LOYALTY MARKETING
SECTION ONE
SECTION TWO
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Loyalty Marketing Metrics: Quantifying Shopper Value
(Part One of Two)
During the past several years, supermarket loyalty programs have benefited retailers by providing them with
meaningful data about their shoppers and their purchase habits. In the past, retailers measured the performance of their business mainly by product category, but the emergence of loyalty marketing programs has enabled retailers to also track their business using metrics based on shopper information. Savvy retailers are using this information to provide targeted personalized offers to better engage their shoppers and to increase their purchases.
The ability to capture and analyze data on a shopper-level basis opens up a broad spectrum of analysis that supermarket retailers can use to grow their business. Grocers can measure activity by shopper, response to promotions by shopper and profitability by shopper. Furthermore, retailers can identify their top shoppers and potential top shoppers and design promotions to cater to the needs and wants of these shoppers.
In grocery as in other businesses, a minority of customers account for the majority of sales. Supermarket industry data shows that in most stores, the top 30% of shoppers make up 75% of the sales. This statistic underscores a retailer’s need to identify its top shoppers and design specific promotions to retain their business. The fundamental goal of a loyalty or CRM program (also known as a Customer Relationship Management or “CRM” program) is to reward, retain and grow a store’s top shoppers.
In general, “Top Shoppers” are those who spend at least $50.00 per week in a store, while “Occasional Shoppers” are those who spend at least $25.00 per week. Compared to other shoppers, Top Shoppers spend far more and are responsible for a majority of the retailer’s profits. Many leaders in the industry believe the single most important metric a retailer can track is the number of Top Shoppers per store. If this number is growing, it’s a very positive indicator of the store’s financial health.
Furthermore, a retailer can improve the return on its marketing investment by using a loyalty marketing program. For decades, printed circulars have been the most widely-used marketing vehicle for grocery retailers. The drawback of printed circulars however is that they are expensive and use a mass-market approach. With a loyalty marketing program, retailers can redirect their marketing dollars to focus on
Top Shoppers and potential Top Shoppers, thereby reducing marketing costs and improving the efficiency of their marketing campaigns.
Loyalty marketing programs can also help independent retailers to compete against big-box discounters, large chains and non-traditional grocery stores such as Target, Walgreens and dollar stores. With its Top Shoppers identified, a retailer can match or beat competitive pricing with custom offers communicated directly to shoppers that are invisible to competitors. With this direct marketing technique, a retailer can provide attractive offers only to its most loyal and profitable shoppers and not to the “cherry picker” shoppers who only buy products on deal and then leave the store.
In summary, a loyalty marketing program enables retailers to achieve the following goals:
- Identify, recognize and reward its top Shoppers
- Measure the performance and Top Shoppers, potential Top Shoppers, and other shoppers.
- Encourage repeat visits and purchases among its Top Shoppers
- Use technology to improve promotional offers and customer service
- Measure effectiveness of specific promotions and campaigns.
This essay was written by ProLogic Retail Services, which has been providing supermarket loyalty programs for over twenty years. It also draws from the work of loyalty marketing expert Brian Woolf and his book “Loyalty Marketing - The Second Act.”
Part Two of the essay will appear in the next issue of the Shopper Tech Update.
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SECTION THREE
