Fuel/Grocery Brands & Loyalty Programs

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Fuel/Grocery Brands & Loyalty Programs

The landscape for grocery store and fuel-based loyalty programs include concepts focused on personalization, ecommerce, disruption, and several emerging trends. Details about these loyalty program insights and more are presented below.

1. Personalization

  • Traditionally, loyalty programs centered on purchasing frequency and how much customers had been spending. More and more, however, loyalty programs are shifting to using personalization (via data analytics) to build one-on-one relationships with customers.
  • As an aside, this personalization is beneficial to brands due to impending state restrictions and policies around data use and marketing. Programs that have already engaged their customers acquired the explicit permissions to market to them (based on their participation in the program).
  • Safeway uses personalization within its loyalty program via an algorithm that matches coupons and deals to customers. The brand’s personalized coupon-based loyalty program is “a big place where Safeway has been playing a cutting-edge role for years now.” The Safeway program is also effective due to its link to gas rewards based on a points system.
  • Another personalized Safeway innovation was that customers who don’t use the gas rewards have the flexibility of being able to redeem those gas points in the grocery store.
  • Safeway’s success is due to letting the coupons drive shoppers into the store on specific days, and then the rewards, themselves, encourage consumers to frequent the store regularly.
  • 97% of Kroger’s 8 million regular shoppers use the store’s loyalty program and other measures. The Kroger program, at the time of the reference’s publication, focused more on gas rewards but made efforts to create personalization through targeted offers for members.
  • Giant Food Stores followed this trend in 2019 with its introduction of a new loyalty program called Giant Choice Rewards. The new program brings all previous programs under one card (Giant BonusCard, Gas Extra Rewards, and Bonus Buy Savings) and shoppers receive personalized weekly offers and semi-personalized monthly offers.

2. Grocer Loyalty Program Insights

  • In 2017, there were 142.5 million individual loyalty memberships in the grocery industry within the United States.
  • Mark Johnson, CEO of Loyalty360, a trade association for customer loyalty that works with brands, restaurants, hotels, and grocers reported that Safeway and Kroger were two of the strongest customer loyalty programs around. Competitors for popularity include H-E-B and Hannaford.
  • According to Business Insider, the quasi-grocery/omnichannel chain/big-box retailer, Target, is one of the best loyalty programs in the United States. This is due to the store’s REDcard that provides its users a 5% discount on every purchase, provides free shipping on online orders and adds 30 additional days to returns for no annual fee. The card is also convenient in that it can link itself to users’ payment cards.
  • 54% of consumers would be willing to join a subscription-based loyalty program for grocery savings.
  • Factors that influence grocery customer loyalty include value for money, convenience, easy purchases, the lowest prices, and positive shopping experiences.

3. Fuel Loyalty Program Insights

  • 4 out of 5 of the top fuel-based loyalty programs are convenience store brands that emphasize in-store offerings rather than just savings at the pump. Speedway was the top program.
  • Fuel-based loyalty program best practices include offering some sort of service (e.g., car wash) and offering rewards based on actions that are natural to consumers when they are on the road (e.g., filling the gas tank and buying coffee).
  • Some fuel loyalty programs are attempting to attract users through targeted mobile promotions engineered to reach customers during their “last mile.” An example of this is RaceTrac’s push during the 2017 holiday season to use a combination of rich media and location targeting that generated a 47% lift in traffic at its 450 outlets across the southern United States.
  • 40% of consumers would be willing to join a paid loyalty program for gas savings.

4. Loyalty Program Challenges

  • Grocery retailers face challenges with loyalty programs due to operating at very small margins which can limit the rewards being offered to program members.
  • Also, the programs are often subsidized by discounts provided by grocer CPG partners. So customers’ “loyalty” is not really accessed because customers “easily game the system and spread their loyalty across a number of brands.” This creates a situation were many grocers provide the same deals (an example noted was that Safeway and Kroger often offer similar selections of coupons and other large regional players like Ahold USA follow the same model).
  • Fuel programs help break up this pattern because they create opportunity costs and ongoing loyalty (because it encourages shoppers to consolidate their shopping to a single brand).
  • Walmart and Amazon are leading brand competitors that disrupt brick-and-mortar loyalty. Most grocers haven’t come up with solutions to these two competitors. Personalization is suggested as a key to encouraging customers to stop splitting their shopping experience.
  • Fuel loyalty programs face challenges getting customers to spend more time in the location. This is because 53% of visitors to gas stations spend less than 5 minutes at the location. Loyalty programs attempt to use data to know the frequency of customer visits and attempt to tailor offerings to high-traffic times.

5. Trends

  • Omnichannelism is emerging as a hot trend of the future as Walmart and Amazon innovate different ways for customers to shop and stay engaged in their efforts to stay on top.
  • Omnichannel marketing took over CRM’s covert operations and now marketing includes in-app messaging, text messaging (SMS), push notifications, and use of other channels, all in addition to email. This trend is slated to grow.
  • AI is also noted as an emerging trend in the grocery loyalty space, especially if used to leverage unused retailer data and create additional value from it, “including more relevant circulars/communications and next logical offers as well as improved pricing and promotions.”
  • It may be worthwhile to note that although mobile payment is an innovative disruptor in many industries, its adoption is expected to be slow for convenience store chains. Regardless, some experts feel this is an opportunity to innovate around fuel retail loyalty programs (ex. “fuel retailers can offer mobile and e-loyalty programs with multiple touchpoints, so that customers can begin their purchase journey online or on their phones, for example by ordering items to pick up at the c-store”).
  • Grocery ecommerce is a growing trend that will impact many brick-and-mortar chains, as internet users opt to shop for deals online rather than close to home (where deals tend to be similar or not as good). In fact, by 2021, 52% of US consumers are expected to order groceries online at least once per week; in 2018, that number was 38%.

6. Growth

  • Convenience store loyalty programs have been expanding, with 42.5% of consumers belonging to a c-store loyalty program in 2019 (up 6% from 2018). Also, loyalty program members end to spend an average of $11.17 per visit vs. nonmembers who spend ~$8.66. Lastly, 57% of c-store loyalty members gas up during their visits.

7. Demographics

  • 68% of loyalty program users are female, and most users are in the 55-64-year-old age range (71%).
  • Female loyalty program users place more value in brands that offer the lowest prices within their loyalty program features.

8. Alternative Ideas

  • When Amazon took over Whole Foods, the latter’s loyalty program was replaced with Prime deals. The new program offered program discounts and a percentage off the entire purchase, as well as additional savings if using the Amazon Prime credit card. All of these benefits were noted as something most grocer’s never do.
  • One grocer, Publix, is famous for not using loyalty programs. This store says customer service is still king in keeping shoppers coming back, not discounts. Publix invests in its staff to keep customer service intact.
  • Some suggestions for revamping grocer loyalty programs include creating a subscription loyalty program where customers pay a certain amount each year to get expedited shipping, or access to more expensive shipping or delivery options (e.g., Amazon Prime).
  • Another suggestion includes creating unique in-store experiences that encourage shoppers to stay in the store longer (e.g., celebrity chefs, product launches, craft beer tasting).
  • One study found that internet users valued quick and easy checkout (83%) over earning rewards and loyalty points (58.7%). Since millennials and Gen Zers are notoriously not as interested in loyalty programs as previous generations perhaps an idea is to use a time/money concept in loyalty rewards and offer program users faster checkout. A related stat to this idea is that 61% of consumers concerned with delivery speed feel that same-day delivery would increase their loyalty.