Guest Post: 5 Ways Retailers Can Leverage Loyalty Programs

wall-of-shirts(Contributed by Wm. Matthew Street)

A customer loyalty program is among the best tools a retailer can deploy and it can provide a wealth of benefits for both large and small retailers. Loyalty programs can serve as a vehicle to encourage and achieve repeat business, help you learn more about your customers and their buying habits, and provide information to your customers, such as marketing messages and promotions.

Loyalty programs are not new (anyone remember S&H Green Stamps), but they are getting more attention lately, mostly due to developments in enabling technology. Technology allows loyalty programs to gather more information, push messages to customers and structure rewards in a more sophisticated way than a simple punch card that offers a free cup of coffee after five purchases. Most people could probably name a dozen retailers using a loyalty program without even breaking a sweat. They could also tell you which ones are working well and which ones are not.

From my perspective, here are the Top Five Keys for designing a successful loyalty program.

Make it desirable: Customers are more likely to opt-in when they see a routine benefit from their loyalty program. For starters, retailers can offer an immediate discount when a customer signs up. Follow that up with heavily advertised in-store deals — available only to loyalty cardholders — and it’s a no-brainer for customers to join your program. The key is to continually show the value in participation. A recent article on Inc.com highlighted McDonald’s Happy Meals, Amazon Prime and My Starbucks Rewards as the three most successful loyalty programs according to consumers. What do these three programs have in common? They all offer instant gratification, vs programs that require customers build up points based on use.While pricing will be the driving force behind most customers’ decision to join your loyalty program, you can encourage their continued participation through customized discounts, ease of use and convenience.

Make it easy: Most people don’t want to deal with the hassle of a bells-and-whistles rewards program, so it’s important to make it easy for customers to opt-in and obtain rewards or benefits. One such frictionless strategy is to give out a card with a unique member number, which doesn’t require registration. This allows the retailer to start associating sales information with a member and also deliver some of the rewards with a simple scan of the card’s barcode at their POS. At a later time, the retailer, through some promotion, could entice the member to their website to redeem a special reward.Of course, this reward would be contingent on a registration, which captures some demographics of the member. Future reward-based surveys could then be constructed to capture additional targeted information. The bottom line is that retailers must make it easy to hook the customer and then gradually gather additional information to associate with the member.

Make it mobile: Many retailers offer a mobile commerce channel, so a virtual loyalty card in the form of a mobile app is not too far behind. Customers are more likely to keep their smartphone with them compared to a physical card.A mobile app also expands the value of a loyalty program. Not only can it serve as a conduit for coupons and deals, it can also show what’s in stock, enable customers to make a shopping list or locate products inside the store.But not everyone has a smartphone. Knowing your customer is key. High-end specialty retailers in the United States can use smartphone apps as a mobile delivery mechanism. But for other target markets, text messages or emails might be the better choice.

Make it personable: An effective customer loyalty program must have the ability to customize promotions according to a customer’s demographics or purchase history. But the information needs to be delivered to the customer in an easy and useful way. Most retailers send customer loyalty offers through email, but that method can be hit or miss depending on the time of day; how much other email the reader must wade through, etc. However, when the loyalty program is run through a mobile app, the customer can easily check the app for deals or rewards when they go to the store. Retailers also have the ability to push custom notifications to a target demographic through a properly enabled mobile app.

    • Example: My local grocery store offers a rewards program that gives discounts on gasoline. The problem is that the nearest redeemable gas station is on the other side of town from where I live. I finally asked the cashier one day, “Why do I keep giving you my loyalty number?” I couldn’t see the benefit of receiving a discount at a gas station that I don’t go to. I was told that I could go to the service counter and trade the gas discount in for a dollar off coupon for purchases in the store. That was the first time I had heard of this.

So, what’s my evaluation of my grocery store’s loyalty program? Overall, I’ll give it a “D,” since a coupon for the store purchase has some desirability, but it’s just not desirable enough to go through the effort.

Gather and analyze Big Data: If the objective is to get more out of your store’s loyalty program, you must analyze your data and use it to intelligently decide which offers and information to push to customers.For example, retailers can strategically send personalized promotions to specific age groups rather than promoting the same deal to all customers. You could also consider including Big Data in your analysis, which could add the benefit of integrating consumer trends into your planning and promotions.

How? Well, say your data show a trend in increased purchases of umbrellas by males ages 24 to 30 who live in large metropolitan areas. You could then create a promotion for umbrellas and target members of your loyalty program who meet the demographics. Remember, don’t just accumulate the data; you must take action on it.

This is all great,” you may be thinking, “but I’m not Google. I don’t have Big Data capabilities.” You don’t have to be a major search engine or a large omnichannel retailer to leverage your company’s data. A retail ERP system can wrap all these objectives together through its many features, such as data collection, promotion planning, customer communication and more. There are many systems on the market these days for retailers both large and small.

A loyalty program, done the right way, can indeed be a powerful tool to deploy. Just think it through first and put yourself in your customers’ shoes when it comes to desirability, ease of use and mobility. Also, plan to measure your effectiveness and make adjustments when necessary while keeping the program fresh and enticing for your customers. At the same time, be sure to plan how you will use the wealth of information you gather.

 


WmMatthewStreetimage 120Wm. Matthew Street is a developer and business analyst at ArcherPoint.  A retail ERP expert, Matthew has spent more than 28 years focused on driving improvements in business processes, operations, inventory management, business planning and accounting.

Comments

  1. Hi ,
    I totally share your views concerning the goals and purposes of a loyalty program. Make it simple and stupid is the Mission otherwise the cardholder will interpret it as being a sham and plunder only the good part of it for financial gains. This would render the system totally off course. My group ( Intermart Mauritius) just launched its loyalty system which aims at giving real benefits to the customers without a lot frills and verbose.

  2. It’s less expensive to retain current customers than to get new ones. In order to retain current customers you need to keep them happy, which is what loyalty programs aim to do. The key is to provide something beneficial to the customer. As in the grocery store/gas example, if the reward isn’t beneficial, there is no reason to be a part of a loyalty program.

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