FMI research reveals a 20-point enrollment gap between lower- and higher-income shoppers, raising questions about who actually benefits from grocery loyalty benefits.
Loyalty programs can be a fantastic way for savvy shoppers to save some money. There’s just one problem: The shoppers who arguably need those savings most turn out to be the least likely to participate.
That’s no mere speculation. It’s a finding from FMI – The Food Industry Association’s own research that I heard presented during a Nov. 12 media briefing on grocery prices and consumer spending.
This is distinct from, yet related to, the digital divide impacting older shoppers.
According to FMI, among shoppers whose primary supermarkets offer loyalty programs, just 58% of those earning less than $35,000 annually are members, compared with 78% of shoppers earning $150,000 or more.
I make that an eye-watering 20-percentage-point difference, and it ought to concern any retailer who uses loyalty programs to deliver attractive prices.
The hell of it is that 62% of shoppers report their incomes are falling behind inflation, while 65% are “extremely concerned” about grocery prices.
Loyalty Programs Work… If You Enroll
There is absolutely no reason to dismiss loyalty programs themselves. Anyone who’s spent more than 30 seconds shopping in or working for a food retailer gets that instinctively, and FMI’s research gives us the persuasive numbers to prove it.
Andy Harig, FMI’s vice president of tax, trade, sustainability and policy development, reported that 89% of shoppers are aware of the loyalty program at their primary supermarket. Roughly seven in 10 shoppers offered a program have enrolled.
Among participants, approximately three-quarters consider their programs extremely or highly valuable. About the same proportion say their loyalty programs are “essential” to saving money and staying on-budget. Harig also noted that 84% of parents consider their programs extremely or highly valuable.
Those are impressive numbers and, clearly, loyalty programs work for many of the people who use them.
But that’s also what makes the income disparity so tough.
If these programs are essential to managing grocery expenses, why are lower-income shoppers participating at these lower rates? FMI doesn’t provide a definitive answer. But Harig acknowledged the problem: households that could benefit most from loyalty programs are also the least likely to enroll.
The Best Price If You Can Get It
FMI emphasizes that loyalty programs are voluntary. Technically, that’s true; you’re required to join one to purchase groceries.
But there’s a difference between “a voluntary rewards program” and “a pricing regime that makes membership essentially to getting the best available price.” They’re just not the same thing
When one shopper pays a lower price simply because they belong to a loyalty program, the higher price paid by a nonmember becomes glaringly obvious.
Besides, the savings “process,” for lack of a better word, doesn’t always end with enrollment.
Plenty of supermarkets have added digital coupons, personalized offers and app-based promotions to their traditional loyalty programs. In a lot of cases, customers must locate and activate individual offers before shopping.
As we’ve said before, that may be second nature to a technologically proficient customer. It may be considerably less convenient for an older shopper, someone without reliable smartphone access or a customer who simply doesn’t want another application collecting personal information.
To be clear, FMI’s research does not clearly establish that technology, privacy concerns or complicated redemption procedures explain the 20-point participation gap. Those possibilities require more investigation. But you get the feeling the devil is in that particular, specific set of details, And besides, they’re reasonable questions for retailers to ask.
Closing the Gap Makes Good Business Sense
Everyday low price operators like H-E-B aside, FMI reports that approximately 60% of grocers nationwide operate loyalty programs. They’re great for encouraging repeat business and building customer relationships.
The trouble is, it looks like those relationships are getting harder to maintain. During the briefing, FMI’s Steve Markenson reported that shoppers visit an average of 5.4 grocery banners across four retail channels during a typical 30-day period.
The primary store? They capture approximately 70% of grocery spending. The remaining 30% is split among the other retailers. Thirty percent – that’s no small chunk of business available to competitors, and it helps explain why supermarkets place so much emphasis on customer loyalty.
As a wise TV lawyer once said, “Loyalty is a two-way street.” Retailers want customers to consolidate their purchases and come back more frequently. Customers want competitive prices, convenience, and some kind of assurance that they’re getting a square deal. Making discounts a hassle works against that relationship.
Beyond eliminating any tech barriers, retailers should work to determine whether lower-income shoppers are aware of the programs, understand their benefits and find them worth joining.
None of those measures means canning loyalty programs or the personalized promotions people love.
Finding a Better Measure of Loyalty
There’s another number from FMI’s briefing worth considering: 72% of shoppers say they’re doing okay financially… as long as they stick to their budgets. That means, for now, that most households seem to be managing their spending carefully enough to make ends meet.
Supermarkets deserve credit for providing discounts, private brands – all the way ways to stretch grocery budgets. Those efforts matter more than ever right now.
But the industry should take care not to confuse high satisfaction among loyalty-program members with universal access to the savings those programs provide.
FMI’s research doesn’t prove that lower-income shoppers are being systematically denied discounts, only that they participate at a substantially lower rate than higher-income shoppers.
That alone ought to stop us in our tracks. The industry is great at rewarding hyper-engaged shoppers; now it needs to focus on reaching the customers who can least afford to miss out.