Why do they call them “loyalty” programs when most members are anything but?
Economic uncertainty, rising costs, the ease of comparing prices online, and a simple desire for spontaneity have combined to make the vast majority of shoppers less loyal to their favorite retailers than ever.
“The once-loyal shopper is now an infrequent visitor, jumping between brands in search of the best deal,” a new report from Upside finds. In “Winning the Uncommitted Customer,” Upside painted a worrying picture about “a longstanding challenge” for retailers that is now “more pressing than ever: Customers are walking in the door, transacting once, and never coming back.”
Upside analyzed more than 75 million transactions from more than 4,000 retailers in the grocery, fuel, convenience, and restaurant industries, and surveyed thousands of retailers and consumers. It classified 79% of retail customers as “uncommitted,” shopping around and putting “their own needs ahead of loyalty to any particular retailer or brand.”
That means most of a store’s revenue comes from these uncommitted shoppers. So getting them to commit is good business. And the best way to do so, is to offer deals.
“Without loyalty or a cash-back offer, more than 40% of your customers in a given month won’t return in the next year,” Upside warned retailers. About 60% of shoppers said they’re willing to change where they go based on ongoing loyalty, rewards or membership programs.
In an average month, shoppers told Upside that they visit two different gas stations, three grocery stores and five restaurants. The variety of restaurant choices is understandable, because who wants to eat the same meal at the same restaurant every time they go out? The lack of variety in gas station visits likely has more to do with geography, as you’re liable to fuel up at the same places along your daily commute.
But three different grocery stores each month? That indicates that no single grocery store is meeting shoppers’ every need. “Snacks from a big-box retailer, produce from a local grocer, paper products from a wholesale club – does it sound familiar?” Upside asked. The grocery category has the largest share of uncommitted customers in Upside’s analysis – 93%, meaning only about 7% visit the same grocery store every time they shop.
Prices are among the most important factors when weighing where to shop. “The uncommitted customer is value-seeking,” Upside noted. Digital tools have made it easier to compare prices among different stores, so shoppers are using this knowledge to inform their choices.
And sometimes, they just want to make decisions on the fly. About half of all grocery shoppers said they decide where to shop less than two hours before they actually go. This, Upside said, emphasizes “the importance of timely, relevant engagement with customers on-the-go.”
In other words, if shoppers are looking for deals, retailers need to be able to reach them while they’re out and about and make them offers they can’t refuse.
“The right promotion can influence an uncommitted customer to change their behavior,” Upside found. The average shopper said they would travel further if they can earn cash back, with 9% cash back being the threshold they cite as being enough to change their choice of grocery store.
So it’s a good thing that Upside allows retailers to make those very types of offers.
After identifying the problem of uncommitted shoppers in a relatively agnostic way, Upside’s report turns into more of a hard sell when it comes to how to win over those shoppers. Shoppers who browse the Upside app can see various cash-back offers from local grocery stores, gas stations and restaurants. Activate an offer, go to the store, and you’ll get cash back in the form of a percentage off your total purchase.
Among shoppers who don’t use Upside or a retailer loyalty program, Upside saw a 41% drop-off in store visits month-to-month. “When a customer transacts using Upside, there is only a 24% drop-off,” it found.
So the report’s final takeaway is that Upside’s cash-back offers are good for shoppers and retailers alike. And if more shoppers and retailers choose to participate – it could be very good for Upside, too.
Image source: Upside
