Customer-Centric Loyalty Strategy Pays Off: FMI and Precima

To compete successfully with ecommerce sites and other rivals, food retailers must take a next-level approach to customer loyalty, viewing it at once as a strategy, an outcome of daily decisions and a program, according to a report from Food Marketing Institute (FMI) and global retail strategy and analytics company Precima.

"Next-Generation Loyalty: Get It Right In Food Retail Part 2: Loyalty In 3D" asserts that retailers can’t assume that their current customers will remain loyal – they need to consistently earn the loyalty of shoppers by aligning their resources and decisions with customer needs.

“Food retailers need to reboot the way they think about loyalty, taking advantage of the latest tools to truly engage shoppers and earn their loyalty across all customer touchpoints and not merely through a loyalty program,” noted Graeme McVie, chief business development officer at Toronto-based Precima. “They need to align their strategic, tactical and operational decisions across merchandising, marketing, store operations and supplier collaboration so a clear and consistent message is sent to the market that the retailer is working hard to earn the shopper’s loyalty.”

The report, the second of two on the issue, offers a framework and road map for how food retailers can up their loyalty game, which can a lead to a highly loyal customer base and energized associates committed to delivering more value to shoppers.

In fact, the researchers found that a next-generation loyalty strategy allows retailers to increase their number of valuable shoppers, sales per shopper and lifetime value per shopper in the most cost-effective and lowest-risk way by understanding and meeting customer needs better than the competition. As a bottom-line example, the report shows that for a $2 billion retailer with a gross margin of 25 percent, this equates to $70 million per year of incremental sales and $30 million per year of incremental gross profit.

“With the intangible and tangible benefits that are possible from taking a shopper-centric approach, it is surely time for retailers to embrace next-generation loyalty,” observed Pat Walsh, SVP for industry relations at Arlington, Va.-based FMI. “As one of our member CEOs told us, ‘If you don’t like change, you’re going to like irrelevance a lot less.’”

Based on a survey of 3,000-plus shoppers and 200 retailers, the report provides guidelines for how retailers should implement a next-generation approach to loyalty. It recommends a “Crawl, Walk, Jog, Run” strategy to capture and retain customer attention, and build momentum at the retailer and with its trading partners.

Both reports in the series are available to download online.