Grocery retailers looking to drive engagement through a loyalty program should consider some changes to attract lower income consumers, according to a new research-based report from Mintel.
While 91% of Canadians participate in a loyalty program, lower income Canadians are less likely to take part. The Mintel study found just 86% of consumers from a household with income less than $50,000 belong to a retail loyalty program, compared to 98% of respondents from households with income more than $150,000. In total, 50% of Canadians participate in a grocery loyalty program.
The fact lower income Canadians are less likely to have joined a loyalty program could be viewed as an opportunity for grocery retailers, according to Carol Wong-Li, lifestyles and leisure analyst at Mintel.
“Less affluent consumers tend to shop a little bit differently,” she said.
If, for example, people are worried about their rent each month, they will be more interested in lowest prices at discount banners, than loyalty programs with benefits that accumulate over an extended period of time.
“If you are thinking, I just need this right now…. You are not thinking about in a month’s time I am going to get this reward,” she said.
By making some changes to the loyalty program, grocery retailers could increase engagement with less affluent customers who are skeptical about the benefits.
“It has got to be more targeted and a greater focus on immediate rewards,” she said. “Requiring people to buy multiples of something, that is not necessarily realistic for less affluent customers to do,” she said. Buy-one, get one offers for example would likely have more impact.
Retailers also have to clearly communicate the benefits of the loyalty program—especially if it is free to join and rewards can be earned with each purchase. “Something like flyers would be really effective,” she said. “Flyers are still really relevant and people do look at them especially when it comes to looking for discounts for groceries.”
Generally speaking, the research showed membership fees are a significant barrier to entry for new members with 60% of respondents not wanting to pay anything to join a loyalty program. There was a marked difference between older and younger consumers: just 53% of respondents 18 to 34 said they won’t pay membership fees, while 71% of those 55 and older weren’t uninterested in paying to join a loyalty program.
Mintel also attempted to quantify how much loyalty programs influence the shopping behaviours of members. One-third (34%) said they spend more at certain retailers because of the loyalty rewards, while 30% said they buy specific products to take advantage of loyalty program deals. More than one in five (22%) of respondents said they would travel to a store that is further away to take advantage of the loyalty program.
Some of the other key findings include:
- 35% would choose a retailer over the competition because of its loyalty program;
- 31% would rather use their rewards to receive a discount on merchandise than to receive free products;
- 30% save their rewards to use on more expensive purchases when using dollars-off rewards; and
- 30% usually redeem their rewards as soon as they’re available.