The following article was originally published in Loyalty360 here:
With more businesses focusing on digital to remain connected to customers that may be staying at home, grocers are also doubling down on digital to better serve, reward, and adapt to customers.
“As the grocery space continues to evolve and innovate, premium loyalty becomes an interesting topic,” Tom Caporaso, CEO, Clarus Commerce said.” In these programs, customers pay a membership fee in exchange for enhanced rewards that they can use upon joining. There’s no need to earn points in exchange for discounts eventually. Typical transactional benefits can include instant discounts, cashback, and even free delivery. But to take it a step further, grocers can offer things like VIP checkout or priority curbside pickup. On the grocer side, these programs can be profitable right from launch, and they’ve been proven to increase engagement over time. It’s a win-win. In our recent 2020 data study, grocery was the top category in which consumers would be willing to pay for a membership to a loyalty program at 60%.”
There is no doubt COVID-19 has impacted the way that customers shop for groceries. While initially, many customers flooded stores, grocers have pivoted to make shopping safe for customers and employees in-store, with many embracing digital orderings by increasing the number of available slots or adding curbside pickup as a new option.
“The pandemic has forced consumers to change the way they shop for groceries and as a result, they are now habituated to continue shopping online rather than in-store,” Bindu Gupta, Loyalty and Marketing Strategist at Comarch, said. “This trend is likely to continue post-crisis as well. Grocers have to align their loyalty programs accordingly by ensuring new ways to earn and redeem their loyalty currency with a strong focus on personalization. This strategy will be imperative for grocers to retain their customers in the midst of increased competition from direct-to-consumer brands.”
Multiple brands have introduced curbside pickup options for those that still need to get their items but don’t want to go into the store. For example, in late May Aldi announced it was rolling out curbside pickup to nearly 600 of its stores, as well as expanding its click-and-collect services to stores in 35 states by the end of July. Additionally, Food Lion announced in early June that customers who use Food Lion To Go for grocery pickup or delivery can now use their digital coupons and redeem their “Shop and Earn” MVP rewards program member savings, which Loyalty360 wrote about in a previous Daily Reads.
Gupta continued, “In addition, grocers should look to form valuable partnerships that will boost customer engagement and experience. For example, Albertsons recently announced it is partnering with Nuance to launch an Intelligent Engagement Platform, which provides virtual assistant and live chat solutions to help customers get real-time digital support. For more insights on this topic, you can check out the recording of our recent webinar, The New Normal: Reinventing Grocery Retail Loyalty Programs, which highlights more specifics on how grocers can boost customer engagement through their loyalty program.”
Reported by strategic advisory firm Brick Meets Click, online grocery purchases continued to grow in May, with sales up 24 percent month-over-month, to $6.6 billion. According to the firm’s study, the latest increase reflects increases in both online grocery orders and household penetration. About 43 million customers shopped online for groceries in May, raising household penetration from 31 percent to 33 percent. Many believe the main reason being that customers concerned about the COVID-19 outbreak found it easier to reserve a pick-up spot for groceries or have orders delivered versus battling crowds, or potentially risking exposure to the virus by shopping in-store.
“Grocers now have more touch-points to avail themselves of customer insights through card & mobile wallet purchases, apps, and other scan and shop technologies,” Rupa Rajopadhye, VP Marketing Services, Iris Worldwide, said. “These insights can inform important decisions on product placement and personalized promos that drive customer engagement and loyalty”.
Grocery giant Kroger has seen huge gains in digital this year. The brand reported its digital sales grew by 92 percent in the fiscal first quarter, which ended May 23. Kroger is the largest supermarket chain in the United States, with nearly 2,800 stores over 35 states, but the company is looking to take on larger challengers – such as Amazon and Walmart – as customer expectations rise for all industries.
“Vesta’s COVID-19 Brand Sentiment Navigator Study from late May confirmed a rise in consumers’ online spending and found one-third of consumers are purchasing their groceries online half the time or more,” Susan Frech, CEO, Vesta, said. “The moves we have seen grocery stores make to be more flexible, accessible, and safe, from curbside pick-up to designated shopping hours for older patrons, have succeeded in providing a boost in positive sentiment, with Grocery in the top 5 industries that consumers have more positive opinions of through this crisis. As the shopping climate continues to evolve, it will be critical for grocery stores to maintain a dialogue with their consumers to preserve trust and loyalty by understanding their changing needs and communicating the safety precautions they are taking to protect their consumers and employees.”
Kroger is no stranger to technology and innovation. The grocery recently announced an expansion of its partnership with Ocado, a British robotics company. These two companies have partnered to create Kroger’s Customer Fulfillment Centers and announced program expansion adding additional facilities.
“To combat loyalty disruption by both Instacart and Amazon, most grocers are adding home delivery subscriptions with substantial discounts for purchasing an annual subscription instead of paying a monthly fee, which is itself a discount from paying a fee per delivery,” Kate Hogenson, Sr. Director, Strategic Consulting, said. “This is a first step for locking in loyalty but does not fully address the emotional loyalty component that Instacart personal shoppers have built, as they call customers to discuss substitutions for out of stock situations or suggest something that looks fresher than the original item ordered. This is something that a local grocery store fulfilling digital order can match more easily than when an order is shipped from a fulfillment center.”
With many grocers focusing on digital to better position themselves for the short and long terms, loyalty will also be a key focus, especially with the rise of third-party services such as Instacart that may disrupt the brand’s traditional relationship with customers.
Hogenson concluded, “Our Kobie research shows consumers have more interest in curbside pick-up versus home delivery. Some of that relates to the delivery fee, but comments we have seen also reflect a desire for more control – with curbside pickup, the consumer decides when to drive to the store rather than potentially being interrupted by a delivery person during an important Zoom call.”
Looking forward, grocery stores will need to better understand how, where, and when their customers want to shop, while balancing new preferences of curbside pickup and delivery, as well as ensuring safety, all while building loyalty.