I recently saw the latest loyalty survey data from LoyaltyOne that showed a flat number of loyalty members in the c-store space. As of 2014, the number stands at 24 million - basically flat from the previous surveys. This is amazingly low, relative to the statistics of c-stores as far as customer counts and frequency of visits. As a simple comparison, the Walgreen’s program alone has over 120 million members.
So, when it comes to loyalty in the c-store space, what is going wrong?
- Loyalty needs to be compelling. The latest surveys show that about 40% of the stores offer loyalty programs to their customers. That’s pretty steady over the last few years. Why isn't there a higher penetration? My guess is that most feel that loyalty is not compelling, and for good reason given some of the below issues.
- It needs to have a value. Most programs are “me too” that offer very limited value to the members. A majority of the c-store loyalty programs are all about gas discounts. How is this valuable to a member when the value is so low? At three cents off per gallon, the value is only $0.25 to $0.50 per fill. In addition, all a customer needs to do is look for coupons and they can receive a bigger discount, and many stores offer double coupon value on a select day each week.
- There needs to be an incentive. Even with programs that offer other benefits like coffee clubs and in-store deals, most c-stores don’t effectively market this to the members. The program needs to be valuable to get consumers to provide their email and mobile number for offers. I have a SuperAmerica card and have never received a promotion, and to make matters worse, I can only get credit for the program activity if I carry the card. This is not member-friendly.
- There needs to be great product and service. It’s not just about the loyalty program. For loyalty to work, the c-store needs a great product and service offering for their customers. Too many c-stores still do a poor job in this area. The successful stores retain good employees, emphasize customer experience for all employees, have clean stores and quality products.
- C-stores need to gain knowledge about loyalty and how best to reward their customers. Too many convenience stores follow others and are offering really basic, low value loyalty programs. To make it worse, because they don’t have this expertise, they launch the program and don't evolve the program to keep the customers interested. The market is constantly changing and loyalty programs should be flexible and constantly marketed to consumers so they know about the new features and changes.
Finally, I wanted to share an example of a local loyalty program in Minnesota that I feel misses the mark in many ways. Cub Foods (grocery chain) and Holiday Stores (c-store chain) have a partnership in which the Holiday customers earn gas discounts based on the amount those customers spend at Cub grocery stores. There are two big problems with this:
- First, Cub has only a minor share of the grocery market so their customers, by definition, are only a small percent of the potential local customers and program members at each local Holiday store.
- Second, Holiday is incenting their customers to buy core c-store offerings, like milk, eggs, and many other items, at Cub instead of coming to Holiday to purchase them. This program keeps the customer at the pump and does not incent them to come into the store at all. The key to a successful loyalty program is to drive customers in-store to grow revenue from them, especially on the higher margin items. This program does none of that.
Based on these facts, Tecmark sees a great opportunity for loyalty in the c-store space. This will happen when the above issues are addressed with programs that are designed to be valuable to the members, drive activity for the stores that increase their customer numbers and spend, and provide a strong ROI for their business.
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Founder & CEO