In life and in business, making the first move can be quite stressful.
Loyalty programs have become an essential tool for building long-term relationships with consumers, but introducing your c-store's program to shoppers is often a challenge.
This week's episode of How Convenient dives further into loyalty in c-store by discussing the ins and outs of consumers' first loyalty trips. Koupon's CEO Brad Van Otterloo joins Data and Analytics Team Manager Allison Berti to discuss the timing patterns, product categories and more that are helping c-stores drive loyalty program sign-ups and trips.
Loyalty programs have become an essential tool for building long-term relationships with consumers, but introducing your c-store's program to shoppers is often a challenge.
This week's episode of How Convenient dives further into loyalty in c-store by discussing the ins and outs of consumers' first loyalty trips. Koupon's CEO Brad Van Otterloo joins Data and Analytics Team Manager Allison Berti to discuss the timing patterns, product categories and more that are helping c-stores drive loyalty program sign-ups and trips.
Listen and subscribe to the full episodes at one of the following links. Below is the episode’s transcript which has been edited for readability. If you have any comments, questions or would like to learn more, contact us below.
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Transcript:
[Music]
Allison Berti: In this episode, we look at the purchase patterns of first-time loyalty shoppers. Welcome to How Convenient, a new podcast about the essential role convenience stores play in the busy lives of consumers. Our hope is to equip innovative key store leaders as they seek to earn lasting shopper loyalty. In each weekly episode, we will briefly share an update on C-store sales trends and what we are learning from filling in of in-store purchase transactions. Today's episode was recorded on February 25th, 2021. I'm Allison Berti filling in for Greg Crow today. I manage the data and analytics team at Koupon, and I'm looking forward to sharing our data. and C-store insights with you. With me today is Brad Van Otterloo. Hey Brad, how's it going?
Brad Van Otterloo: ALLISON! For years you've been the official voice of Koupon. You've done our voiceover work. You've even been the voice on our phone system. It would make sense that you jumped into podcasting. So it's an honor to be part of your very first episode.
Allison Berti: Thank you very much. And I wouldn't be a true millennial if I didn't try to host a podcast at least once, so... We're really happy to be doing this with you today. Brad and I are new to podcasting, so please be patient with us as we get started. And we'd love your feedback. We'll let you know how you can share that with us in a few minutes. For today's flash, here are the year-over-year metrics for major C-store categories for the week of February 15th.
Alcohol sales are up 8%, candy is down 3%, snacks down 10%, beverages down 5% and food town 13%. We recently estimated gross profit for 2020 versus 2019 across our retailer panel and despite lower trips and an incredibly challenging environment in 2020, overall, in-store gross profit went up 1% on a per store basis. Looking at a category level, gross profit growth in tobacco, alcohol and beverage made up for declines in food and snacks.
Couple of episodes back, we spoke with Koupon's Chief Revenue Officer, Dustin Cooke about the importance of retailer loyalty programs. Diving further into loyalty and seed store, today, we are looking into a consumer's first loyalty trip.
Let's first take a look at Basket Affinity. We evaluated the first purchases of recent loyalty joiners, first older cohorts. We found that recent joiners purchased snacks and candy at a higher rate in their first loyalty baskets and purchased cigarettes at a lower rate than joiners top of the pack. Our analysis shows us that in the past tobacco users have been more active than non-tobacco users in retailer loyalty program, likely due to heavy loyalty promotions. People joining more recently, however, are slightly less likely to each tobacco users.
Brad, why do you think recent loyalty joiners are less likely to be tobacco users? If tobacco isn't bringing in new loyalty consumers to C-store, what is?
Brad Van Otterloo: First time loyalty baskets are a very interesting metric to look at. So as the head of any loyalty program should know that they need to have a very deep understanding of why people join their program and then ultimately why people stay. So right now we're focused on why they joined. To me, there's only one reason someone joins a loyalty program, is to get access to something that only members can have access to, but it also needs to be interesting enough to balance the effort or the lift that it takes to sign up for the loyalty program. Because loyalty at the end of the day is a relationship between the shopper and the retailer. And just like all the relationships, there has to be some give and take at the beginning to be able to really establish that trust.
Historically offers on tobacco have been a great driver for these new users. And it makes a lot of sense. Because, for now in our industry, unfortunately, the loyalty programs have an unusually high-level barrier to entry, meaning the customer needs to fill out a lot of information to be able to have access to the program. There are even some programs out there that before you get access to anything, they need to know your home address. And I will never understand why a convenience store needs to know my home address, especially as we're building out that initial relationship.
When you combine that lift with the value that can be provided on tobacco products, it balances it out and it makes that lift [Inaudible 04:17] in terms of anybody can get access to higher level offers. What I would say is right now, maybe there are not as many tobacco offerings available as there have been in the past. You mentioned it early on in terms of the growth that that category has seen over the last year. And maybe offers are not as important as they have been for the last few years, so maybe there's less of those. And so, the offers on other types of products are replacing them where possible, or even the barrier to entry for some of our retailers, I know are beginning to lower in terms of the lift that those users need to ask.
Allison Berti: Great. Now from a timing perspective, first time loyalty purchase patterns follow the same overall timing trends we see in C-store. First time purchases increase throughout the workweek, peaking on Fridays and are at their highest between 7:00 AM and 12:00 PM. This suggests that retailers could promote their loyalty programs during normal hours of high traffic, such as breakfast or lunch hours during the work week.
Now let's look at the categories, making up the first trip baskets. What are loyalty users reaching for when they use their card for the very first time? So first time loyalty trips, most frequently contained beverage, cigarette and snack items. Within beverage, new loyalty consumers are purchasing bottled soda, fountain drinks and energy drinks. Top brands include Fountain Soda and Fountain Coffee, Monster energy drinks and Mountain Dew. First time loyalty trips containing cigarettes, most often contained premium cigarette products. The top occurring brand is Marlboro.
And lastly, within snacks and chips, packaged pastries and beef jerky are making up the baskets of first-time loyalty shoppers. Leading brands and products include private label, donuts, Cheetos, and Lays. Brad, knowing how important building a loyalty base is going to be to a convenient store success in the coming years, how do you think retailers can drive signups and trip, given what we're seeing in the trends of first-time users?
Brad Van Otterloo: Yes. As we already mentioned, first time sign-ups is a very important metric to keep track of. And the information you just shared is really valuable to anyone running a loyalty program. When looking at the types of deals that were best for any individual program, here are the things that I would suggest that they focus on. First, the overarching principle should always be to interact with the shopper in the way they want to be interacted with. As we already talked about, you're building a relationship and as the retailer, you're making the very first move. You need to make it compelling.
The first offer goal is not to change behavior or to look for incrementality. Or any of those goals that ultimately you want to have as outcomes of a loyalty program. The first goal is to get them in the program in the first place. All offers need to be structured that way. In this context, that would mean providing an offer that encourages activity that they're already involved with. So if coffee and the pastry business, are strong in the morning, than a deal on buying them both together can be a very good incentive to have them join the loyalty program. In the afternoon, if it is around a packaged beverage and energy drinks, then you should have that available in the afternoon. And as history has shown, value on tobacco products is key, especially as shoppers become poly users of different products as was discussed in our last episode.
And finally, securing funding from CPG Partners for these offers is incredibly important. As a retailer, you do not need to go after this alone. There are partners that want to provide you value, to be able to help you in this journey. And at Koupon, we know the brands that are excited to help you in this endeavor.
Allison Berti: Awesome. So before we wrap up, I have to know Brad, you're taking your first loyalty trip. What are you reaching for? An energy drink? Bag of chips?
Brad Van Otterloo: Allison, there's no secrets as to what action I would take. To anyone that's listened to this episode before, it's three words, ENERGY drinks aka liquid sunshine, aka happiness in a can. That is absolutely the thing that I reach for. How about you?
Allison Berti: I definitely go in for something sweet. I think especially as more people start going back into the office, including myself, I can see myself stopping for that morning coffee donut combo, and then maybe signing up for the loyalty program on there.
Brad Van Otterloo: Ah, solid. Very good.
Allison Berti: All right. Well, great. Thanks for joining us today, Brad. And thanks for listening to How Convenient. Don't forget to subscribe, rate us and give us a review. You can find more insights at blog.koupon.com. See you next week.
[Music]
Brad Van Otterloo: ALLISON! For years you've been the official voice of Koupon. You've done our voiceover work. You've even been the voice on our phone system. It would make sense that you jumped into podcasting. So it's an honor to be part of your very first episode.
Allison Berti: Thank you very much. And I wouldn't be a true millennial if I didn't try to host a podcast at least once, so... We're really happy to be doing this with you today. Brad and I are new to podcasting, so please be patient with us as we get started. And we'd love your feedback. We'll let you know how you can share that with us in a few minutes. For today's flash, here are the year-over-year metrics for major C-store categories for the week of February 15th.
Alcohol sales are up 8%, candy is down 3%, snacks down 10%, beverages down 5% and food town 13%. We recently estimated gross profit for 2020 versus 2019 across our retailer panel and despite lower trips and an incredibly challenging environment in 2020, overall, in-store gross profit went up 1% on a per store basis. Looking at a category level, gross profit growth in tobacco, alcohol and beverage made up for declines in food and snacks.
Couple of episodes back, we spoke with Koupon's Chief Revenue Officer, Dustin Cooke about the importance of retailer loyalty programs. Diving further into loyalty and seed store, today, we are looking into a consumer's first loyalty trip.
Let's first take a look at Basket Affinity. We evaluated the first purchases of recent loyalty joiners, first older cohorts. We found that recent joiners purchased snacks and candy at a higher rate in their first loyalty baskets and purchased cigarettes at a lower rate than joiners top of the pack. Our analysis shows us that in the past tobacco users have been more active than non-tobacco users in retailer loyalty program, likely due to heavy loyalty promotions. People joining more recently, however, are slightly less likely to each tobacco users.
Brad, why do you think recent loyalty joiners are less likely to be tobacco users? If tobacco isn't bringing in new loyalty consumers to C-store, what is?
Brad Van Otterloo: First time loyalty baskets are a very interesting metric to look at. So as the head of any loyalty program should know that they need to have a very deep understanding of why people join their program and then ultimately why people stay. So right now we're focused on why they joined. To me, there's only one reason someone joins a loyalty program, is to get access to something that only members can have access to, but it also needs to be interesting enough to balance the effort or the lift that it takes to sign up for the loyalty program. Because loyalty at the end of the day is a relationship between the shopper and the retailer. And just like all the relationships, there has to be some give and take at the beginning to be able to really establish that trust.
Historically offers on tobacco have been a great driver for these new users. And it makes a lot of sense. Because, for now in our industry, unfortunately, the loyalty programs have an unusually high-level barrier to entry, meaning the customer needs to fill out a lot of information to be able to have access to the program. There are even some programs out there that before you get access to anything, they need to know your home address. And I will never understand why a convenience store needs to know my home address, especially as we're building out that initial relationship.
When you combine that lift with the value that can be provided on tobacco products, it balances it out and it makes that lift [Inaudible 04:17] in terms of anybody can get access to higher level offers. What I would say is right now, maybe there are not as many tobacco offerings available as there have been in the past. You mentioned it early on in terms of the growth that that category has seen over the last year. And maybe offers are not as important as they have been for the last few years, so maybe there's less of those. And so, the offers on other types of products are replacing them where possible, or even the barrier to entry for some of our retailers, I know are beginning to lower in terms of the lift that those users need to ask.
Allison Berti: Great. Now from a timing perspective, first time loyalty purchase patterns follow the same overall timing trends we see in C-store. First time purchases increase throughout the workweek, peaking on Fridays and are at their highest between 7:00 AM and 12:00 PM. This suggests that retailers could promote their loyalty programs during normal hours of high traffic, such as breakfast or lunch hours during the work week.
Now let's look at the categories, making up the first trip baskets. What are loyalty users reaching for when they use their card for the very first time? So first time loyalty trips, most frequently contained beverage, cigarette and snack items. Within beverage, new loyalty consumers are purchasing bottled soda, fountain drinks and energy drinks. Top brands include Fountain Soda and Fountain Coffee, Monster energy drinks and Mountain Dew. First time loyalty trips containing cigarettes, most often contained premium cigarette products. The top occurring brand is Marlboro.
And lastly, within snacks and chips, packaged pastries and beef jerky are making up the baskets of first-time loyalty shoppers. Leading brands and products include private label, donuts, Cheetos, and Lays. Brad, knowing how important building a loyalty base is going to be to a convenient store success in the coming years, how do you think retailers can drive signups and trip, given what we're seeing in the trends of first-time users?
Brad Van Otterloo: Yes. As we already mentioned, first time sign-ups is a very important metric to keep track of. And the information you just shared is really valuable to anyone running a loyalty program. When looking at the types of deals that were best for any individual program, here are the things that I would suggest that they focus on. First, the overarching principle should always be to interact with the shopper in the way they want to be interacted with. As we already talked about, you're building a relationship and as the retailer, you're making the very first move. You need to make it compelling.
The first offer goal is not to change behavior or to look for incrementality. Or any of those goals that ultimately you want to have as outcomes of a loyalty program. The first goal is to get them in the program in the first place. All offers need to be structured that way. In this context, that would mean providing an offer that encourages activity that they're already involved with. So if coffee and the pastry business, are strong in the morning, than a deal on buying them both together can be a very good incentive to have them join the loyalty program. In the afternoon, if it is around a packaged beverage and energy drinks, then you should have that available in the afternoon. And as history has shown, value on tobacco products is key, especially as shoppers become poly users of different products as was discussed in our last episode.
And finally, securing funding from CPG Partners for these offers is incredibly important. As a retailer, you do not need to go after this alone. There are partners that want to provide you value, to be able to help you in this journey. And at Koupon, we know the brands that are excited to help you in this endeavor.
Allison Berti: Awesome. So before we wrap up, I have to know Brad, you're taking your first loyalty trip. What are you reaching for? An energy drink? Bag of chips?
Brad Van Otterloo: Allison, there's no secrets as to what action I would take. To anyone that's listened to this episode before, it's three words, ENERGY drinks aka liquid sunshine, aka happiness in a can. That is absolutely the thing that I reach for. How about you?
Allison Berti: I definitely go in for something sweet. I think especially as more people start going back into the office, including myself, I can see myself stopping for that morning coffee donut combo, and then maybe signing up for the loyalty program on there.
Brad Van Otterloo: Ah, solid. Very good.
Allison Berti: All right. Well, great. Thanks for joining us today, Brad. And thanks for listening to How Convenient. Don't forget to subscribe, rate us and give us a review. You can find more insights at blog.koupon.com. See you next week.
[Music]
