Why consumers want more than low prices to keep them loyal

You sure? Don't believe everything your retail consultant mates tell you.

Well, clearly we all like a good deal and it's always going to be an important part of any buying decision, but if you keep going back to your customer base with just another discount, followed by another, then people will stop buying and disengage with the offers you are sending out. Take Gap. If you sign up to its customer newsletter, you will receive an email every day offering some sort of discount. Customers wait for the 40% or 50% offer to come along before ever spending anything, and even then the numbers drop away quite quickly.

But surely it all comes down to price in the end?

You would be surprised. In a retail industry dominated by the everyday low pricing strategies of the German discounters, price has become less powerful on its own as a way of keeping your customers loyal. Shoppers now expect your prices to be as low as they can. To keep them loyal you have to offer them something else. It's why the majority of retail loyalty cards are no longer just about generating points to get direct discounts. They've subtly changed in recent years to be much more about how a specific retailer can help customers in other areas of their everyday spending.

How do you mean?

Just look at the loyalty schemes you are a part of. Tesco Clubcard, for example, offers you vouchers to spend in restaurants, a trip to the cinema, family days out and other experiences to enjoy. It's not just a way to get money off your next grocery bill. Sainsbury's noticeably gave up its own loyalty programme in favour of Nectar that allows you to spend your points across a number of services or non-competing retailers.

You got any figures to back all this up?

Absolutely. Recent research by Forrester shows that 59% of people want something extra other than price discounts from a loyalty scheme. They want rewards and services not available to others. Get that offer right and 69% of loyalty members will spend more with you and recommend your products and services to their peers. But it's not just about what they get, but how they get it. Fifty six per cent of loyalty customers see good service, like a dedicated customer line, or delivery benefits, as key to that relationship.

Interesting. What else?

Arguably the most disruptive influence on how we all now subconsciously judge a retailer's loyalty offer has come with Amazon Prime. Being an Amazon Prime member does not give you any more money off its products. No, it is all about making your life easier. Ordering products with just one click. Faster, more flexible ways to pay for your goods and then how, where and when you have them delivered. The chance to watch more films, access exclusive programmes (even Jeremy Clarkson), download your favourite music and then share it with friends and family. Being an Amazon Prime member is more of a lifestyle choice than simply a glorified alternative to collecting Green Shield stamps. As those retail consultants say, the trick is to be a loyalty company, not a company with a loyalty programme.

Yes, but the wine industry relies enormously on discounting to get people to buy more wine.

It does and has got into a right pickle as a result. It has created generation after generation of wine drinkers who think price first when deciding what wine to buy. It's why there are so few brands to connect with consumers on anything but a transactional level. But it does not need to be this way. Look at how smaller wine merchants or connected restaurants are becoming so successful. They rely far less on the prices they are charging, or their money off promotions to build a consumer base, but instead get a far more meaningful connection with tastings, events, dinners or winemaker talks.

But how do we make wine promotions more meaningful?

Again it is all about knowing who you are selling your wine too and pushing the right offer to the most suitable customer. Don't just send out a mailer with the same promotions to all your registered customers. Spend the time to break down your lists and then target specific customer groups with the wines they are most likely to buy. Most of all make your offers mobile, and digitally savvy enough that they can be used on smartphones. It might sound like common sense, but too often merchants, retailers or restaurants push the same offers to all customers and wonder why they are not picked up.

So what's the answer?

Well, ideally we would not be thinking about promotions at all. But all the other steps you can take to gain the trust, build the loyalty of your customers. How can you reward them in a way that makes them feel better? It could be providing them with more information about what you sell in ways they can relate to. It might be offering them better delivery options, incentives for recommending their wines to their friends. How you are going to use their data to get them more wines they like, be it online, in-store or a combination of the two. But in the end it all comes down to balance. We all like a good offer, but now we want it to come with bells, whistles and other personal benefits.

* This article was first published as part of the Grapevine views, insights and analysis newsletter produced for the London Wine Fair.  

Running stores could be the next big thing for wine suppliers and producers

Come again? Wouldn’t that be robbing Peter to pay Paul?

Well, that depends on who the Peter and Paul are in the equation. If you mean are we going to be seeing a Matthew Clark or Gallo-themed wine shop on the high street any time soon then probably not. At least not for now. But behind the scenes careful thought is being given as to how wine distributors and producers can get closer to the market by being part of either their own retail operations or working alongside partners in the industry.

How do you mean?

A lot of this activity is taking place already, but under the guise of wine vans and pop-up bars at food and drink festivals, and sporting events around the country. Not a week goes by without news of another wine business running their own pop-up. Be it a wine generic like Vins de Bordeaux running its recent Bordeaux Butterfly Bar at London’s Broadgate Circus. We've even seen big high street names like Aldi and Tesco run their own wine-themed retail pop-up shops. Get it right and you can become a consumer and tourist attraction in your own right. Take Campo Viejo’s well established annual Spanish fiesta and its recent five-day wine and food experience, ‘Fiesta de Color’ near London Waterloo. 

What about wine distributors?

Going direct to the consumer is already big business for some major wine distributors. Conviviality even has its own division, Conviviality Trading, that looks after its own events and sampling campaigns. Its Peppermint businesses, for example, is a dedicated outdoor bar event operator managing over 40 events a year. The Wondering Wine Company, which started life at Bibendum, its also now covering 40 plus consumer and sporting events a year selling Conviviality drinks through its fleet of vintage vans and has had a go at running its own pop-up retail store.

What else?

As traditional wine importers become brand developers and owners in their own right then running their own retail - or event - concept is a great way to first trial, develop and then seed those brands with consumers. Copestick Murray, which usually has to rely on its retail partners to sell its wines, is currently promoting its iHeart wine range with a summer tour of festivals and events in its new branded camper van. Buckingham Schenk is running a pop up bar for the Viñalba Argentine wine brand in London this October. Look hard enough and there are plenty of other examples of wine importers doing the same.

So where’s the high street retail angle?

Ah, good question. Yes, the vast majority of this activity has currently been targeted campaigns, mainly at outdoor events, for short periods of time. Restaurants might have evolved out of pop-ups, but wine merchants or retails stores haven’t. But that could well change as distributors look to take more control of their destiny. They might be in charge of sourcing their own wine, but they have no control over how their wines are sold.

OK, sounds interesting.

Major drinks distributors are already providing lots of commercial support to help bars and restaurant groups build their wines sales and manage their drinks lists. It would not be a big leap of faith to turn that support into funding a restaurant, bar or wine merchant to open a retail site (or two, or three) where they would have a lion share of the wines being sold there.

Are you just making this up?

Heaven forbid! But you only have to do a bit of lateral thinking to look at the amount of time being spent by traditional wine distributors on setting up these pop-up bars and events to make you question what the ultimate objective is here. Particularly when you could argue such initiatives are a big distraction from the day job of servicing their customers and getting the right wines to them on time.

So what is going on?

All of this pop-up and events activity is doing one thing. Bringing wine businesses and producers in direct contact with consumers. It is cutting out the middle man. It is allowing them for the first time to get their hands on real, raw consumer data it can use to better understand the business they are in. They don’t have to rely purely on Nielsen, CGA or IRI sales data. They can see and hear with their own eyes and ears how consumers behave when buying not just any wine, but their wine. That’s worth trudging around muddy fields in the summer for. Or better still having a retail store you have a stake in and let the sales data do the work for you.