Earlier this month, my colleague Colin Shaw wrote an excellent, insightful blog about the actual customer value that is, or isn’t, inherent in loyalty programs: http://www.customerthink.com/blog/loyalty_cards_don_t_drive_loyalty My response in support of Colin’s perspectives was that, as in virtually any worthwhile relationship, there must be mutually beneficial value which, to the extent possible, is both targeted and personalized. Just having a company’s loyalty card, per his post, means relatively little unless customers both understand the program and see reward for themselves through active participation: http://www.customerthink.com/blog/ongoing_loyalty_program_value_challeng…
I also noted that companies behind the loyalty programs, likewise, need to see value for the enterprise (in the forms of new customer attraction, product/service differentiation, ‘barrier to exit’ customer retention, data to leverage, and profitable performance) as well as the customer. We’ve seen with some U.K. supermarket chains, and more recently Albertson’s, Acme, Shaw’s and Jewel-Osco (sold by Supervalu to Cerberus Capital Management in March) that there is a growing tendency to abandon the loyalty program – definitely a risky, and potentially very commoditizing, move – in favor of, as Albertson’s has told its customers “offering great prices to everyone.” For customers, there’s something approximating ‘bait and switch’, diminished treatment in this move. So much for targeted, personalized customer value and the multiple marketing and relationship benefits of profile and purchase information.
In this era of Big Data generation and leveraging insights to create greater customer value and loyalty behavior, Cerberus has made a strategic decision in the opposite direction. The loyalty programs for these former Supervalu chains were pretty superficial and generic, focusing principally on discounts; and, as in the case of Shaw’s, a major value and experience makeover was deemed more of a priority than endeavoring to mine and apply the data coming from the program.
Greg Girard, marketing strategies and retail analytics program director at IDC, said that shoppers “have been defecting from Shaw’s for fundamental reasons – – high prices, dingy stores, and poor customer service being the most pressing.” As Claudia Imhoff, president of Intelligent Solutions, commented: “I don’t think they have the analytical prowess to use the information that’s being given to them, and that’s a shame.”
The lessons here are:
1) that the loyalty program has no value for customers if it is non-engaging and represents little benefit, beyond just saving money and
2) the loyalty program has no value for the company sponsoring it if the data collected are not used to improve customer ROI (or the available data are not collected in the first place), and all the organization is doing is throwing resources into something that’s expensive and unproductive.
Claudia Imhoff wisely concluded: “We need to get analytics to a point where it’s easy to use and the cost isn’t prohibitive. And, we have a little bit of education to do with low-profit businesses so that they can see a return on investment quickly and in a tangible way.” For Shaw’s, the priority now is to first solidify the behavior of its customer base, or so Cerberus appears to believe. “Fundamentals are the cake of customer loyalty; personalization is the icing. Cerberus has to bake the cake of customer loyalty from scratch — and in a hurry,” IDC’s Girard said.
