Back From the Dead: Amazon / Whole Foods Revives the Loyalty Card
Among U.S. food retailers, loyalty card usage has been dropping precipitously. In 2015, grocery loyalty program memberships stood at 188 million. Two years later, membership had fallen 24% to 142 million per the Colloquy Loyalty Census. Some of that drop may be due to consolidation among merging companies, but that big a drop can’t be explained by supermarket M&A over 3 years.
Loyalty cards are not a heavy lift for consumers. When you pay, show the card or code on your phone. But it’s an extra step, and when you’re trying to get in and out of the store, flashing your loyalty ID takes more seconds. If the value isn’t perceived, it won’t be top of mind or seem worth the modicum of effort.
For the retailer, the promise of loyalty cards is that all the great data gushing into the program should enable compelling consumer insights and the ability to make more effective, targeted promotions than the typical supermarket circular.
The problem is, customers often didn’t see anything compelling in supermarket loyalty cards and abandoned them. A proof point: The majority of grocers can only attribute 10% or less of sales to loyalty program participants, according to a study by RIS News, Progressive Grocer, and Carbonview. (Kroger is a notable exception. More on that later).
Whole Foods was no different. The grocer rolled out a program in 2017, but it never achieved its aspirations. Digital coupons didn’t grab shoppers attention, the promised rewards for free products or experiences didn’t materialize, and the program didn’t scale to all stores. Effectively, the WFM loyalty program was a zombie, without substance or life.
In April, WFM announced its old program was being scuttled, without even rolling over prior rewards. There just wasn’t enough consumer engagement with the old program to necessitate doing so. “Any account benefits, including membership and/or unused rewards, will not roll into any future programs,” Whole Foods told its members.
The Amazon / Whole Foods relaunch. This spring, Amazon and Whole Foods announced a new loyalty program. No card required, just the new Whole Foods app or your phone number linked to your Amazon Prime account. Last week, WFM completed the roll out nationally. Real value is promised, and is already being actively promoted with in store discounts, colorful signage, and via email to Prime customers.
What’s different now? More importantly, can grocery loyalty memberships find new life as a widespread, valued feature of food shopping, with compelling value for both the consumer and the retailer?
When Loyalty Cards Don’t Work
Onboarding and retention are a real issue. 54% of loyalty memberships are inactive across all sectors, not just grocery, per Colloquy. 28% of consumers leave loyalty programs before redeeming a single reward.
So is trust. Just half of members (51%) “still trust” loyalty programs with their information. Which means that half of members are reluctant to share info.
And poor design. If you’ve every used a grocery loyalty card — and ditched it — you know that clunky app design, too many steps, and confusing programs are commonplace.
Spamming. According to research by Excentus and Ipsosof 1,000 consumers, 38% felt overwhelmed by too much communications.
Oh year, and relevance. Tellingly, 36% felt that program communications weren’t useful to them.
Ultimately, it’s about the benefits. When the benefits — historically, some form of cash such as a discount — aren’t obvious and substantive, the consumer stops participating. The same research revealed that 53% of consumers didn’t find the rewards interesting. 57% said it took too long to earn them.
When Loyalty Cards Do Work
One good example of a successful grocery loyalty program is the Kroger Fuel Program, which provides a benefit consumers want: a discount on filling up at the gas station. For each $100 in grocery purchases at Kroger, the consumer gets $0.10 off per gallon. (For a 20 gallon fill-up, that’s a $2 discount, or effectively a 2% discount on groceries). This is a program that gets people to Kroger. In other words, loyalty.
More than anything else to date, consumers value fuel savings over other currencies, such as cash back or credit cards, according to the Excentus / Ipsos research. “Nothing cements loyalty more than gasoline discounts,” explaining that fuel rewards are the top driver of loyalty memberships. Further, 20% of consumers reported shopping specifically at a store where they can also earn fuel rewards.
Beyond the fuel rewards program, Kroger’s Plus Card is considered “best-in-class”. It reportedly is used with 96% of transactions, and goes where others have failed. Among other benefits, Kroger uses loyalty card data to personalize the coupons it sends to 12 million households. The Wall Street Journal reports that Kroger’s data analytics unit, staffed with 750 employees, has developed 850 algorithms that uses purchase data to ascertain when someone has gone on a diet, had children, or retired…. and then sends appropriate offers.
Beyond compelling rewards, continuing participation in a loyalty program is driven by app design, ease of use factors, and a clear understanding of the benefit(s). The Kroger app includes a shopping list function, online ordering, digital coupons, prescription reorder, and links to the fuel program.
What Amazon / Whole Foods Got Right
The Whole Foods program is offered as part of membership in Amazon Prime. The initial launch suggests Amazon is getting the key things right where others have failed:
1) Valuable benefits. The company promises discounts in-store for program participants, including 10% off items already on sale, plus specials just for members.
2) Ease of use. Just tell your phone number to the cashier, or flash the bar code on the app. The app is (currently) clutter free.
3) Relevant recommendations. Amazon has not yet said how it will personalize the loyalty experience, but it’s an easy bet that the Amazon recommendation engine will be put into service based on WFM’s product assortment.
What Could be Next From Whole Foods Loyalty
Kroger set the pace, and has features that seem likely to be integrated into the WFM program, such as the shopping cart and online ordering, considering its Amazon ownership. Beyond these core features, what else may be ahead?
> Alexa tie-in. She already has a shopping list. The voice interface is great, but the Alexa app interface is not. It’s buried in the menu structure and clunky. Expect Alexa integration with the WFM app for a full-featured shopping list capability that makes list creation and food shopping faster.
> Real analytics. It doesn’t take much imagination to see how your purchase data and shopping lists can be massaged for useful recommendations (i.e. prescriptive analytics) a la Amazon.
> Prescription tie-in. With Amazon’s purchase of PillPack last week, expect to see prescription refill and delivery to Amazon lockers inside Whole Foods, even if the store doesn’t have a pharmacy.
> Relevant engagement. It’s not just about deals, but about foods and topics that each consumer cares about. If the consumer watched a baking show on Prime Video, then information about seasonal Maine blueberries would be especially useful. For those who take prescription statins to control cholesterol, then identifying foods that are good choices for low-cholesterol diets, such as safflower or avocado oil instead of butter and margarine, is valuable information.
The game is on. Considering that food shopping is a task that the average U.S. household performs more than once per week — and a $700b industry — it’s ripe for a digital revolution. It’s not just about online ordering, or mealkits, but about how information can be used to better serve consumer’s food habits and interests — and make them happy loyal shoppers.
