One of the occupational hazards of operating a loyalty program based on providing preferential pricing is that at some point you end up giving the preferred pricing to everyone. That is the problem that Albertsons recently wrestled with, and seemingly pinned down, when it announced it was cancelling its Preferred Card loyalty program. According to the company, everyone has the card, so it decided to take the “special step” of not requiring one anymore. It calls the new approach “Card Free Savings.”
“Our customers are the only reasons that our doors open every day,” the company explained on its website. “Because of you, we exist. It’s that simple. We feel it’s our job to give everyone a great shopping experience, and that includes offering great prices to everyone.”
Sure, everyone loves great prices, but what about the information consumers shared in return for participating in the loyalty program? One of the purposes of loyalty programs is to gain the insights to inform better decisions about merchandising, locations, pricing and hours – not just promotions. It is all part of elevating the customer experience.
This is what so many marketing heads were worried about so long ago. Two-tiered pricing models for loyalty are not competitively differentiating unless they are applied at the individual level. And when executed as mass programs, they especially won’t work when you can go to Walmart without a card and get the same prices or better.
True, Albertsons’ decision is not surprising if everyone is getting the same discount and you’re looking to make the experience easier for the customer. But it is shortsighted from a customer data perspective, and it ultimately may lessen the company’s ability to fully understand its customers and their behaviors – and this may impact its ability to engage them in the future.
….which won’t stimulate or engage customers. Admitting blandness, along with eliminating the program, may be as great a sin. And, as you note, the additional challenge in a discontinued loyalty program is that customers are not proffering the data and insights needed to provide even more value, communication targeting, and advocacy behavior: http://www.customerthink.com/blog/ongoing_loyalty_program_value_challenges_and_how_to_fix_them
Also, as much as ineffective loyalty programs may undermine customer relationships and behavior – http://www.customerthink.com/blog/loyalty_programs_are_they_enhancing_or_undermining_customer_behavior – the removal of a long-standing program represents a perceived value ‘minus’ for customers; and, from a trust and confidence perspective, may do more strategic harm for a company like Albertson’s than keeping the program in place, even at a diminished level.
When a company has the lack of marketing foresight and will to maintain an active program, this says a lot about the enterprise, its customer-focus capability and ability to provide value. In the statement Albertson’s sent to customers, they wrote: “The card isn’t so special anymore. Everyone has one.” This speaks volumes about customer importance. It seems that when Supervalu sold the company to Cerberus Capital last March, they also gave away some marketing proficiency. I live in a geo area where we have Acme Markets, part of the bundled supermarket chain sale to Cerberus – rather fittingly, in Greek mythology, the three-headed dog which guards the gates of the Underworld – so it will be interesting to see if there is a domino ‘minus’ effect on the chain’s loyalty program (I’m a member).