates convenience for shoppers to build a shopping list and save themselves time by downloading and compiling coupons and deals intended to use. This rewards customers by involving them in value creation, a critical element of building commitment and loyalty. Though banking deals and building shopping lists takes extra effort, both customers and merchants will benefit from learning and experiencing new technologies and tools that are increasingly important in people’s lives and work, adapting to trendy digitalization and mass intelligence. With JFU, the loyalty card program is no longer just a promotional or marketing tool; it has evolved and expanded into a customer engagement and branding platform as well.
Building in data integrity
Data are ingredients for insight to power and differentiate successful loyalty programs from mediocre and failing ones. But requiring customers to carry and scan cards to support merchants’ data collection has been challenging at store registers and even harder at other non-POS touch points, within or across channels.
Safeway understands the value of data integrity. It has a policy of “no loyalty card, no discount” to enforce card scanning at register. JFU advances the enforcement further by instituting an integrated three-step process for card members to earn savings – banking deals to card number online or via mobile app, shopping in store or online, and redeeming banked savings at checkout. The mechanism builds incentives, convenience, and humility with a Club Card number in the center, pre-emptively stopping data leaking without manned policing. Customers not carrying their cards can be assisted by looking up their card numbers at store checkout with their registered phone numbers. Though that will take extra effort and time, any marketers serious about loyalty and any shoppers serious about savings need to understand that customer identification and total view is the foundation and the least disputed objective to build loyalty and enable savings.
Price: Going on the offensive
Grocers have been on the defensive when it comes to pricing. Their chief rival, Wal-Mart, has established and consolidated a price leader position, creating a magic price 10% to 20% cheaper on basic, commonly needed items. Fighting for their survival in response to Wal-Mart’s intrusion, supermarket chains fired people, invested in technology, remodeled stores, and even begged suppliers for partnerships to stay in Wal-Mart’s game of Every Day Low Price (EDLP). After hundreds of retailers went broke or disappeared by playing EDLP, prevailing chains seem to have found their ways to bring price down to that range, trailing but closer to Wal-Mart’s. But all they have been doing is working the supply side from their store operation back up to manufacturers and farmers, the sort of tactics Wal-Mart has been doing, better. They might have just forgotten the front door – marketing is their strength, but Wal-Mart’s weakness, and they have a weapon that Wal-Mart envies but cannot have – the loyalty card.
Grocers can and will play the card data to chase Wal-Mart on aggregated customer intelligence for operation efficiency and supplier bargain, but more importantly they shall do what Wal-Mart cannot – mine actionable insight tied to individual shoppers and execute both segmented and personalized targeting with relevancy, precision, and speed. JFU is moving in that direction: identify 20 to 40 favorite items for individual shoppers, offer them the best deals, and place next to a competitor’s prices to convey a clear message – we are the true price leader for what you really care about, not an EDLP slogan for items you do not need. It shifts the battle from the back to the front and fights back in a non-Wal-Mart way - item by item and customer by customer. Wal-Mart can hardly respond due to its inability to identify customers and link each of them to his or her own shopping history, demographic and attitudinal intelligence on customers aside. Wal-Mart may match the deals, but that helps break the myth of EDLP.
With JFU, a loyalty card program supersedes marketing or shopping and can transform an enterprise’s business strategy and a shopper’s total experience. It sharpens a marketer’s teeth, but also energizes competitors, inviting them closer for a battle. It touches shoppers and also connects suppliers. It builds brand and loyalty, engaging shoppers at more touch points, in more channels, and with more enticing deals and higher aspirations. The expanded and deepened engagement raises unprecedented opportunities, but also risks. What if a shopper finds JFU is truly just for you or even everyone but me? What if the reward does not match a shopper’s expected return on extra effort, and what if a technical glitch occurs? The list can run on and on.
Continuously experimenting and evolving is essential. There will be cracks, fills, and refills. But JFU is a giant step in the right direction, reflecting our times. The world is going digital. Big Data has become an economic and business asset and is a theme discussed everywhere from Science Magazine to The Economist and by Harvard scholars, McKinsey consultants and bloggers. Mass intelligence has empowered us all, including consumers and shoppers.
Safeway was an early innovator in loyalty programs and marketing innovations. Once again, the retailer has made its move and is betting on it big, from the corner offices to the store floors. Will time again show Safeway is delivering loyalty right? It looks promising, but if they falter, another retailer will step in to move loyalty forward. The race is on.
Jundong Song, Ph.D., is a partner and VP of marketing intelligence and technology at 89 Degrees, a next-generation marketing solutions provider that uses advanced analytics to drive better engagement for multichannel marketers. He can be reached at firstname.lastname@example.org.