The Calculus of Loyalty

Many consumers, including me, have a tall stack of cards from the various loyalty programs they belong to. Between the cards for hotels, airlines, and car rental companies, I got so tired of the bulge they caused in my wallet that I bought a separate zippered pouch to carry them all. The one card that I still keep in my wallet is my grocery store loyalty card because I use it so often.

Loyalty programs aim to get consumers to buy one brand instead of another, or shop at one store instead of another, not just once, but over and over. They are one input into the price-quality-value calculus that consumers do in their heads every time they decide where to shop or what to buy. Different customers do the math differently, and even now, price alone does not always win, even in low-involvement categories.

In recent research with consumers about their preferred brand of canned goods, we saw the price-quality-value equation at work. Canned goods are far from the most innovative or exciting part of a grocery store’s offering. They pretty much define low-involvement in groceries. That said, consumers told us that the graphics on the can, the logo, the colors, all set quality expectations about the product inside and the experience of using or consuming it. Our research showed that the brand they preferred was the one they perceived as most expensive and highest quality. Why? They saw it as the best value.

Our findings are consistent with the just-released 2009 Brand Key Customer Loyalty Engagement Index. Based on research conducted earlier this year, they found that “consumers are not buying based on price alone. Instead, they are relying more on their perception of value when deciding which brands to stay loyal to during the recession.”

Despite the current economy, or because of it, some consumers still prefer (and pay more for) brand-name canned goods and other seemingly low involvement categories. Their loyalty stems from their own sense of what’s the best value for the money.

Store brands compete with branded goods manufacturers for consumers’ attention. Recently, Walmart announced plans to up its game, aggressively expanding and enhancing its own brands in quality and appeal. ALDI did, too.

Retailers have store loyalty programs to help with customer retention. Manufacturers have to find ways to engage customers and make them feel a connection to their brands and products – their own form of loyalty programs. Tools like social media offer an unparalleled platform on which to build customer connections that build loyalty.

Who do you think is doing a good job creating loyalty, and how are they doing it?

The Problem(s) with Sears

I’ve always liked Sears but have never bought anything there. I bought a lot from Lands’ End before it was acquired by Sears (when my kids were younger), but nothing since. It’s not that I actively avoid Sears. When we bought our house it had a Kenmore washer and dryer, and we looked there for appliances when we remodeled, but bought elsewhere.

What’s wrong with Sears?

According to Sandra Jones' story in Tuesday’s Chicago Tribune, “as Americans worry about their jobs, debt and homes, they are buying less of the goods Sears sells: appliances, tools, tires and clothing.” The economy is hurting all retail, and at least the first three categories are particularly affected. But I think there’s more than the economy that’s undermining Sears.

Sears has a super portfolio of brands in the hard and soft goods categories – Craftsman, Kenmore, Lands’ End. Not being familiar with the rest of their assortment, I went to the website.

Once on the site, I went to check out their Juniors department with my 16-year-old daughter in mind. The Juniors department makes it easy to shop by brand. Why didn’t I know they carried Levi’s? Because of the strength of Craftsman and Kenmore, I think of Sears as essentially or at least primarily carrying its own brands in all departments. Years go, Mervyn’s tagline was “We’ve got the brands.” I guess that made me think that other moderately priced stores (like Sears) didn’t.

Problem #1: People don't know Sears carries major brands.

The top of the Juniors landing page features 3 ads promoting different sales. Below that is the “Shop These Popular Items” section featuring…socks. Not just socks, but a package of white tube socks, an Adidas 3-pack of white below-the-ankle sports socks, and 2 different SKUS of Support Therapy socks. Support Hose for Juniors! What are they thinking? Even if these items are good sellers to Juniors (which seems hard to believe) they deposition the rest of the assortment as seriously not on trend, and reinforces my image of Sears as frumpy.

Problem #2: Sears' (web) merchandising needs help.

Realizing that I might have found a replacement for the soon-to-be dearly departed Mervyn's where I buy my teenage son’s Levi’s (he wears 539’s), I clicked on Young Men’s next. No easy search by brand here. In my experience, guys are as brand conscious as girls, if not more so. They shop by brand, and so do the women who shop for them, but the Sears site seems not to acknowledge this.Once I found the Levi’s, I saw a very limited assortment and no 539’s. When I entered “Levi’s” in the search bar, I came to a Levi’s branded landing page that allowed me to select by customer type, and then by type of clothing – this worked great. But why not have a search by brand option or a Levi’s tab or link instead of relying on customers to use the search bar?

Problem #3: Sears doesn't understand how its customers shop (or at least doesn't show it does).

Beyond the web experience, I wonder if the assortment is just too broad to be represented by a single brand. I do find the juxtaposition of flat screen TVs and bicycles with wine, laundry soap, just-released hardback books and specially promoted few apparel items all under one roof at Costco to be like a treasure hunt. Power tools, washing machines and tires just don’t do it for me.

I’ve always suspected that Kenmore and Craftsman would do better with more distance from the Sears brand, and vice versa. It’s great they have their own websites, which don’t even mention Sears. Do they really belong on the Sears homepage? In the Sears circulars? Maybe the quickest way to make Sears relevant is to cut the chord and make the softer side of Sears more credible.

The Uber Problem? Sears' hardgoods brands overshadow the rest of the Sears offering and customer experience.

Meanwhile, I worry that the story Danielle Novy, reporter for BNET wrote recently may be right – Sears may be on thin ice…that's about to crack, and it won't be due to global warming!