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The growing importance of customer loyalty programs in grocery retail

The growing importance of loyalty programs in grocery retail

Grocery loyalty programs have been around for years, but with the changing landscape as well as customer shopping behavior, it is now more important than ever. The goal for loyalty programs is to be relevant and timely to shoppers and their preferences and to create a continuous dialogue between the customer and the brand or retailer.

The benefit retailers get utilizing loyalty programs is the access to customer data, shopping patterns and behavior with direct engagement with the shopper, elevating the communication and optimizing the offers to meet their needs. This ultimately leads to help drive sales for the retailers.

The current scenario

Customer loyalty programs build large customer databases and retailers can leverage this information to create more personalized and targeted promotions tailor-made for every customer. A successful loyalty program is a well-crafted blend of rewards and recognition features that change shopper behaviors. However, grocery loyalty programs are challenged not only by the economics of the industry but also the limited opportunities to differentiate the customer experiences for each customer.

However, compared to other industries, the grocery retail industry today still does not have a completely organized, leveraged and utilized customer data to deliver the optimum level of personalization and relevance to the customer, unlike in industries such as travel or banking.

Limited impact on shoppers

The grocery retail industry operates at small margins, which limit the rewards grocers can offer to the program members. Furthermore, compared to other retail loyalty programs, grocers depend on subsidizing their programs with discounts provided by the CPG manufacturers they are partnered with. Most loyalty programs have followed suit and use the same strategy, enabling shoppers to spread their loyalty across different brands.

Digital coupons - a primary feature of most grocery loyalty programs are offered by most of the retailers in an equal capacity. Another perk is the member pricing feature is an attractive way to entice shoppers into joining the program, but this feature too is replicated across all of the programs, limiting the impact these programs can create.

One feature of the grocery program that does create an opportunity cost and loyalty is reward points. Some shoppers even consolidate their shopping to a single brand in order to maximize the points earned and get a chance to get more discounts with every purchase. While most grocery programs prefer CPG subsidies, retailers should not limit the programs only to create more loyal customers. With e-commerce retail giants like Walmart and Amazon leaving no stones unturned to engage with shoppers, grocers need to double up on creating successful customer loyalty.

Looking ahead


Grocery retailers are facing several options today, they must decide among differing formats, both online and in-store, and seek the best combination of program features available to them.

A growing demographic - Millennials, in particular, seek immediate gratification, support, rewards, and recognition. Moreover, they do not invest a lot of time while planning grocery lists as they center their grocery visits around recipes more than replenishing a set stock. They are also far less price-sensitive in their menu planning as compared to previous generations. Additionally, as shoppers are increasingly opting for healthier lifestyles, produce as well as non-processed foods have become important aspects for grocers to drive retention and loyalty.

With the rising popularity of Walmart and Amazon among shoppers, grocers must foresee the future from both physical stores as well as digital capabilities. A well-managed loyalty program uses analytics and insights to enhance customer experience and elevate shopper journeys. Another major trend is the development of artificial intelligence. Leveraging AI, grocers can use unused retailer data and create additional value from it and tailor more relevant communication and improved personalized pricing and promotions.

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customer experience in a grocery store

Customer experience- Why it matters most for grocery retailers

Customer experience- Why it matters most for grocery retailers

With the rapid advancements in technology and the shifting shopping behavior of consumers, grocery retailers are now faced with the challenging task of competing for customer loyalty. Every retailer wants shoppers to consistently make purchases from their business rather than their competitors. Many retailers often sell the same products, so the shopper can purchase from almost any retailer without having any preference to buy from a specific retailer.

For instance, while needing to buy Purina Friskies Wet Cat food, the shopper has several retailers to choose from, from Kroger to Target to Walmart to even Amazon. The aspect to keep in mind is that shoppers are often loyal to the overall shopping experience provided by retailers, and not to the products it sells.

The term 'customer experience' is used synonymously for providing a positive, seamless and wholesome shopping experience. This includes the integration of digital into the physical sphere where retailers can interact with customers across every touch point.

Here are 3 ways in which retailers can enhance the customer experience and keep customers coming back to their store for more:

In-Store efficiencies

For all the benefits that online shopping has to offer, the downside is the inability to touch and feel the product before making a purchase. In an effort to bring the convenience and efficiency of online to the brick and mortar, retailers are changing the design and the business model with the ultimate goal - to make the in-store experience as smooth and easy to navigate as possible.

Incorporating technology in the brick and mortar stores is becoming imperative as shoppers find that innovations such as auto-checkout, online ordering, mobile app offers, etc make their shopping experience easier and quicker.

In an effort to lure shoppers back into physical stores, some retailers are even altering the design of the physical store and creating smaller format stores, adjusting store displays to prioritize convenience, and incorporating new technologies. Grocery chains like Tesco and Food Lion are undergoing major store redesigns to compete with giants like Amazon and Whole Foods.

Some chains are even including experiences such as wall climbing activities and special events and even dining into their physical stores to encourage more in-store engagement with shoppers.

Personalization

Personalization improves the customer experience making it easier for shoppers to locate products they want easier and faster. This also makes shoppers feel like the retailer understands them and who they are. In the online format, personalization will involve product recommendation based on past purchases or curated homepages. In the store, this would involve features like digital fitting rooms, product customization based on saved items or past purchases.

Shoppers want personalized experiences, and retailers are trying to deliver this expectation. Successful personalization comes down to customer data to be able to provide a memorable tailored experience. Retailers like Home Depot and Walmart are heavily investing in personalization.

Retailer loyalty programs

Once customers are delighted with the shopping experience, loyalty programs are one method to keep them coming back. These programs track and incentivize purchasing behavior and engagement. The more customers shop and spend, the more they are likely to receive in return.

It is much easier and profitable to engage and convert existing customers rather than new ones, so driving loyalty becomes more important. Loyalty programs when done right, can enhance the customer shopping experience tremendously. Retailers must create a program that both incentivizes and connects with customers.

To build a strong customer base, customer experience plays a very pivotal role. Customer loyalty programs along with personalization are just a few methods in which retailers can improve the shopping experience for customers.

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