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June 2015

Do You Know Who Uses Your Loyalty Programs?

 

Recently, BP announced it was simplifying its rewards programs that allow customers to choose from three different cards, based on their needs and wants. In short, BP realized that consumers wanted “more bang per buck and ease of use” when it comes to loyalty cards.

 

Retailers, whether purveyors of food, merchandise or sporting goods, likely do not find this news earth-shattering. However, before they can figure out which programs are most successful and desired by customers, retailers must first understand who uses the rewards programs.

 

Identifying Your Loyalty Users

Recent research of convenience store customers and their usage of loyalty programs indicates only about 25 percent of consumers use loyalty programs, but of that percentage, an average of 66 percent indicate they use their loyalty cards regularly.

 

To build and maintain a successful loyalty program, c-stores must increase consumer participation rates higher than 25 percent. With that said, c-store operators must also identify and cater to their heaviest users of loyalty programs. For example, the heaviest users of loyalty programs, according to the April Carbonview data, are 35-44 year-olds, “older” Millennials, “some” high school and purchasers of prepared foods.  A caution here is that this is not a universal finding and that it is on the onus of the retailer to determine who falls into the “heavy user” quadrant for each chain and for some larger companies, for each location.

 

The same can be said for those who fall into the “average” and “light user” categories, as well as for those who don’t really care about loyalty programs. These consumers either don’t believe the programs are worth the rewards or using the program is too taxing. (I liken this to Subway’s old punch card system. I often wound up with about 17 cards with one hole punched in each, and still could not remember to bring any with me the next visit.)

 

What to Do with This Information

There have been numerous articles written on how to increase usage and penetration of loyalty programs, therefore, this will be quick and actionable.

  1. Make the program easy to use: Allow a customer to put a sticker on their license or phone, or anything they might carry to make it easy to earn rewards. Lowes, for example, has a My Lowes sticker works in this manner. In the ideal world, just let the customer show a license to scan at the gas pump, and membership would increase dramatically.
  2. Make it worth it. Offering a  free car wash after ten gasoline fill-ups is OK, but offering 20 cents off a gallon of gas during the same period is more attractive. Make sure customers are clear on the program and know what it is they are getting. Ignorance is often the major barrier to using rewards.
  3. Keep adding members. See item one above. Make the rewards easy to attain and worth the time. Ultimately, this is about increasing traffic and revenues to your store, so the more you add, the most customers you will have.
  4. Use the information. This is critical. As a retailer you have customized information on each customer. When I receive a coupon in the mail for something I was already going to buy from an establishment, well, I’ll go there, buy it and probably buy something else.
  5. Ask what rewards customers really want. If retailers are at a loss for why programs are not used or they fall into the “who cares” quadrant, simply go to the customers and ask why. By probing customers, it increases intimacy with them, improves relationships and also provides the retailer with detailed information on what customers really seek. Consider “tiers” and options, as pointed out with BP’s new program. Make it flexible and personal.

  

Where to go from here

The best way to start or grow your loyalty program is to identify your customer and/or shopper (they are not the same.) Either use an outside firm or perform some internal work on who falls into which quadrant. The point is to keep the heavy users very happy and move the average users to the heavy user spot. From there, the light and “who cares” users may benefit from the changes made based on the other groups.

May 2015
How can c-stores handle the gas station perception with respect to foodservice?

 

Convenience-store retailers have an ongoing set of challenges as they strive to run (and sustain) profitable foodservice programs. Some of the most common issues revolve around competition from other channels (namely QSRs) and offering consistent product and service systemwide. But perhaps the biggest challenge faced by c-store foodservice operators is overcoming the perception that the store’s offerings are no more than stale, lackluster “gas station” fare.

 

C-store channel members all have the ability to help change this perception, incrementally. Here are a few strategies we have learned from our experience in the overall foodservice industry, and others gleaned from observing some of the leaders in c-store foodservice.

 

1. The Quality Factor

A sure-fire way to prove to consumers that c-store foodservice is on a par with other foodservice segments is to continuously deliver quality. C-store consumers judge quality in a number of ways, including meals prepared in their sight, foodservice samples, the smell of the food (such as fresh bread), “made on” dating, and attractive food presentation.

 

2. Convenience: Catering to Busy Lifestyles

This may seem obvious to convenience-store operators, but convenience is always one of the top three factors consumers consider when they select a restaurant or other source of ready-to-eat food. That’s true regardless of the venue. As they present their offerings to consumers in a larger foodservice context, c-stores must work to ensure that consumers can easily locate the prepared food section, can order quickly, and are provided a number of quality grab-and-go items. The speed of checkout is also critical; most consumers are willing to wait less than five minutes to fulfill their c-store foodservice order.

 

3. Focusing on Health

In the current economy, away-from-home foodservice consumers have become more concerned about price than about eating healthy. We expect this to be only a short-term trend. Over the past several years, healthy eating has become a part of our culture’s lifestyle aspirations. More recently, legislators and regulators on the local, state and now national level are starting to highlight the importance of healthy fare in foodservice establishments. (The proposed federal LEAN Act would require restaurants, stores and other foodservice chains nationwide to disclose calories for all menu items on the menu or menu board.) At the moment, 28% of c-store foodservice users believe nutrition information labeling on foodservice items is important. Nearly a quarter of c-store foodservice consumers seek out healthy items at a c-store. If c-stores want to compete with other segments, they must provide consumers with both indulgent and healthy items. Quick Chek is just one of the chains doing well at this; it recently rolled out an egg-white and turkey sausage omelet on a multi-grain roll, with 350 calories and six grams of fat.

 

4. Delighting the Customer

Making customers feel that they’re getting something “special” goes a long way toward building loyalty. Pleasing a first-time customer who may be ordering coffee could lead to many, many returns by a regular customer for a coffee and muffin. Historically, consumers have rated c-store employees even lower that QSR employees on friendliness and helpfulness. This needs to change. The best performers in our industry often know their “regulars” and their preferences. Some c-store leaders go as far as to have a customer’s foodservice items waiting at the counter when they enter the store!

 

5. The Importance of Foodservice Safety Training

One of the top issues in the foodservice industry right now is food safety. In fact, c-stores generally see food safety as their #1 issue—more important than attracting traffic, increasing sales or increasing profits. No convenience store—no foodservice establishment—is in a position to bounce back from a food-safety mistake in competitive market where simply getting customers in the door is challenging enough. On their path to becoming true restaurants, leaders in c-store foodservice have given food safety top priority. They have installed regular training programs that address proper food handling and food safety techniques.

 

 

Convenience-store operators, as well as the suppliers and wholesalers serving them, are facing unprecedented opportunities along with unprecedented challenges. The segment’s image as a competitive, high-quality foodservice provider is improving—but we’re certainly not there yet. By focusing on and applying the strategies summarized here, c-store operators, suppliers and wholesalers can work together to continue improving the segment’s traditional image of mediocre “gas station” foodservice.


April 2015

Dear McDonald’s


It seems that everyone is an armchair historian or strategist for McDonald’s these days. There are those who believe the Golden Arches has played its last card and should just give up on those finicky Millennials, while others believe McDonald’s is as sustainable and Americana as Kraft Mac and Cheese and Disney World.

 

I fall somewhere between. As a professional in the foodservice industry, I am also a long-time customer of McDonald’s (I especially dig the Egg McMuffins by the sack.) In my quasi-personal and professional experience, here are a few suggestions to the strategists in Oakbrook and Burger University to help McDonald’s get on the right track.

 

Burger and fries are the draw

There are 60 million US customers served per day. Dare I say there are a few people ordering high-calorie, high-sodium burgers and fries of supposedly unknown origin? Yes, Chipotle is the popular kid on the block, but McDonald’s is The Fonz: Great in High School and the real thing.

 

Please get my order correct

And not only at the drive-thru. I asked for an Egg McMuffin in a quiet restaurant on two occasions and was disappointed to see I had four egg biscuits when I got home to a hungry pack of wild adolescences.

 

The drive thru should not be parking too

There are two spots reserved for those whose drive-thru order is not quite ready. What is the point of the drive thru if one is to park, referee the kids and wait for an employee to come deliver food to the black minivan that is now billowing smoke? Seems like there could be better execution here and it certainly plays into my choice of restaurants.

 

Breakfast all day

As of this writing, stores on the west coast are testing breakfast all day. Breakfast is reportedly 30% (or $10 billion) of the chain’s revenue. It would seem therefore, that breakfast is a success that may reap greater rewards if expanded.

 

Good, better, best hot beverages

During the Great Recession, McDonald’s seemed to have success with dollar-priced hot beverages. The specialty coffee equipment in McDonald’s is well-equipped to make creative, highly customized and bolder (and some might say more bitter) coffee drinks. And beverages are very, very profitable and are what draw customers. Offering different tiers of price and quality hot beverages provides lacrosse mom’s with choice, for example.

 

Theory and practice are opposites: Put Oakbrook MBAs at the cash register

I once had on my first resume “handled customers, sometimes irate, in a high pressure environment” referring to my days as a waiter in a dinner theater. Developing the “consumer journey” and segmenting consumers into neat piles of hamsters is very different than testing the theories in person and in a highly chaotic and unpredictable environment. My suggestion is, put the corporate marketers, researchers ad strategists at the cash register for a week. See and experience firsthand the fickle, disgruntled and sometimes impatient customer storm out the door.

 

Others foodservice consultants and pundits like me will continue to tell McDonald’s what they “need” to be doing in its time of struggle and management upheaval. When you are a category leader – such as Walmart, Starbucks and McDonald’s - the media will place you under the microscope. McDonald’s has been at crossroads many times before (remember the worms purportedly in the hamburgers in the 80s? The pizza that didn’t fit past the drive-thru window? The McLean burger?) and I have little doubt that this storm too, will pass.