Deep discounting with online services like Groupon and LivingSocial allows retailers a way to quickly attract new customers, and many retailers have jumped on the daily deals bandwagon. I wrote about daily deal companies back in July, and concluded that these programs do have their place and merit.
However, many retailers are paying the Groupons of the world to access a group of customers – only to have those buyers never return after redeeming their deals. With this type of quick-sale model, it can be difficult for retailers to follow up with customers and retain them.
Retailer-managed customer loyalty and rewards programs can help establish the right platform to retain and analyze key customer data, while cultivating an ongoing relationship with buyers.
Effective Loyalty Programs Offer More than a Free Sandwich
Many retailers have some form of a loyalty and rewards system in place, but far too often these are punch card rewards. While free sandwiches are great on the tenth visit (who doesn’t love a free sandwich?), paper punch cards fail to capture rich data about who customers are and what types of products they are purchasing.
With customer-spending data to analyze, retailers can make better decisions about product inventory and future sales/promotions to offer. Central to a successful retail operation – and loyalty program – is having the right point of sale (POS) software in place, and many of today’s POS systems offer customer relationship management (CRM) and loyalty program features to provide retailers with the tools they need.
Whether retailers are looking to develop a new loyalty program or rejuvenate an existing one, here are some best practices to keep in mind.
1. Create a Program that Drives Loyalty
First and foremost, a good loyalty program needs to be exclusive (but easy to join), offer rewards of high perceived value (but not at the retailer’s expense) and present your brand in a positive way. A few other key points to consider:
Discount your items for members only. Promotions should put the retailer in a position of gaining repeat customers. Providing non-members access to discounts reduces the allure of loyalty programs and dilutes their effectiveness and appeal. Ensure that promotions are for registered customers only, and use them to entice new customers to join the program. Retailers will need a POS solution that can identify loyalty members using a membership number at the time of sale to provide rewards and track purchases.
Premium (pay) programs should always provide a premium service. Customers have been spoiled by premium rewards programs such as Amazon Prime, but there’s a reason people pay $79 per year for the service. The program offers great shipping rates on purchases, and this encourages customers to return and spend more. Today, traditional point accumulation programs shouldn’t have a fee. Only premium programs should. Some of the country’s largest chain retailers are realizing this. Best Buy recently removed the yearly fee for their Reward Zone points program, and now provides a rewards program based on points per dollar spent.
Offer rewards that are worth something. If your program has a prize at the end of the tunnel, make it worth customers’ while. That means retail rewards programs shouldn’t match the Dave and Buster’s arcade model. That is, don’t make customers spend hundreds of dollars to receive a generic, cheap and uninteresting reward. Instead, provide a reasonable reward of higher perceived value that also encourages continual spending and participation – like future discounts.
2. Develop Program Membership
Developing a strong program oftentimes sells itself, but taking the initiative to get the program snowballing goes a long way, too. Most important in developing a large loyalty membership is making the program easy to join, easy to use and easy to share with customers’ friends and family.
Reduce the point of entry for program access. In 2011, leaving a membership card at home shouldn’t bar customers from receiving purchase credits. Allow customers to use their email address, phone number, account number or a unique user name to connect purchases to their loyalty account. It’s a win-win because the retailer gets more valuable data, and customers receive more reward benefits.
Entice customers to return – and bring a friend along, too. These rewards hit on multiple levels: they provide incentive to return to your store, as well as bringing new customers in. For example, a local burrito chain in Austin recently ran a promotion where if a customer brought a friend on the next visit, both could eat for $10. Loyal customers are some of your strongest brand ambassadors, and sharing a good experience is likely to rub off on friends. Email marketing features within POS solutions allow you to easily reach out to members and have them connect with friends for additional rewards.
Integrate with social media and check-in applications. There are a number of social media opportunities for retailers out there, but it takes more than just inputting your information on your Yelp page or securing twitter.com/yourbrand. Ensure that these media are actually encouraging browsers to join your rewards program. For example, put a promo code up on Twitter, or offer a discount for loyalty program members when they check-in with Foursquare. Using the database within the POS system, retailers can track which promotions are most effective, and which customers redeem them.
3. Collect and Analyze Good Customer Spend Data
Once you’ve developed a great loyalty program, mining data to discover trends, weaknesses and strengths is one of the greatest benefits of a loyalty program – as well as one of the most frequently ignored or underused. This is where POS systems with strong CRM and loyalty-specific functionality become a great asset.
Play to different customer types. Sales expert Mark Hunter describes five different types of customers that are all important to a store’s success. The discount shopper is much different than the need-based or loyal customers. Creating multiple reward methods – or individual plans – can expand the depth and reach of a program, leading to data that is more indicative of the average store customer. Retailers using CounterPoint by Radiant Systems have the ability to customize multiple loyalty programs and set parameters such as point ranges per purchase and redemption methods.
Allow for multi-channel rewards redemption and access. If you’re a multi-channel retailer and have both a physical and online presence, customers should be able to redeem and receive credit for both types of transactions. A great example of this is Barnes & Noble’s reward program, which allows customers to receive a percentage discount on all items both in-store and online. POS systems with integrated e-commerce portals can log customer purchase information in its internal database.
Make promotional decisions based on sales analysis. Analysis of your sales can identify your weakest or slowest moving items, making them potentially great promotional items to your loyalty members. Alternatively, you can find the items that sell the fastest and allow loyalty members first chance at purchasing them, further developing the value of the program. Reporting tools that pull customer data will be useful in determining future promotions. In addition, retailers using Retail STAR from Cam Commerce can assign specific reward values on either a per-item or per-department basis, allowing retailers to create a very personalized program.
I’m interested in what loyalty programs you’ve found effective, and what are the key factors to consider in managing these programs? Please share your experiences below.
Thumbnail created by Dennis Hill.