Quick question: which is your favorite coffee place? You probably didn’t miss a beat before saying Starbucks or Costa, right? What about your favorite grocery store? Now you’re wondering, does a specific grocery store actually matter, as long as I’m getting fresh, good produce?
On a scale of 1 to 10, if coffee scores a 9 or 10 when it comes to commanding customer loyalty, daily essentials like groceries fall on the shallow end of the scale.
Unsurprisingly, 83% of customers visit 4 to 9 grocery stores in a year, and only 1% are loyal to a single chain.
While discounts and offers may sway customers in favor of a specific store, low margins on groceries make it difficult for hypermarket chains to offer these.
Adding to grocery chains’ woes is competition from niche grocers such as those offering organic products, and online hyperlocal players like Fresh Direct, Local Harvest, and ShopFoodEx.
Still, all is not lost for the ubiquitous grocery stores, as 50% of households still consider the supermarket as a primary channel for shopping for groceries.
Through targeted and personalized loyalty programs, grocery stores and hypermarkets can nurture customer loyalty and capture a large share of the grocery shopping pie.
In this article, we’ll delve into how loyalty programs make a positive impact on grocery sales, along with some best practices and strategies for grocery chains to design an effective loyalty program.
Loyalty Program as a Differentiator: Why You Need One for Your Grocery Chain
In April 2020, online grocery sales rose to an astounding $5.3 billion, with total orders increasing from 46.9 million to 62.5 million between March and April, respectively.
While the pandemic overhauled consumers’ grocery shopping habits, most stores scrambled to keep up with increasing demand. Owing to a shortage of inventory and manpower during the lockdown, most stores were unable to fulfill orders or offer any incentives to loyal customers.
Think of all the customers the stores may have lost during the pandemic – even as demand increased – simply because they were unprepared.
What if they could win back these lost customers when stores started opening up post the lockdowns?
Loyalty programs allow grocery stores to reel in regular customers with well-designed incentives and personalized offers. The ultimate goal? To increase the average basket size and encourage repeat purchases.
For instance, take a look at the array of incentives the global supermarket chain Walmart offers to build customer loyalty: store pickup of online grocery orders, automated in-store shopping experiences, and unlimited delivery for paid members.
In the next section, we’ll explore nine strategies to build a powerful grocery & hypermarket loyalty program and the tools that can help you get there.
9 Strategies to Revamp Your Grocery Loyalty Program
While massive tech-driven retailers Walmart and Amazon can afford to offer deep discounts and free deliveries, traditional grocery chains can compete for customer wallet share by offering personalized, value-focused experiences.
The best customer loyalty programs harness customer data from multiple channels and store locations, to offer meaningful rewards and incentives. They make customers feel valued and special.
A good grocery loyalty program must fulfill customer needs, improve their shopping experience, offer appealing rewards, and be consistent with their expectations.
Let’s take a look at 9 strategies for grocery stores to nurture customer loyalty :
Develop a deeper understanding of customer behavior
This is the cornerstone of a successful grocery and hypermarket loyalty program. The subsequent strategies are dependent on how well retailers can achieve this.
What does an in-depth understanding of customers look like in practice? It means getting a granular understanding of customers’ shopping habits, preferences, and shopping goals.
- Specifically, you want to track the following types of customer data:
- Demographics (single, family, millennial, couple)
- Product categories frequently bought (organic, sugar-free, gourmet, etc.)
Shopping Behaviour (average basket size, preferred time of day for shopping, which days of the week they shop, etc.)
One of the major challenges for grocery and hypermarkets in deploying a great loyalty program is the lack of technical know-how to capture customer data across various channels and using it effectively to offer personalized experiences.
The best way to understand and analyze customer data is to use a Customer Data Platform or CDP. This gives you a 360-degree view of the customer, including in-store shopping, online experiences, and information from third-party platforms such as payment providers, social media networks, and other marketing channels.
Deliver 1:1 personalization
Once you have enough data about your customers, it’s time to sweep them off their feet with hyperpersonalized experiences. Personalization includes choosing the right channel, time, place, and offer for each customer.
While personalization is a key ingredient to ensure the success of a loyalty program, only 2 in 10 customers are satisfied with the levels of personalization in existing loyalty programs, across various industries.
These are some key areas where grocery chains can harness personalization:
- Dynamic in-store vouchering
A leading hypermarket chain saw an $8.8 million increase in sales using this strategy. The idea is to use customer’s in-store shopping behavior to up-sell, cross-sell, and increase purchase values using real-time coupons with limited validity.
For example, customers who purchase almond flour may be offered coupons to buy other keto-friendly options such as sugar-free chocolate and protein bars. The key here identifying the propensity to purchase (customer segment vs product category).
- Targeted marketing
Identify the channels customers are most likely to convert on, and send exclusive promotions on those channels. Unfortunately, most grocery retailers still rely on traditional engagement channels like SMS for delivering promotional or loyalty-related communications.
- Data-driven rewards & incentives
Use customer loyalty data such as points, loyalty tier, and transactions, to send targeted promotions. For example, offer additional loyalty points to members who shop on the weekend for fresh fruits, or those who participate in an upcoming sale.
- Automated cart curation
This is applicable if you have a digital presence. Use customer’s transaction data to automatically curate their online shopping cart. This can be a time-saver for customers, as most people buy the same set of groceries each month. Offer personalized recommendations for out of stock items to wow customers even more.
- Trigger event-based offers
Who doesn’t love birthday greetings and goodies from their favorite brands?! Send special offers and discounts to your customers on special occasions like birthdays and anniversaries to make their day even more special and increase their spending with your store.
- Use gamification & event-based rewards
Gamification is the use of game mechanics in non-game scenarios. In loyalty programs, that translates to offering loyalty levels and tiers, unlocking options, progress feedback, goal setting, and challenges.
According to a report, gamification almost doubles the engagement of loyalty programs. A whopping 8 in 10 customers interact with game mechanics when they are present in loyalty programs, but only half of the loyalty programs have any such features.
The Starbucks loyalty program is a good example for grocery stores to draw inspiration from. It has different tiers based on spend, member status, and rewards such as purchasing a certain number of items per week to achieve bonus stars.
Grocery stores can gamify loyalty programs in two ways. First, they can offer points based on events such as social media posts, QR code scans, and reviews and feedback, etc. Second, they can use loyalty program platforms like Capillary’s Loyalty+ to introduce gamification elements such as “pick and win, “spin the wheel”, and “scratch and win” within their loyalty program.
Deploy Product/SKU/Category-based Promotions
Promotions on specific brands and categories are a good way to leverage the existing brand or product affinity within a customer segment.
For instance, you can offer a specific customer segment a 10% discount on PepsiCo beverages for a limited time. Again, the success rate of these promotions depends on the delivery time, channel, and of course the target segment to get the best results.
Extend your rewards catalog
Partnering with other brands to extend your rewards catalog is an excellent way to make your incentives more appealing, and tap into your partner’s customer base.
A common example of this is the fuel points many grocery stores like the Smith’s food and drug store offer.
Here’s how it works: shoppers earn fuel points every time they shop for groceries, prescription drugs, and gift cards. These can be redeemed at participating fuel centers.
There’s clearly an appetite for coalition programs as 60% of customers share they’re interested in such programs. Grocery stores can partner with food brands, drug stores, and other services such as salons and spas, to make their loyalty points more valuable.
Nurture behavioral loyalty
The best way to make customer loyalty a habit is to reward customer behavior.
Here are some customer actions for which you can provide added incentives:
- Check-in: Offer rewards for customers when they check-in to your mobile app for 7 consecutive days. This will ensure they open your app regularly.
- Refer a friend: Provide loyalty points and special discounts to customers who refer a friend or family member to your store or app.
- Shares or likes: This is a simple yet effective way to increase social media buzz about your brand.
- QR code scans: This is a great way to track when customers enter your store and get them to participate in in-store events and promotions.
- Visiting a store: Similar to rewarding app check-ins, you can also provide added offers and points to those who visit your store at least twice a week.
Provide real-time gratification
This means using geo-location and app-sign-in data to personalize promotions as well as generate real-time coupons for customers during checkout.
In 2017, 2.75 billion coupons were redeemed at grocery stores. What’s more, one in three people said they frequently looked for coupons online for food purchases.
Here are three ways to provide instant gratification to your customers when they visit your store:
- Dynamic vouchering: As discussed earlier, this is a great way to promote related items to shoppers when they’re at your store.
- QR codes: Provide real-time discounts and offers to customers who scan QR codes at your store, and increase the average basket size.
- Beacon engagement: Each time a consumer comes in the vicinity of your stores, provide them with dynamic offers to increase footfall in your stores.
Connect in-store & online customer interactions
We’ve seen the massive shift in consumer’s shopping habits from brick and mortar stores to online websites and apps. What hasn’t changed though, is consumer’s expectations of seamless experiences, both online and offline.
For grocery and hypermarket chains, it pays to adopt an omnichannel approach to cater to changing consumer preferences and capture customer data at various crucial points.
What should you look for when setting up an online presence for your grocery store? The ability to host your store on the web, and manage inventory and orders, promotion and marketing, payments and logistics, and SEO.
Additionally, you’ll also need the option to collect and harness customer data to integrate online and offline experiences.
For example, when an in-store customer logs into your online store for the first time, you can provide them with coupons and vouchers for products related to their last purchase at your store.
Match the right message to the right channels
Imagine promoting pipes and valves for industrial use on TikTok. Or bracelets for teens on LinkedIn.
Each social and communication channel has its own target audience and key demographic. Moreover, each of your customers likely spends more time on one platform as compared to others.
Communications around your grocery loyalty program and specific offers/promotions should be communicated by recognizing the best channels of promotion for each customer.
Channels such as Instagram, Facebook, Twitter, are likely popular with a younger demographic, while WhatsApp may be used to engage older customers. Grocery stores can use the platform to send information about loyalty points, point expiry information, collect feedback, and send post transaction information to customers.
To create a truly great grocery loyalty program, think beyond the confines of a traditional model. Despite the challenges involved, the grocery and hypermarket space offers plenty of opportunities to deploy a premium loyalty experience that will allow retailers to deliver unique benefits and personalized rewards to drive shoppers back to their stores more frequently and differentiate them in an increasingly competitive space.