Wal-Mart’s Loyalty Initiative
By John Hennessy, Vice President, Concept Shopping, Inc.
Wal-Mart has taken a close look at the shopping habits of its customers, and used that analysis to segment its customers into three groups:
Times Shop Wal-Mart/Year
% of Grocery Business to Wal-Mart
* For customers in the Skeptics group, Wal-Mart is not the store of choice. Instead, they are identified as those who shop Wal-Mart on an urgent basis.
The goal of Wal-Mart’s shopper segmentation effort is to better understand its shoppers and how they shop Wal-Mart. Wal-Mart believes it can convert skeptics to selectives; selectives into loyalists, and build its already loyal customers.
The result of this analysis, according to Wal-Mart Executive VP and CMO John Fleming, speaking to the American Consumer Conference in New York City, is a five-point plan.
The first change is to offer products shopper are purchasing elsewhere and use its supply chain expertise to lower the price for those goods. First identified target is organics. The goal is availability at Wal-Mart and a 10 percent reduction in the premium price paid for these products.
The second initiative is to respond to changes in shopper demographics. Singles get married. Families add children. Children grow up and leave. Wal-Mart’s response is to offer products that make sense for these customer groups.
Third, Wal-Mart has identified 350 stores that are dominated by Hispanics, their fastest-growing audience. Offerings in these stores are being expanded to appeal to this group among other initiatives.
Fourth, Wal-Mart has developed a new store format designed to be faster, easier and more convenient. The target for this change is affluent, educated consumers, specifically appealing to female shoppers.
Fifth, in an appeal to young people, Wal-Mart aspires to use only renewable energy and create zero waste within 15 years.
“In the long term, that will drive deeper loyalty with our customer base,” Fleming said.
Moderator’s Comment: Is the basis for Wal-Mart’s “loyalty initiative” fundamentally sound from the supporting information the company has made public?
Does using high-level customer segmentation and appropriate business practices to meet the needs/desires of targeted groups equate to a higher level of consumer loyalty?
This is very interesting. Wal-Mart, without a loyalty card that simplifies customer-level analytics, claims to be tracking its 130 million customers down
to the frequency of trip level. Likely they are matching sales and trips to consistent payment types and augmenting with surveys probably combining whatever internal information
they have with outside information.
With all of Wal-Mart’s success in other areas of retail operations, tracking customers is not where I would look to them for best practices. But with what
they do have they can certainly derive the shopper segments they have defined.
Shopper tracking capabilities aside, the subtext here is familiar to any retailer. There are reasons shoppers choose:
- Not to shop my store,
- Shop my store reluctantly,
- Shop my store less than they should, or
- Shop elsewhere for what I offer.
For some, it’s the store layout. For others, it’s price. For still others, it’s the availability of specific products. And it could be as simple as the
Trying to be all things to all people doesn’t solve these problems. Understanding what’s broken and fixing it does. Wal-Mart has identified a lack of store
match to local market area or desired customer segment to be broken and is working to fix it. Best Buy and others have had success with this approach.
This high-level customer segmentation marketing effort by Wal-Mart does turn the marketing possession arrow from what I want to sell to what my shoppers
and potential shoppers want to buy. That’s more the execution of a good business practice than a loyalty marketing initiative. –
George Anderson – Moderator