Judging by bulky key chains, it would seem supermarket loyalty program participation must be going through the roof.
Except the opposite is true. The total number of memberships in these programs fell about 1% in the past two years, to 172.4 million, according to the 2013 Colloquy Loyalty Census from LoyaltyOne. The growing bulk on key chains is at least partly due to expanding loyalty card participation in other types of programs.
In fact, the supermarket situation is unique. Surging signups over a period of years have produced high penetration and possibly saturation. Compare that to loyalty programs in industries including financial services, specialty stores, airlines and hotels, where growing membership is still the norm.
That’s why LoyaltyOne’s advice for supermarkets makes sense: “The overall focus must shift from acquiring new memberships to better engaging the customer base and driving repeat purchase behaviors.”
There are some good supermarket examples of engagement, and size of company isn’t necessarily the determining factor.
Sure, size helps. Kroger  and Safeway , two of the largest operators, have managed to produce highly sophisticated and successful efforts. Kroger’s program was top rated in a new study  by Maritz Loyalty Marketing, which polled program members. The ability of Kroger to leverage its partner DunnhumbyUSA  for personal offers has been crucial to that effort. Meanwhile, Loblaw Cos. , another large retailer, just launched a digital loyalty initiative for the Canadian market that it said most closely resembles Safeway’s successful Just For U program.
Despite the loyalty advances of giant retailers, smaller players are making progress as well. Independents are close to their markets and have a unique connection to shoppers. Some are combining that knowledge with innovative technologies.
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Local Choice Produce Market, a Portland, Ore.-based startup, aims to avoid programs that are merely price driven. As cited in an SN story , the retailer eschewed a traditional loyalty card in favor of its My Local Choice Program, which uses near-field communications. Members obtain a key fob or sticker to place on their phones. When they arrive at the store, they receive a text message welcoming them with notices of specials. The program aims to identify the behaviors of customers and then influence their decisions with messaging in ways that directs them to various parts of the store. Already the initiative has pulled in about 1,000 members.
Meanwhile, PSK Supermarkets , Mt. Vernon, N.Y., has years of experience using a loyalty marketing program that’s succeeded in offering targeted promotions to top shoppers for some 12 stores. It’s also increased the number of customer visits and met revenue increase goals, according to an SN article . The program has even enabled in-store personal interaction by generating alerts to managers when a top shopper is in the store and should be greeted.
What lessons can the industry take from all this loyalty activity?
First, these programs need to focus on the total customer experience rather than just price breaks, or else shoppers will merely cherry pick multiple retailers seeking the best prices.
Read more: Kroger Tops Loyalty Program Survey 
Second, loyalty efforts need to be based on an understanding of customer habits, and technology typically plays an important role here. That said, even the smallest retailers have access to technologies that can advance their progress.
The same study that ranked Kroger’s loyalty program as No. 1 noted an industrywide phenomenon in which dissatisfied loyalty program members typically cease participation rather than formally pull out. This “passive defection” is considered a major problem, and the study’s author, Maritz Loyalty Marketing, urged retailers to proactively identify the early warning signs of disengaged members.
That advice makes sense, but my concern is that at the point when members taper off their activity, it may be too late. A central goal of loyalty programs should be to make sure this never happens in the first place.
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