We have all had the experience of checking out at the grocery store, pharmacy, or bookstore, and having the cashier ask whether we are part of the store’s customer rewards program. If we answer “no,” the next question is, inevitably, whether we want to join. New data from an FGI Research study indicate that over three-quarters of consumers say “yes” to this second question: that’s how many respondents report that they hold some kind of customer loyalty card, whether or not they also use a store-issued credit card.

And it’s no wonder that so many do. More and more companies offer rewards for customer loyalty. Not only retail outlets but hotels, restaurants and airlines use rewards as a way of promoting business and retaining customers. There are even online applications, like SCVNGR, which encourage consumers to build their own rewards programs. The FGI Research study, based on sample from FGI SmartPanel^TM, assesses what it is about customer rewards that attracts consumers. The results illuminate why so many sign up for loyalty cards, notwithstanding concerns about privacy; and why they are nevertheless more reluctant to opt for alternatives, like store-issued (or “private-label”) credit cards.

Shoppers Want to Save
Knowing that 77% of shoppers hold some kind of loyalty card, FGI Research asked why they opted to sign up –and whether they were satisfied with the rewards that they received. Most shoppers (82%) say that rebates, discounts, and overall savings are the foremost advantages of having a loyalty card. The next advantage that users cite is being able to build up bonus points toward some kind of reward or discount, which 41% say is a perk. Meanwhile, 39% of those surveyed say they like being able to get personalized coupons, and 38% enjoy having access to special, members-only sales.

A full third of cardholders say they find no problems whatsoever with their membership, indicating a high level of satisfaction with rewards programs. Among those who have complaints, 64% wish only that they could get more rewards with their cards; the idea of a loyalty card, in itself, still attracts them.

Some aspects of rewards programs don’t register at all with users. Only 7% of respondents indicate that special treatment for members, like waiving the need for a receipt with returns, drew them to get a membership. Donation programs, which, for instance, automatically contribute a fraction of each sale to a charity of the user’s choice, excite a mere 8% of respondents. We can draw a variety of inferences from this body of data, the most important of which is that customers use loyalty cards most often for the savings, sales, and rewards from which they personally benefit. The biggest problem that customers have with loyalty cards is when they feel that these “rewards” are not forthcoming.

“What are the advantages of your customer loyalty card?”

Privacy Concerns a Roadblock
What about shoppers who opt out of customer rewards? Why do 14% of respondents report forgoing the opportunity to save money and enjoy other benefits?  Some say they don’t shop frequently enough at any store to make the card worth having (43%), and others opt out because the programs don’t yield enough rewards to justify signing up (33%).

By far, the most-cited concern is privacy: 9 in 10 non-adopters report reluctance to sign up for the cards due to concerns about information security. Whether they don’t want stores giving out their data to third-parties (39%), don’t like that stores can keep track of their buying habits to create customer profiles (27%), or simply don’t like to issue too much personal information (24%), shoppers who opt out do so in order to protect their privacy.  However, if they had a guarantee of privacy, two-thirds of respondents would be open to the idea of using loyalty cards.

Credit Card?  No Thanks.
While an increasing number of retail outlets are starting to offer store-issued, or private-label, credit cards (like the Target RedCard), consumers avoid them for the most part. Only 40% of those surveyed in the TrendTruth study identify themselves as holders of such cards. As with loyalty cards, security issues deter many customers from using store-issued credit cards. But even were privacy less of an issue, consumers would remain wary: just half of those surveyed said they might be open to using a store-issued credit card under more secure circumstances. That’s because privacy is not the only issue discouraging shoppers from adopting.

ABC News: Risks of Private-Label Credit Cards

Over two-fifths of shoppers say they stay away from store-issued credit cards because the interest rate is too high.  Others say the same about the annual fee (32%) and the financing percentage (31%). In short, many shoppers think the cost of maintaining a private-label credit card outweighs the benefits of having one. Loyalty cards may be more attractive simply because it’s free to sign up –and there are none of the dangers to users’ credit scores that store credit cards pose. In any case, a third of those surveyed say they don’t shop frequently enough at any store offering the service to justify opening a card.

Nevertheless, some shoppers have found the cards useful (as evinced by the forty percent who identify themselves as card-holders). Over half (56%) of these shoppers say they like the cards because of the discounts, savings and rebates that they offer. 46% appreciate having access to special members-only sales and events (46%), and 39% like that the cards have no annual or extra fees (39%). These users clearly think the benefits of having a card outweigh the risks and downsides.

Which Cards, Which Stores?
Private-label credit cards are most popular at department stores. Among those who carry store-issued cards, 62% report having gotten it from a department store. Meanwhile, only 24% got their card from a big-box retailer like Target.  When it comes to non-credit loyalty cards, supermarkets (88%) and pharmacies (59%) rank first and second, while bookstores (31%) come in third.

“For which types of stores do you hold customer loyalty cards?”

How Many Cards?
FGI Research asked how many cards survey respondents held. Almost all (92%) have more than one. Nearly a quarter (22%) have two rewards cards. One fifth (20%) carry three. Slightly fewer (18%) carry four. A handful (17%) report holding over 7 customer loyalty cards. Meanwhile, most (60%) of those who have opened private-label credit cards say they only have one or two such cards.

We identified some possible explanations for the handful of shoppers who hold 7+ rewards cards. It may be that those who enroll in customer loyalty programs fall into one of two groups: either they have cards for the few stores where they shop most often (i.e. their preferred grocer, pharmacy, and bookstore), or they simply have the habit of saying “yes” every time they are asked to join a loyalty program. Those who hold cards to correspond to stores where they shop regularly would not likely carry more than 2-3. Those who say yes to every offer of a rewards card would likely have more than 7. Deeper research could help correlate consumers’ behavior (how many cards they hold) with their motivations (why they sign up for cards in the first place).

Actionable Insights
The results of this study indicate that the vast majority of shoppers use some kind of rewards card, whether that be a free customer loyalty card or a store-issued credit card. Many of those who don’t carry the cards would be more willing to do so if certain conditions, like those surrounding privacy, changed.  Most shoppers remain wary of store-issued credit, largely due to high interest rates and other fees, but also due to dangers that such cards pose to their credit scores. For either type of card, some shoppers don’t adopt simply because they don’t shop frequently enough at any particular store to make signing up worthwhile. Targeted research and analysis could help businesses understand these non-adopters and secure their loyalty.

• Retailers interested in expanding their base of registered cardholders, whether for loyalty or store credit cards, should use an awareness and usage study fielded from their target demographic to understand whether and why their customers are using the cards –and, if they aren’t, why not.
• A survey of customers’ sentiments about each type of card could help retailers, and other businesses, seeking to start up a rewards program pinpoint the type of program that would best serve their objectives.
• Ongoing customer satisfaction tracking is indispensable to ensure that customers feel their rewards cards offer enough rewards and promise enough perceived benefits to warrant the effort it takes to sign up.

Next Steps You Can Take

• Contact FGI Research: click here or call us at (919) 929-7759
• Explore FGI Research’s market research solutions, including custom panels, full service research, and our online sample (SmartPanel).
• Join FGI Research’s online panel to participate in future studies.

Survey Methods
Respondents: 400
Date of Survey: July 19-22, 2010
Sample Source: FGI SmartPanel

This nationally-representative sample consists of adults aged 18 and up and is balanced to the US population using recent census data. One can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Online Communities Drive Deeper Insight
Our experts have spoken before about the benefits of online-community-based market research. Industry news sources report that more and more companies use communities to fill a need that focus groups once did, attracted to the comparative flexibility and cost-efficiency of the Internet. Certainly, the online community and the focus group have a good deal in common –but they are different in very important ways.

Like in a focus group, moderators can ensure that forum discussion in the community stays on-topic and addresses objectives. However, the online format gives community members more opportunity to speak candidly. This frees insights to emerge from the discussion in a way that feels organic and authentic. Online research communities bring to light ideas that other research methods can miss, and businesses, as a result, are able to capture richer data from the qualitative research they conduct.

Social Media Monitoring Captures Unscripted Feedback
Social media monitoring collects qualitative data, but it does so in a different format than the online community. Social media monitoring captures spontaneous online interactions that are not moderated, and hence it harnesses thoughts that consumers might not express as freely under controlled conditions. The social-media approach gives businesses new ways to understand and respond to consumer behaviour. Researchers found recently that Twitter is an accurate predictor of box-office profits. The popular micro-blogging site sheds light on other subjects, too –which is why FGI Research chose to include data from Twitter in its community solution. With social media monitoring attached to our community solution, we can create a more complete perspective of any research project.

What the Updates Include
The SmartPanel^TM community invites consumers to take surveys and participate in forum discussion in exchange for material incentives. The community portal features an online forum, quick surveys, and secure client- and user- access, among other features. Meanwhile, the new community solution offers the choice of whether to include, on the landing page, a module tracking forum discussion or a feed tracking buzz on popular social media sites.

Qualitative data from community-based research will help businesses refine existing quantitative studies, contextualize quantitative results, and define fresh business initiatives to better serve customers’ interests. For community members, the many features and opportunities to contribute to research make for a dynamic online experience. In short, the new community not only engages customers in online discourse, but it provides researchers with a larger volume of better data, for a better value.

More About SmartPanel^TM
The FGI SmartPanel^TM is one of the most respected online consumer panels in the industry. It is an engaging and interactive platform that invites users to take surveys, exchange ideas, and interact with other panelists in exchange for rewards like cash and prizes. Cash and prizes are delivered promptly, securely and directly into survey respondents’ PayPal accounts. In addition, SmartPanel^TM members are eligible to join the SmartPanel^TM Community. To join SmartPanel^TM, visit the SmartPanel^TM Gateway.

When you hear the words “online shopping,” you typically think of consumers buying items like books, clothing and electronics. “Groceries” probably does not appear on that list, but survey data from FGI Research suggests that perhaps it should.  A number of consumers are buying their milk and bananas online, whether they get their order shipped to them or pick it up in-store.

This reflects a broader trend in retail: the growth of online shopping, which has revolutionized the industry and the way people shop.   In 2007, the U.S. Census Bureau reported that e-commerce represented 44.6% of all retail sales, bringing in approximately $89 million.  The stage is set for growth in Internet retail, and consumers are making a habit of buying goods online. As the options for buying groceries expand, it follows that more consumers will make that purchase online too. But there are still some obstacles to adoption. Just who uses online ordering, and why, is one question that FGI’s study explored in depth.

CBS News Reports on Online Grocery Shopping

Big Spenders Likelier to Buy Online
While most consumers still do their shopping in a brick-and-mortar grocery store, online grocery services are attracting the most valuable customers in the market. Among the online shoppers who spend $500 or more per month on groceries, approximately one third buy all of their groceries online.  Although there are just a handful of them, the online grocery shoppers who buy 100% of their groceries online are those who spend $1,000 or more on groceries every month.  In other words, the most loyal online grocery shoppers are those with the highest grocery expenditures.

Even as online ordering catches on among customers who spend the most on groceries, those customers represent a small fraction of all shoppers. Most shoppers surveyed do not spend quite as much on groceries, especially online.  54% of respondents who order groceries online spend $200 or less per month on such services.  These results imply that online grocery-shopping is less a regular habit than an occasional indulgence, except among a small selection of shoppers. To make sense of this insight, FGI Research asked consumers to explain why they chose (or didn’t choose) to shop online for groceries.

Shoppers Motivated by Time, Convenience
Among those who bought groceries online with home delivery, most did so as a matter of convenience (65%) or to save time (58%).  A surprising number (36%) said they did it to save gas. Interestingly, men most often cited convenience as their motivation, whereas women cited saving time.  One inference that this could support is that men simply don’t like going to the grocery store, while women don’t have the time.

As for shoppers who ordered online with in-store pickup, about half (49%) said they wanted to save time, and  2 out of 5 appreciated the convenience. Meanwhile, 29% said that they wanted to ensure they purchased only what they needed –perhaps indicating that these customers felt the physical act of browsing the aisles encouraged them to make more impulse purchases.

“Why do you use online grocery shopping with home delivery?”

“Why do you use online grocery shopping with in-store pickup?”

Online Options Still Have Downsides
Notwithstanding the benefits of convenience and saving time, many cited cost as discouraging them from buying groceries online. Customers who had used online ordering with home delivery were most irritated by having to pay an extra fee for the services (61%).  They were also annoyed by mix-ups (31%), such as items that were missing or incorrect in the final delivery, and when stores did not offer desired items or have them in stock (29%).  Despite these downsides, most online shoppers (77%) had used the home delivery option at some point.

Fewer shoppers (46%) had used the in-store pickup option, but those who had expressed frustration about the extra fee as well: 4 in 10 said it was a downside of the service. Furthermore, 35% were frustrated by the fact that they “still [had] to drive to the grocery store,” which might render moot the convenience of having their order picked out and bagged when they got there. A quarter of those who used the service were irritated about the protracted process of getting into the store, sorting out their orders, and getting out. 1 in 4 also said mix-ups were a problem.

Why Not?
FGI Research asked non-online-grocery-shoppers why they chose not to use the service. The top reason, which 36% identified, was the desire not to lose the experience of going to the grocery store and browsing the aisles. Some customers (35%) said their grocery store did not offer online ordering, and they did not want to have to switch stores in order to get the service. Finally, 1 in 3 said the extra fee was too high.

With all of these factors to discourage them, as many as a third of those who never shopped online for groceries said that, no matter what, nothing could make them start.  The other two-thirds indicated that they might be likelier to try the service for a lower fee (36%), if they received tangible incentives such as freebies and discounts (34%), or if their grocery store started to offer the service (33%).

“What would it take to make you start using online grocery shopping services?”

Actionable Insights
The results of this study indicate that some consumers are starting to use online grocery shopping services, and that those who do not might be willing to try if certain circumstances changed.  Namely, if more grocery stores offered online services, and if the fee for the services decreased, more customers would be likely to use them.  As of this study, those who spend the most on groceries are likeliest to use online ordering. More research would lend insight into how to target non-users, including those with a modest grocery budget, and make the service more appealing to them. Some steps that grocers could take to capitalize on the online trend include:

• For stores that do not offer online ordering, fielding a concept test to see how customers would respond to such an offering.
• For stores that do offer the service but seek to expand or alter it, using an awareness/usage study to find out whether customers are aware of – and if they are, whether they use – online grocery-ordering.
• For stores that offer online ordering but have identified concerns about mix-ups, long waits, high fees, or other shortcomings, implementing a study on customer satisfaction to find ways of improving their performance. A focus group, whether online or in-person, would offer more detailed insight into what the service’s strengths and weaknesses are, and how the company could alter its offering to better meet customer needs.

Next Steps You Can Take

• Contact FGI Research: click here or call us at (919) 929-7759
• Explore FGI Research’s market research solutions, including custom panels, full service research, and our online sample (SmartPanel).
• Join FGI Research’s online panel to participate in future studies.

Survey Methods
Respondents: 203
Date of Survey: June 21-30, 2010
Sample Source: FGI SmartPanel

This nationally-representative sample consists of adults aged 18 and up and is balanced to the US population using recent census data. One can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.