SAN ANTONIO -- While many retailers agree that frequent-shopper programs yield important data about the spending habits of their customers, using that information to affect shoppers' buying behavior has been a more elusive goal.
Even retailers with long-established customer loyalty programs acknowledge their limitations. "I don't think there's such a thing as a loyal shopper," said Bob Brodbeck, president and chief executive officer of Dick's Supermarket, Platteville, Wis. "There are higher spenders who simply expect more than those who don't spend so much."
Brodbeck joined Marv Imus, vice president and owner of Paw Paw Shopping Center, Paw Paw, Mich., and Bill Martin, president of Skagway Discount Department Stores, Grand Island, Neb., at a panel discussion about card-based loyalty programs at the eighth Global Electronic Marketing Conference, held here March 21-23. The conference was sponsored by Retail Systems Consulting, Naples, Fla., and the Food Marketing Institute and the Grocery Manufacturers of America, both of Washington.
The panelists did report that card-based loyalty programs enable them to gather information on key customer groups. For example, through Dick's Frequent Card Program, the retailer learned that "the top 15% of the spenders generate 60% of the profit," Brodbeck said, noting that the bottom 15% of shoppers produce a net loss of 13%.
For a program to work effectively, retailers need to focus on the items already in the consumer's basket, rather than expanding the basket size, Brodbeck said.
"We found that card-based programs cannot change behavior," said Brodbeck. "Customer expectations for program benefits are high. Savings and rewards should be on things they buy most often."
Skagway's Martin said that although the retailer was "surprisingly" able to increase the basket size of its highest-spending customers, there was little increase among other groups.
"We found that the top shopper will spend more," Martin said. "The top spending 5% (of our cardholders) did spend more, but the top 25 to 30% didn't move up (their spending) all that much."
Brodbeck said that if changes in card-based frequent-shopper and loyalty programs, such as adding point rewards, occur too often they will keep such programs from fulfilling their promise for both consumers and retailers.