Magazine Article | January 1, 2000

Frequent Shopper Programs Move Into The Mainstream

Source: Innovative Retail Technologies

Implementing frequent shopper programs has helped many retailers cater to their customers' needs and increase revenue.

Integrated Solutions For Retailers, January 2000
Will the growing popularity of frequent shopper programs in the retail community soon be reflected on Web shopping sites? Sean Harrell, IT (information technology) manager at Southland Trade, says it's inevitable. And, from a marketing standpoint, he feels the frequent shopper concept and Internet shopping are fully compatible. Indeed, providing frequent shopper credit for purchases made at his company's Web site is now a priority project for Harrell.

Help Is On The Way
"Storefront solution providers have become much more aware of frequent shopper programs," notes Harrell, "and they realize the need for frequent shopper tracking to be integrated into Web site shopping carts."

To accommodate both POS processing and frequent shopper program tracking, Harrell says, "We are upgrading to a Windows NT product called Catapult, supplied by ECR Software. It handles our POS data and addresses all of our frequent shopper needs, except for loyalty membership cards, which are provided by Vanguard ID."

Southland Trade, located in Moyock, NC, is a complex consisting of a gift shop, convenience store, sports memorabilia shop, two restaurants, a gas station, and an outdoor farmer's market. All operations accept the frequent shopper card; in addition, the restaurants offer VIP cardholders a 10% discount.

Frequent Shopper Programs Continue To Gain Popularity
According to the ACNielsen study, nearly two-thirds of all U.S. households believe it is important to shop in stores that offer a frequent shopper or loyalty card program. Research conducted in December 1998, by the consulting firm found frequent shopper programs rated as one of the three most important factors affecting a consumer's choice of where to shop. The other two factors identified by the study group, the members of ACNielsen's Homescan Consumer Panel, were location, and in-store sales.

Ample proof exists that frequent shopper programs have gained widespread public acceptance. Three years after Safeway Stores U.K. became the first British retailer to introduce a loyalty card program in 1995, the number of households using its ABC Card had soared past 5 million. More than 80% of Safeway's revenue is derived from shoppers carrying its loyalty cards. ACNielsen believes that 80% membership or more is achievable for an established frequent shopper program.

Many retailers appear to be happy with the performance of their frequent shopper programs. One such retailer is Greenhills Farms, a 70-year-old grocer headquartered in Syracuse, NY. It has had a frequency shopper program in operation since 1993, and has observed a steady increase in member spending. In fact, the increase went from $25 per week in the first year of the program to the current $100 per week, says Lisa Piron, director of MIS.

Dorothy Lane Market, headquartered in Dayton, OH, has become heavily dependent on its frequent shopper program. Its monthly newsletter describing frequent shopper rewards has proven so successful, says Amy Brinkmoeller, director of MIS, that the store has eliminated newspaper advertising. The two-story grocery operator introduced its loyalty card program in May 1995, and has 75,000 participating households.

Dave Ratner is founder and CIO of Dave's Soda & Pet City, a three-store beverage and pet store based in Massachusetts. Ratner says sales traceable to his company's card program have turned him into a strong advocate of "loyalty programs" - a name he prefers to frequent shopper programs. Ratner pampers club members with special benefits such as free apple pies at Thanksgiving (no accumulated points or purchase necessary). Another perk offered by Ratner's company is opening stores early for card members on certain Sundays and holidays.

Frequent Shopper Programs Accepted By Public
ACNielsen estimates that the percentage of consumers participating in a frequent shopper program has climbed from 24% in 1996, to 55% in 1997, and to 66% in 1998. Moreover, the loyalty card reward concept has succeeded despite hostility from consumer advocate groups, the media, and in some cases, even managerial personnel within retail store organizations.

Frequent shopper programs have survived an initial criticism, which was the invasion of consumer privacy by retail corporations. Carol J.G. Ward, a business columnist for the Houston Chronicle addressed this issue when she wrote, "Grocery store shoppers must weigh the value of these benefits [frequent shopper program benefits] against the loss of privacy that happens as soon as they fill out the application for a frequent customer card."

Shelby Gilje, troubleshooter columnist for The Seattle Times and a loyalty program skeptic, declared a year ago, "Store club cards may backfire in the Pacific Northwest, where privacy is something consumers may value more than a few dollars in savings."

There has been positive press coverage, too. Stephanie Salter, a columnist for the San Francisco Examiner, describes loyalty cards as "marketing genius" and "one of those rare and elusive entities known as something for nothing." Salter closed an Examiner column about the Safeway Club Card with, "You got me, Safeway. I like being in the club."

Questions usually asked in membership applications include name, address, family size, occupation, and annual family income. Unlike credit bureaus, family data provided by applicants is rarely checked or substantiated. Because frequent shopper program data is rarely substantiated, columnist Gilje says Safeway employees are directed to encourage customers to submit false information if they aren't comfortable with the questions.

Loyalty programs need complete support of an organization from top to bottom to be fully effective, says Lisa Piron of Greenhills Farms. Jay Robinson is the director of electronic marketing at Wild Oats and also one of the speakers at the Food Marketing Institute's 1998 Loyalty Marketing Conference. Robinson zeroed in on a surprising resistance of personnel at many retail organizations to the frequent shopper concept. Initially, said Robinson, he had to beg for help from disinterested colleagues in conducting his firm's loyalty program. Nevertheless, says Robinson, the program has been extremely valuable to his company.

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