Understanding the Convenience Store Shopper. Excentus Customer Profile Research 2018

Transcription

1 Understanding the Convenience Store Shopper Excentus Customer Profile Research

2 Contents 03 Excecutive Summary 04 Introduction 05 C-Store Loyalty 06 The C-Store Loyalty Shopper The Big Story: Loyalty, Location and Price The Big Decision: Loyalty Rewards Fuel Savings Rewards Technology Demographics 13 The Opportunities Ahead 14 Contacts and Media Requests 2

3 Executive Summary Few industry sectors are as competitive as convenience retail. Consumers have a deep pool of options to choose from including major national and regional brands making differentiation difficult, and margins (particularly on fuel) are notoriously slim. In this environment, carving out an advantage is as much about survival as it is about success. The best way for convenience retailers to survive and succeed is to understand their customers. Convenience retailers can stay relevant and establish competitive advantage if they get to know their customers better than anyone else, bridging the gap between the business side of growing revenue and the consumer side of knowing what shoppers want and expect. This report, based on survey data collected by Excentus and Ipsos from over 1000 U.S. consumers in November 2017, paints a portrait of the convenience retail shopper: who they are, what drives them, what they value, and what makes them loyal. This is valuable information and illustrates the importance of having a well-executed c-store loyalty program. One of the most noteworthy findings of this report is that while convenience, location and price were the traditional value propositions for c-stores, shoppers have overwhelmingly embraced a new value proposition loyalty programs which have become integral for the convenience retail business. This shift to loyalty reflects a new mindset in how consumers think about c-stores. Operators, too, are re-thinking the necessary areas of focus to increase and grow business. There are new opportunities created by loyalty, and c-stores that succeed in 2018 and beyond will be those that listened to shopper data and took action to attract new customers, increased engagement and built loyal relationships. The industry is lacking real data and intelligence on its most important asset its customers which is why Excentus undertook this comprehensive survey to understand today s c-store shoppers, and help convenience retailers get customers into their stores and spending more. Looking at this year s data, we are confident that a rewards or loyalty program should be at the top of c-store operators minds in In shoppers minds, rewards have become nearly as important as location in deciding where to shop. 43% of c-store shoppers choose a specific site because it offers a rewards program, compared to 44% who decide where to shop based on location. Fewer shoppers choose a c-store based on gas prices (31%) and food & beverage options (24%) not that these are irrelevant, but rewards have become popular because they add value to every area of convenience retail, including gas prices and merchandise. This is a significant development for the industry, as rewards programs are no longer a nice to have but a must have for stores that want to stay relevant and increase and grow business. This report offers primary data on loyalty shoppers in the convenience retail sector, along with actionable insights on how c-store operators can use loyalty programs to generate revenue. Our companion report, The Road to Rewards 2017, looks in more detail at what types of loyalty programs consumers engage with the most, which currencies they value, which strategies influence their behavior, and what motivates their loyalty to a certain c-store. 3

4 Introduction Convenience retail has achieved record growth over the past few years and continues to attract operators, according to the National Association of Convenience Stores (NACS). However, while convenience retail has been growing, it has also been changing. Nearly two out of every three sites (63%) are owned by single-store operators. This means that the vast majority of c-store operators have no significant reach, resources or operational efficiency for sales and marketing efforts. Regional chains with multiple sites are also struggling for the same reasons. They lack the technology and expertise to understand their customers personal shopping habits, preferences, and develop strategies to target them effectively and profitably change their shopping behaviors. Because of this lack of insight into shoppers, more operators have invested in new technology, and specifically loyalty technology, to build more segmented, targeted and profitable relationships with each customer. As a result, c-store shoppers have come to embrace and expect a rewards or loyalty program, and as the data shows, they overwhelmingly choose to shop specifically at stores that offer one. The story to watch in 2018 will be how convenience retailers improve or implement their loyalty programs. These programs are so common now, and the difference between one that s a cost center or a profit driver is having the right approach... and understanding how loyalty truly drives growth. A technologydriven mindset is a change in approach for the traditional convenience retail sector, but it s becoming more common as more operators realize the benefits of loyalty technology. Rather than be worried about change, c-store operators should see the new opportunities loyalty creates for convenience retail, and how it can strengthen traditional assets and advantages such as location and fuel price. 4

5 C-Store Loyalty The biggest findings, by far, in our survey of c-store loyalty shoppers were around the extent of influence that loyalty programs wield over shopper decisions. Not surprisingly, location is still the number one reason shoppers go to a specific c-store (44%). What s new is that nearly as many shoppers (43%) go to a c-store because it offers a rewards program. This is important news for the industry. What this tells us is that loyalty programs go hand-in-hand with a new public image of what a c-store can be. In shoppers minds, the opportunity to earn rewards is more important than gas prices (31%) and food and beverage options (24%) in deciding where to shop. Importantly, this represents a significant mind-shift among c-store consumers, and indicates that they are now considering value beyond the shelf or the roadside sign. The fact that loyalty has become an integral part of the decision-making process for c-store customers (convenience + loyalty + price = value) is a remarkable trend for the convenience retail sector. Increasingly, shoppers are moving away from purely transactional relationships. Instead, they want loyalty memberships with brands that treat them right. If proof is needed, just follow the money c-stores without a loyalty program attract less traffic, have fewer new customers and generate lower sales. In convenience retail, what matters is bottomline sales. And loyalty programs have proven that retailers can maximize their revenue potential when they focus on what customers really want. Good loyalty programs practically run themselves, because the technology is so sophisticated it rewards investment with growth. Once customers experience a brand that personalizes offers based on their interests and preferences, they are less likely to switch to another brand simply for reasons of price or convenience. Rather than leave anything up to chance, we developed this survey and report to help c-store operators look at the overall data in convenience retail, and see the common thread throughout the industry the need to invest in loyalty technology and programs, for no other reason than shoppers are demanding it. The proof is that shoppers are voting with their feet and wallets by choosing to shop at c-stores with loyalty programs. C-store rewards programs drive customer loyalty. I visit a particular convenience 43% store (or chain) because of its rewards or loyalty program s 24% rewards, savings and offers. I visit a particular convenience store (or chain) because it offers a variety of packaged goods and snacks. How do you interact with convenience stores and their rewards or loyalty programs? 44% I choose a convenience store based on location. 31% I visit a particular convenience store (or chain) because of the low gas prices. 5

6 The C-Store Loyalty Shopper Who are these shoppers walking into convenience stores every day? C-store operators may know their customers by name and face, but really, what do they know about them? Are they married? Have kids? What s their income? Which days and times do they spend the most money? What kind of merchandise are they buying? How often do they come in? Do they interact with digital communications or use the mobile app? How well do you know your c-store shoppers? Income? How do operators even begin to answer such questions without invading their customer s personal space? For c-stores with loyalty programs, the data will answer all these questions and more, and if there isn t an answer, they have the tools to get one. By narrowing in on what customers really want and maximizing those profit areas, loyalty cuts out all the irrelevant and costly offers as well as stale messaging that turn shoppers off. Loyalty helps get customers back into the store more frequently, using offers and promotions personalized just for them. Schedule? Family? Engagement? Spend? Frequency? 6

7 How does your membership in a convenience store rewards or loyalty program affect your shopping at that store or chain? I shop at that store more frequently than other c-stores. I shop only at that store or chain. 3% 10% 12% 22% Belonging to a c-store rewards or loyalty program does not influence my shopping there. I buy items I wouldn t normally buy at that store/chain because of the rewards I ll get with the purchase. 51% I shop at the store about the same as I shop at other c-stores. The Big Story: Loyalty, Location and Price There are few things that matter more in convenience retail than location and price. We can say confidently that loyalty programs have become as important, if not more so, than location and price. Location is still huge and remains the number one reason shoppers shop at a specific c-store (44%), but don t let that fool you nearly as many shoppers (43%) said they go to a c-store because it offers a rewards program. In shoppers minds, rewards are far more important than gas prices (31%) and food & beverage options (24%). These findings pose a real challenge to the traditional c-store business model. What kind of questions should operators be asking about their business, if customers so overwhelmingly prefer shopping at a store with a loyalty program? The influence of loyalty extends not only to where customers shop, but also how much they spend. 73% of shoppers will shop more frequently (51%) or even exclusively (22%) at the convenience store where they are a loyalty member. The Big Decision: Loyalty Rewards It s no mystery why c-store loyalty programs are so popular they give rewards for frequent, everyday purchases. The customer gets a better deal and the c-store gets higher sales numbers along with valuable customer data that can be used to generate further revenue. With that in mind, choosing a reward or loyalty currency is an important decision it could determine whether a program is successful or becomes a cost center. 7

8 Fuel Savings Fuel has always been the c-store industry s greatest asset, and while that is still true, operators are realizing that they need to add value to their fuel business. Fuel savings as a loyalty reward has proven to be the most popular currency. Memberships in loyalty programs that provide fuel discounts have risen by 10% in the past two years, according to our survey data (see our companion report, The Road to Rewards 2017). No other specialty loyalty program or reward type enjoyed comparable growth in this time span. One huge advantage for fuel savings as a reward currency is that shoppers now have something valuable to consider on top of gas prices from a roadside sign. Maybe they choose to wait a few hours to fuel up, so they can earn or redeem rewards at a certain store. Loyalty rewards give shoppers an incentive not to switch brands strictly for location or price. The survey data shows that c-store shoppers are influenced by fuel savings rewards even when the price of gas drops, because fuel is always a costly necessity. It s a valuable, unique and near-universal reward that appeals to as wide an audience as possible. Fuel savings have again overtaken cash-back as the rewards currency with the highest level of engagement among U.S. consumers, who also ranked fuel savings as their #1 preferred type of rewards currency for the third year in a row. 39% of shoppers prefer fuel savings, while 35% say they want cash-back. Loyalty programs that offer fuel savings have been successful because they create a popular reward for a core business product that serves as a catalyst to attract customers to the store. The industry is changing, certainly, but fuel savings rewards also show how the industry can build on traditional assets to create competitive advantages. By attaching rewards to fuel, shoppers have an incentive to shop where they can earn those rewards, whether at the c-store itself or at a partner merchant. For c-stores, the popularity of fuel savings rewards consistently increases foot traffic and in-store sales. What motivates you to use or interact with your convenience store rewards/loyalty program? I can earn and redeem rewards... 15% to save money on the products I buy regularly 21% to save on the cost of fuel 18% on fuel and products inside the store 11% to cover the products I buy regularly 15% 7% 7% on products inside the store directly from my mobile app because the offers are personalized and relevant to me 8

9 What about rewards in general beyond fuel savings? How do they influence shopper behavior and decision-making? Once a c-store operator decides on a loyalty currency, s/he also has to follow the rules of loyalty, which can be challenging for an operator with no expertise outside the c-store business. One rule of loyalty is that regardless of currency, whether fuel savings, cash-back or something else, loyalty rewards should be highly valued, easy to earn and easy to redeem. Operators must realize that even though shoppers want rewards, they can lose interest quickly unless the program is simple and consistently engaging. For that reason, many c-stores partner with a loyalty specialist to help choose a reward currency and manage the technology and strategy, at least until the program is successfully up and running. How does your membership in a rewards program influence your shopping behavior or your decisions about where to shop? 36% 22% 21% I tend to shop more frequently at stores where I can earn rewards A rewards program does not influence where I shop I schedule my shopping to take advantage of rewards-related specials and promotions 15% 16% 14% I link my rewards program to my credit card so that all of my eligible purchases automatically earn rewards I will switch brands or stop at a different store if I can earn more valuable rewards or save more money I will spend more money or buy more than I originally planned if I can earn more rewards or save more money I tend to shop at stores 20% where I can earn retailer rewards and rewards that 12% help me save on fuel I wait for members-only promotions that can help me earn more rewards or save more money 16% I tend to shop only at stores where I can earn rewards 9

10 Which one best describes your personal experience with earning and redeeming your rewards? 35% I accumulate rewards until they re valuable enough to redeem on something I truly need or want. Rewards programs in general increase the frequency of shopping among 36% of customers, but convenience store programs have a 15% higher incidence of loyalty, which means that among c-store loyalty program members, 51% are influenced by the program to shop more. Why aren t some customers participating in a store s rewards or loyalty program? The reasons can be simple and often easy to fix: 1 Do not shop at convenience stores (46% - especially older customers) 2 Not aware of a rewards Customers who shop or loyalty program at 16% I earn rewards regularly on everyday purchases and redeem them regularly exclusively at the c-store where they are a loyalty their c-store (26%) on fuel at the pump. member tend to be male (32% versus 11% female), (30%) and have 3 Have not been asked to join (18%) children. 16% I redeem rewards as soon as I earn them (e.g., within one month). 14% I accumulate rewards over time and redeem them on gifts or items for special occasions. (back-to-school, holidays, birthdays, vacations, etc.) By segmenting customers as program members and non-program members, c-stores can create two sets of data to compare sales performance. What we ve found in our surveys of c-store loyalty shoppers is that they consistently out-visit and out-spend customers who have not joined the program. Loyalty technology gives operators the tools to review sales performance, set program KPIs and make targeted changes that lead to higher sales, more program members and long-term business growth. 10

11 Technology Ultimately, loyalty is an end result of loyalty marketing, but in the context of convenience retail, what we re really talking about is loyalty technology: essentially the engine that makes loyalty possible. Loyalty technology connects different sources of customer data and draws a digital portrait of each customer, so operators can see the most profitable areas for sales and marketing. The technology itself, if implemented well, requires little oversight from operators and automates day-to-day customer relationships. Loyalty technology doesn t just sit in the back of a c-store it connects the store directly with each customer for more frequent and profitable encounters, particularly on mobile devices. Millennials are driving the shift to loyalty and digital marketing in convenience retail. They are well-adapted to brand commerce on their smartphones, but they re also selective about who they allow into their digital space. When a loyalty program is valuable and rewarding, customers show their satisfaction by using the mobile app regularly and sharing data everyone wins. 60% of year-olds use a mobile app to track and redeem rewards. 50% of people with children rely heavily on mobile apps, while 23% of people without children do. 31% 10% of all loyalty customers of c-store shoppers visit prefer to use a mobile the store based on app app to track and redeem or notifications or rewards, up 11% from (equally) ads displayed at the pump about in-store promotions. 12% of shoppers visit a specific c-store because its mobile app is easy to use. 11

12 Loyalty Shopper Demographics Gender & Age What do we know more generally about c-store loyalty shoppers that could help inform revenue and business strategy? On average, c-store loyalty shoppers are more likely to be young, college-educated, full-time employees, wealthy and married with children. Nearly half (49%) are millennials in the age range. This is a significant demographic shift that must be reckoned with. 39% male 35% female 17% 34% 49% year olds year olds 55+ year olds One out of every two loyalty shoppers (51%) will visit the c-store to make a purchase in addition to gas. This is slightly higher in males (60%) and people with children (59%). Two out of five loyalty shoppers will spend more than $10 per visit. Social Profile With these demographics, we can see why location and price are not as meaningful as they once were. Shoppers are no longer just going to c-stores nearby instead, c-stores are coming to shoppers first, with mobile offers and rewards tied to personal data. And shoppers today have significant disposable income; they want fun and rewarding relationships with their favorite brands. This is the loyalty mindset that drives spending across all demographics. 57% have children 43% college educated 41% married 41% HHI $55K+ In-Store Spend 38% 22% 16% 12% 12% $0-5 $6-10 $11-15 $16-20 $20+ 12

13 The Opportunities Ahead The big story in convenience retail this year is certainly around the influence that loyalty programs wield over c-store shopper decisions. Of course, location and price are still important value propositions for the industry, but rewards are now necessary to add value to specific business areas, including fuel and instore merchandising. Loyalty technology has been, and will be, key for the growth and evolution of convenience retail. The big question for 2018 is: how can c-store operators achieve the success that other stores have been able to achieve through rewards or loyalty programs? The first step is to invest in the right technology, along with a valuable rewards currency, effective and meaningful customer communications, and in-store offers and rewards. For operators, this might seem like a big commitment, but keep in mind that loyalty is about building more profitable and lasting customer relationships. The rewards are worth the investment. Loyalty is about building more profitable and lasting customer relationships. The rewards are worth the investment. In an industry that sees through the lens of loyalty, operators would be aware of opportunities and trends as soon as they occur, not five years down the road. This is because they have the tools to monitor customer data and use it to drive day-to-day business objectives. The c-stores that listen to customer data never get left behind, because they re the ones driving the industry forward. Why? Because they invest in their customers, and use loyalty rewards to nurture customer relationships, get more customers from the pump into the store and increase revenue. Ultimately, the data that loyalty programs collect across all customers helps operators make high-level business decisions such as where (or whether) to open a new site. Loyalty takes out the element of chance and makes it easier for operators to plan for sales and business growth. This year s c-store shopper loyalty survey demonstrates how loyalty programs are having a dramatic impact on convenience retail revenue and business growth, and why operators should be paying attention to loyalty. How will this new data and insight into c-store loyalty shoppers influence your business strategy and purchasing decisions in 2018? 13

14 Contacts and Media Requests Excentus Corporation, a PDI Company About Ipsos Media Inquiries Excentus, a leading loyalty marketing and technology firm specializing Ipsos is the world s third largest Vanessa Horwell, ThinkInk in the design, development and implementation of loyalty programs, survey research firm with offices , x232 was acquired by PDI in 2018 to expand PDI s retail enterprise software in 56 countries. In North America, vhorwell@thinkinpr.com portfolio, helping convenience store retailers and petroleum wholesale Ipsos consists of 1,500 research marketers thrive in a digital economy. Excentus offers a scalable, cloud- professionals across 30 locations Emily Bowe, ThinkInk based platform to manage, measure, and monetize fuel-based loyalty in the U.S. and Canada. Both the , x246 programs. Drawing on the success of Excentus owned and operated Fuel Ipsos survey invitation list and ebowe@thinkinkpr.com Rewards program, which has grown to more than 14.5 million members the returned data are weighted and over $1 billion in fuel savings, Excentus serves national and regional to reflect the demographic brands, Consumer Packaged Goods (CPG) manufacturers, grocery chains, composition of the U.S. adult convenience retailers and their customers. Over 1,200 customers operating population. more than 100,000 locations trust PDI to optimize their entire operations now including loyalty whether they are a single site, multi-site, dealer or franchise operator. To learn more about Excentus, visit and for more information about PDI, visit 14