Sure, shoppers love discounts as a reward for their loyalty. However, many supermarkets are finding they can take loyalty to a new level by enabling frequent shoppers to cash in their points for a variety of items, ranging from movie tickets to donations to their favorite charities.
"Our objective is to give the customer a lot of reasons to pull that card out, not just when they are shopping our store," said Stephen Zubrod, vice president of marketing at Baker's Supermarkets, a 20-store chain based in Omaha, Neb. "The more they pull out that card, the more they are thinking of your supermarket not just as a place to shop, but as part of the community."
The next wave of activity in the frequent-shopper arena, observers say, will be to credit frequent shoppers with points for services and purchases outside the supermarket.
As competition for frequent shoppers heats up and loyalty programs become more prevalent, supermarkets are scrambling for unique ways to reward loyal customers.
"With customers collecting so many frequent-shopper cards, it is clear that supermarkets are now struggling with a way to have their frequent-shopper program stand out from the crowd," said Glenn Hausfater, managing partner at Partners in Loyalty Marketing Inc., a Chicago-based consulting firm. "Retailers are moving to add value to their card through ways that are outside the walls of the store. For example, discounts on concert tickets, discounts at local museums, and discounts at the dry cleaner."
The ability to accrue points toward donations to charities is one of the fastest growing areas of frequent-shopper programs, according to a study by the Food Marketing Institute, Washington.
City Market, a 41-store chain in Grand Junction, Colo., recently revamped its program to allow frequent shoppers to designate points to a specific charity, such as the Red Cross or local church organizations.
"What we were doing before is having the organizations come in and purchase gift certificates, which they would sell, and we would give them back 5% of the sales," said Rhonda Bever, City Market's director of advertising. However, this program was labor-intensive to administer.
"Beginning in April, we changed the program so that the organizations come to us with a list of frequent-shopper numbers from their members and supporters. We enter those numbers and track their purchases," she said.
Beginning July 1, City Market, along with Bi-Lo, Mauldin, S.C.; King Soopers, Denver; and Smith's Food & Drug Centers, Salt Lake City, will begin participating in a manufacturer-supported program to provide donations to local youth sports leagues, according to a source familiar with the project.
The program, which will be administered through the Association for International Youth Sports, Chicago, will distribute funds provided by grocery manufacturers, including Kraft Foods International, Rye Brook, N.Y., and Procter & Gamble, Cincinnati. The manufacturers will designate certain products which, when purchased by participating frequent shoppers, will earn points toward donations to local youth sports programs.
As supermarkets search for innovative ways to reward customers, one of the next big challenges in shopper-loyalty programs will be crediting frequent shoppers with points for products or services purchased outside the supermarket, observers noted.
For example, Ukrop's Super Markets, Richmond, Va., which owns 51% of First Market Bank, rewards frequent shoppers in the Market Share program with points based on their average quarterly bank balances in addition to points accrued for purchases.
"By adding the banking component to the frequent-shopper incentives with the Market Share program, it gives customers of the supermarket and the bank an opportunity to accrue points faster than if they were just accumulating points based on their purchases, which is something that has truly sparked an interest in both customer bases," according to Cheryl Moore, First Market Bank vice president and director of marketing.
With Ukrop's holding a majority ownership in the bank, there are more opportunities for cross promotion, Moore pointed out.
"In August, we will start a program where we will give double points to Market Share participants on their purchases of Ukrop's branded products," Moore said.
While Ukrop's and First Market have a unique relationship that makes it easier to manage joint promotions, other retailers are looking to expand their programs so that customers can not only redeem points for items outside the supermarket, but also earn points for those purchases.
"That is really the next step. Developing relationships with affinity partners is certainly something to consider moving forward," said Baker's Zubrod.