Loyalty Can Be Fickle

Written By Julie Determann, Account Supervisor

During the holiday season we will be looking back to our best blog posts of the year.

Here is Number 7 by Julie Determann

Jewel reward card

 

Jewel-Osco, a Chicago-area supermarket chain, has decided to discontinue a trend that they helped set, their “Preferred Customer” loyalty card program. The new owners, Cerberus Capital Management, feel that they want to simplify the shopping process by giving all customers the same benefit of everyday low prices… whether they have a card or not.

As a professional marketer, I seriously question their logic. A brash decision to end this loyalty program could be catastrophic for two reasons: (1) Customer Perception and (2) Data Mining. To demonstrate my first concern, let me paint a picture of a routine shopping experience for you…

You push your wobbly cart up and down the aisles favorably comparing the retail price with your preferred customer price. Then you pick the shortest line and head to checkout. In line, you juggle your purse while simultaneously unloading the cart and searching all the zippered pockets and/or wallet slots in a frantic quest for your Preferred Card. At last you find it and proudly hand it over to the sales associate. Despite this slight inconvenience, you experience instant gratification after the card’s been swiped, the register reveals your special savings and the sales associate circles the save amount for emphasis on your receipt.

Complete Satisfaction…Agree? Let’s face it, there was no program enrollment cost. And when you couldn’t find your card, the nice checkout lady usually swiped hers on your behalf. It was a no-brainer, a win-win situation that left us feeling good knowing that ultimately we were saving money.

In hindsight, Jewel-Osco’s retail prices may have been higher than other stores and that card may have encouraged overbuying with its “buy 2 get 1 free” deals, but as loyal customers we felt entitled to these “exclusive bargains”. Regardless of what was bought or how much was spent, at the end of the day, we were content knowing we held a discount card that never expires, was valid on countless products, and saves us money every time.

With that realization, I fear Jewel-Osco’s decision terminate the loyalty card will lower customer satisfaction and possibly invoke ill will. Regular customers are accustomed to receiving an additional deduction at the end of their sales transaction. When the loyalty program and the deduction stops…let’s hope the regular loyal customer doesn’t stop coming! Ironically, even if the new grand total is the SAME amount as it would have been with a loyalty card, it’s the customers’ perception of whether or not they are receiving a tangible savings that matters most.

This “everyday low prices” approach reminds me of my associate Kara Monson blog in June 2012, “JC Penney Brings Sales Back” Here she addressed questionable marketing decisions made by a well-known clothing retailer. Bottom line, after 6 mos. the decision to eliminate “sales” and “couponing” resulted in a 40% revenue decline and a prompt return to past marketing tactics. (Side note, at least they could promptly admit that they were wrong and try to recapture losses…)

But my secondary more critical concern is the invaluable loss of customer purchase data. The demographic and geographic information that Jewel-Osco obtained upfront with each new customer enrollment: mailing address, email, gender and age, which likely built their current customer database. And the daily insight on individual shopping habits that they captured every time a preferred card was swiped: products purchased, quantity purchased, average sales amounts and shopping frequency.

If Jewel-Osco utilized this customer data correctly, it should have permitted them to provide customers with desirable printable point-of-purchase coupons for their next shopping excursion. And was likely responsible for targeted personalized offer coupons sent via mail or email featuring the brands/products Jewel-Osco knows that individual customer is purchasing!

To me it is unfathomable, they would choose to discard consumer data. One-on-one customized marketing is the current way to go! Currently nothing is more significant than fully understanding your customers’ individualized needs and wants. Jewel-Osco may able to acquire some data through credit card providers, but they’ll undoubtedly lose all transaction history on cash customers.

When questioned, Jewel-Osco President William Emmons said, “We don’t feel that we need to have an individual customer’s detail so much as the data of our product movement in each store. We have a local approach. The majority of marketing and merchandising decisions for Jewel-Osco customers are made in our Itasca office by local associates who live and shop in the neighborhoods where our stores are located.”

Yes, each local store’s performance is important and the corporate office should bear witness to their neighborhood stores, however to best service and market to both the neighborhood and individual customers for all locations, in my humble opinion, they should have maintained the influx of customer transaction data. Quantifiable data speaks louder than a few in-store observations and with proper data capture, measurement and analysis Jewel-Osco could learn a lot more about what their customers and the community as a whole does– and then they could justify their future decisions with logical numeric rationale.

I wish them luck with their new “Old-School” approach, but sadly, I think in six-month’s time this may be another lesson learned as we detail the launch of their “new and improved” loyalty program!

Find this interesting and/or beneficial? “Like” my blog. Need marketing help? Contact me: jdetermann@twochicago.com

Here are posts Number 8 9, and 10

(Originally Posted August 2, 2013)