Will Everyday Low Prices Replace Loyalty Programs?

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Customer Loyalty
Customer Experience
What's more effective at growing customer loyalty--loyalty card/points programs or everyday low prices? A growing number of grocery chains are opting for low prices. Earlier this summer, grocery chains Acme, Shaw's, Albertson's, Star Market, and Jewel-Osco, all made the decision to ditch their customer loyalty programs for everyday low prices.

What's more effective at growing customer loyalty--loyalty card/points programs or everyday low prices?

A growing number of grocery chains are opting for low prices. Earlier this summer, grocery chains Acme, Shaw's, Albertson's, Star Market, and Jewel-Osco, all made the decision to ditch their customer loyalty programs for everyday low prices.

The Jewel-Osco supermarket chain, recently bought by Cerberus Capital Management, said it had decided to put items on sale on a store-wide level, rather than offer discounts only to those with a store loyalty card. "We think every customer deserves the same price. It's that simple," said Jewel spokeswoman Christine Wilcox in a press release.

In essence, these chains traded individual customer details for the option to move their products fast.

Some critics said they suspect grocery chains aren't effectively mining data in a meaningful way so they drop their programs. While these everyday low prices may be the key to moving products, the key question becomes, "At what expense does this come to the customer experience?" Without individual customer data, how can these chains make improvements to the experience design, quality of products and services, and ease of use? And how can they know when the relationship goes sour and a customer dumps these brands for others that offer a more personalized approach to shopping and the perception that they appreciate their business and will reward them for continued shopping?

Basically, everyday low prices have replaced the ability to determine the "why" behind what drives and doesn't drive customer loyalty.

I spoke last week with Gary Edwards, chief customer officer at Empathica, about this topic and he said retailers that drop their loyalty programs in favor of a low-price strategy should expect some vulnerabilities. "One thing clear in making such moves is they have to account for the fact that there's a certain degree of attrition," he said.

Edwards added that to say you have the lowest prices is important, however, to be truly successful retailers must target customers in the digital space with personalized promotions and specials. Once you remove the need for the card, loyalty programs become easier to manage and potentially more lucrative for the provider.

Currently, Restaurant.com rewards customers from a social perspective. Each interaction offers a certain number of points, while also earning the user a badge. For instance, by "liking" Restaurant.com on Facebook, users receive the "Thumbs Up" badge, while collecting a complete set of badges allows the user to satisfy an entire mission. Customers who connect with Restaurant.com across all social networks, for example, will complete the Social Maven Mission.

As Jeanne Bliss, owner of Customer Bliss, pointed out in this column, "Building loyalty and earning continued loyalty with our best customers is about managing relationships and emotions, not program components, fulfillment houses and the amount of logoed stuff we can get on their desks."

Walgreen's, for example, is appealing to its customers' emotions and incenting certain behaviors. The company launched its Balance Rewards loyalty program last fall in more than 7,900 stores, and rewards its customers for completing specific behaviors. For example, members can earn points for completing healthy behaviors like walking daily and for receiving certain immunizations.

Like Edwards said, time will tell whether or not these grocers have made the right decision. Until then, customer loyalty hangs in the balance.

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