3 Proven Loyalty Program Mechanisms That Work in Grocery Retail
With 37% of consumers now preferring to consistently shop with the same retailer rather than switching*, customer loyalty keeps increasing. Hence, it is important to build a future-proof relationship with your customers. But you already know that!
Short-term loyalty programs, or loyalty campaigns, are proven supermarket tactics that connect grocery retailers with their customers. This is one of the reasons you need loyalty campaigns in your marketing strategy. However, you need to choose the right mechanism that delivers both ROI and brand equity, and adds to your customers’ loyalty.
For that, here’s a rundown of loyalty program mechanisms to conquer your marketing goals. Let’s go through the characteristics of instant reward, redemption, and hybrid campaigns.
1. Instant reward campaigns
The instant reward mechanism in a nutshell
- The retailer defines the minimum spend requirement they want shoppers to meet, as well as the rewards they will give-away for free during the campaign.
- Each time customers spend this minimum amount on groceries, they thereby qualify for a reward and can immediately receive it at the cash register.
- For example, if the minimum spend requirement to qualify is $20 and a customer spends $45, they will receive 2 instant rewards.
In general, an instant reward loyalty campaign features an entire line up of rewards to collect, which stimulates repeat purchases. Collectability is essential to keep customers’ interest up and keep them coming back. Moreover, the rewards are usually distributed in a sealed, blind package—a way to build up the thrill of unwrapping and collecting all of them.
Rewards in instant reward campaigns
The options for products to give away in an instant reward program are endless. To be able to make the right choice, start by looking at what is relevant for your current customers, and more specifically the new audience you want to reach.
In general, instant reward campaigns run for 6 to 8 weeks, or until stocks last, and are usually focused on families with kids. The rewards to collect are often playful or educational, such as toys and games. They are also great to retain switchers—shoppers who tend to divide their grocery purchases across different stores and base many decisions on discounts or rewards. They also help retailers attract new customers to their stores during and beyond the campaign.
Taking Little Garden™ and Little Shop™, two of UNGA’s most popular loyalty concepts, as examples, we see the following:
- The first one rewards shoppers with free seedling kits, like Checkers Little Garden in South Africa, which teaches families and kids of all ages where food comes from.
- The second one, like M&S Little Shop in the UK, gives away miniatures of the most popular supermarket products for children of various age groups to play with.
These rewards might be different, but they all appeal to a certain target group and help create an emotional bond between retailers and shoppers.
2. Redemption campaigns
The redemption mechanism in a nutshell
For redemption campaigns—also knowns as stamp & redeem-, saver-, loyalty stamp-, or reward stamp campaigns—the program mechanism is a bit different.
- The retailer defines the minimum spend requirement and the rewards.
- However, in a redemption program, each time customers meet this spend requirement, they get a stamp.
- This means that the retailer also defines how many stamps customers need to collect to complete a full stamp booklet, which qualifies them for the reward.
- For example, if the minimum spend requirement is $5, and a customer spends $21, they will receive 4 stamps. And if the retailer defines that customers need 30 stamps to fulfill a booklet, they will need to present 30 stamps to redeem a reward.
- For this reason, the rewards in a redemption campaign tend to be of higher value than instant rewards.
Redemption campaigns usually last longer as well so customers have time to collect enough stamps to be able to redeem their rewards. Their duration can really vary depending on the goal of the program, the rewards, the mechanisms involved, or even the retailer’s investment level.
Rewards in redemption campaigns
Depending on the nature of the rewards, a complete stamp booklet enables customers to get them for free or a large discount on the original price.
Redemption was the mechanism behind Magnit’s “Have Fun With Hasbro Games” in Russia, during which shoppers could collect and redeem for five of the most famous Hasbro games with up to 80% discount. The campaign was very well received by families who were excited to add new board games to their collection for a cozy winter at home.
With high perceived value rewards, the redemption mechanism not only attracts new customers but also grows the retailer’s share of wallet by retaining shoppers in the short and the long run.
3. Hybrid loyalty campaigns: The best of both worlds
The hybrid loyalty mechanism in a nutshell
As the name suggests, a hybrid campaign is the marriage of an instant reward- and a redemption campaign. It mixes elements from both loyalty program mechanisms in order to create a tailored program that fits the retailer’s loyalty strategy.
During a hybrid loyalty campaign, shoppers can receive both instant rewards and stamps when they reach the minimum spend. In addition to collecting instant rewards, they can thereby redeem higher perceived value rewards as well once their stamp booklets are complete.
Rewards in hybrid loyalty campaigns
During a hybrid campaign, instant rewards encourage customers to come back to a supermarket and collect stamps each time they shop. More rewards and ways to engage in a campaign are great incentives to drive up your footfall and sales.
Choosing the best mechanism for your loyalty strategy
Know that you can combine additional tactics with these loyalty program mechanisms to maximize the program’s performance and return on investment: sale of merchandise items, supplier funding, loyalty card use, etc.
However, retailers’ needs differ. This means that loyalty program mechanisms that worked for another retailer might not work for you, or that mechanisms that worked for you in the past might not be adequate for your next campaign. There are indeed factors to consider in your decision-making process, such as your goals, your target audience, your marketing calendar, your level of investment, the size of your stores, online or physical, etc. A loyalty agency such as UNGA will guide you and tailor the program to your needs.
*2020 Retail Customer Loyalty Study – Customer Communications Group