Although loyalty programs have long been a staple of food and grocery retailing in Europe and the Americas, the idea of linking them to specific business objectives is still fairly new to such companies in Asia. A study by KPMG – Making the Connection: Rethinking the Role of Loyalty Management – found 40 percent of them collect point-of-sale data, but fail to analyse it regularly.
Yet the need to focus on loyalty management has never been more compelling. The food and grocery segment in Asia is worth US$1.5 trillion and is growing at 4.3 percent compound annual growth rate. Consumers’ income brackets and preferences are changing rapidly. Local markets are diverse and sensitive to the smallest changes. The range of customers and the gulf between them mean it’s impossible to take even a large segment-based approach to retailing in Asia.
"Asian consumer diversity and rapid market growth mean it’s time for business to focus on communities."
Lead Partner, Strategy Group
We found that companies need to get close to the local community. In India, for example, local communities – even those as close together as two kilometres apart – prefer to use different types of rice. If your business doesn’t stock the right variety, customers will soon switch to a different chain.
Achieving this level of understanding requires a fundamental shift in how businesses view loyalty management. It’s traditionally been seen as a branch of marketing and considered infrequently. But Making the Connection argues that food and grocery retailers in Asia need to establish a continuous feedback loop with their customers – one that permeates every part of the company – to keep up with the pace and scale of change.
Adrian James, an Associate Director at KPMG Australia and contributor to the study, believes “this feedback loop would affect decisions at every level; bringing science to the art of retailing, using loyalty data to gain insight into customer behavior, and using that insight to help tailor a retailer’s proposition to the needs and preferences of its target customers.”
Park’n’Shop, one of Hong Kong’s largest supermarket chains, sparked a seismic shift in its employees’ attitudes to loyalty management by launching a ‘year of science’. Line managers were encouraged to showcase how they leveraged customer data in everyday processes. Healthy competition between departments prompted many innovations. Park’n’Shop made sure that every loyalty program had a sustained impact on customer lifetime value. It wasn’t trying to make extra sales each week, but monitored results at segment levels and focused on driving up average customer transaction values over 12 months.
This level of detail and segmentation is vital if loyalty management is to prosper in the rapidly changing Asian retail sector. Businesses relying on a single definition of a ‘loyal customer’ will find they lack the deep insight that enables them to truly understand consumers. ‘Dynamic segmentations’ unlock the potential for immediate and future growth. The customers who are valuable to you today may not necessarily be the most valuable in the future. By implementing a continuous feedback loop, you can constantly identify which customer segments can help you achieve your goals.