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    Low Prices Supplant Customer Service as Top Customer Loyalty Driver: Report

    In contrast to Colloquy’s last report on consumer loyalty to U.S retailers, in 2008, Walmart dominated the 2010 index, reflecting a reality in these recessionary times: low prices drove consumer loyalty.

    In contrast to Colloquy’s last report on consumer loyalty to U.S retailers, in 2008, Walmart dominated the 2010 index, reflecting a reality in these recessionary times: low prices drove consumer loyalty.

    The index compiled by Blue Ash, Ohio-based Colloquy, the publishing, education and research division of LoyaltyOne, ranks the top U.S. retailers according to customer loyalty ratings. The 2010 index draws from a December 2009 survey of 3,500 U.S. consumers in five regions: Northeast, Southeast, Midwest, Southwest and Northwest. Respondents were polled in four retail categories: grocery, personal care, department stores and mass merchants.

    According to the latest index, customers claimed the highest loyalty to Walmart in many of the grocery, personal care and department store regional categories. Costco snagged the highest customer loyalty ratings in three out of five mass merchant regional categories. In the 2008 index, shoppers claimed the most loyalty to Costco, which ranked first in nine out of 20 regional and retail categories.

    “Our 2008 index showed that loyalty marketers worked within a significantly different retail landscape,” noted Colloquy partner Kelly Hlavinka. “Customer service, store environment and a wide product selection were the underlying factors for customers’ self-professed loyalty. But our 2010 index proves that the Great Recession became the great equalizer. Two years later, customers view loyalty differently. We’ve witnessed a profound change among consumers since the recession hit: Low prices have stepped up to become retail’s strongest loyalty lure, according to consumers. That is something which was simply not true in 2008.”

    Hlavinka authored a 17-page white paper, “RetailTALK: What Price Loyalty? The 2010 Colloquy Retail Loyalty Index,” which offers a complete review and analysis of the company’s latest study of U.S. retail consumer loyalty ratings and attitudes. The paper is available free at http://www.colloquy.com/files/2010-COLLOQUY-RetailTalk-White-Paper.pdf.

    In the grocery category specifically, Kroger, which has a customer-centric focus and ran a customer loyalty program through the recession, was the loyalty leader in the Midwest. In the Southeast, Publix rose to first place from its second-place showing in 2008. In the Southwest, HEB ranked first with messaging similar to that of Walmart, and an ongoing six-store rewards program at its Waco, Texas, locations.

    But the highly fragmented grocery sector, where neither conventional nor discount grocers are present in every state, gives the advantage to Walmart. The mega-retailer’s message of low prices and value strikes a chord with shoppers, as well as its ability to leverage its broad distribution network, led to first-place consumer loyalty ratings for the Bentonville, Ark.-based company in the Northeast and Northwest, and third-place rankings in the Southeast, Southwest and the Midwest.

    For the personal care category, in the highly competitive Southeast region, Walgreens and Walmart finished neck and neck for the top loyalty ranking, with CVS and Publix tied for the No. 2 spot. In a tight three-way race in the Midwest, Walgreens and CVS edged out Walmart, although CVS hadn’t been among the top five two years ago. Walmart easily won the Northwest, kept the top spot in the Southwest, and outpaced CVS and Rite Aid in the Northeast.

    Among mass merchandisers, BJ’s Wholesale and Meijer earned top loyalty rankings in the Northeast and Midwest markets, respectively, replacing such familiar names as Sears, Sam’s Club and Big Lots. Costco continued to come in first in all other U.S. regions, while Walmart ranked second in all but the Southeast, where it placed third behind Target, which itself rated third in the rest of the United States.

    Several chains that made the top three spots in the 2008 index for department stores dropped from the 2010 top-three list, among them J.C. Penney, Dillard’s and Dollar General. As in other retail categories, Walmart and Target rose to the top. Walmart rated first in customer loyalty ratings in the Northeast and Midwest, and tied with Macy’s for the No. 1 slot in the Southwest. In the Southeast, Walmart placed second to Target, and in the Northwest it was behind top-spotter Costco.

    “With the recession acting like a second-stage booster rocket, Walmart has upended the status quo among its national retail peers by chewing into their last remaining frontier — customer-professed loyalty — at least for now,” said Hlavinka. “The glimmer of hope for retailers is that as jobless rates go down and consumer confidence returns, retailers may very well regain their footing — if they continue to work toward customer-centric solutions and more sustainable strategies rather than combating Walmart on low prices.”

    Colloquy will share the results of its 2010 Retail Index in a Webinar sponsored by the Catalog and Multichannel Retail Marketing Councils of the New York-based Direct Marketing Association on April 22 at 2 p.m. EST. Registration information is available at http://www.colloquy.com/event_view.asp?uid=140.

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