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    Loyalty Index Puts Costco at Top in Customer Loyalty

    Loyalty marketing consultant and publisher Colloquy on Friday said its national Retail Loyalty Index placed Costco as the top consumers' choice for loyalty in the grocery, personal care, and mass merchant categories.

    Loyalty marketing consultant and publisher Colloquy on Friday said its national Retail Loyalty Index placed Costco as the top consumers' choice for loyalty in the grocery, personal care, and mass merchant categories.

    Colloquy previewed the new index last week at the Direct Marketing Association's DM Days New York Conference & Expo, to answer a key question: To which retailers do consumers profess their deepest loyalty, and why?

    The Retail Loyalty Index is based on the results of a November 2007 survey of 3,000 U.S. consumers, Colloquy said. Its data includes 500 completed interviews in six demographic segments: affluent household heads, young adults, seniors, women, Hispanics, and a general population control group.

    Consumers were asked to reflect on personal experiences with retailers at which they shopped most often in the previous three months, the Cincinnati-based company said.

    Across five geographical regions -- Northeast, Southeast, Midwest, Southwest, and Northwest -- Costco was the winner in the Grocery category. The warehouse club was the first choice of consumers in two regions, the Southwest and Southeast. Publix was a close runner-up in grocery, and H.E. Butt Grocery Co. followed.

    Costco also was named the favorite among personal care retailers, winning three regions and placing in the top three in the other two. Wal-Mart was the runner-up in this category, suggesting that consumers are more price-conscious in this sector than others, according to Colloquy.

    The highest-rated, stand-alone pharmacist in this category was Rite Aid.

    Drawing a distinction between loyalty and frequency, the Colloquy Retail Loyalty Index shows that Wal-Mart is the dominant U.S. retailer for consumer shopping frequency. Consumers across all categories shop at Wal-Mart more than any other retailer, it found.

    But Wal-Mart did not register equally high loyalty ratings from respondents. While Wal-Mart's Everyday Low Price (EDLP) tactics have made it the world's number one retailer, other retailers who attempt to emulate Wal-Mart's success will find that the EDLP model of retailing comes at a cost, Colloquy said.

    "A marketing strategy focused solely on sale prices and promotions not only faces diminishing returns, but can also actually breed disloyal customers," said Rick Ferguson, Colloquy's editorial director. “Our research results demonstrate that retail marketers have an opportunity to shift their focus from EDLP toward loyalty drivers that build true customer engagement, larger transactions, and improved margins."

    Colloquy said a complete report on the retail loyalty research is available free of charge at www.colloquy.com/whitepapers.

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