Loyalty Programs

Everyone uses a loyalty program. You choose a certain credit card so that you can rack up airline miles. You pull out a plastic card for the cashier to swipe at the grocery store that gives you access to certain discounts. I carry a plastic tag on my key ring for Starbucks that gives me a free drink on my birthday and free soy milk in my drinks. There are plastic cards for the loyalty programs at office supply stores, pet stores and so many more.

The definition of a loyalty program is to provide discounts, prizes, or other incentives to encourage continued patronage of a business, according to Wikipedia. Generally, loyalty programs are considered less expensive to maintain than allowing customer defection or “churn.”

Jarrett Paschel, Ph.D. is the vice president of strategy and innovation for research consultancy The Hartman Group and he wrote about the results of research done on retail loyalty programs. “We’ve been listening to frustrated consumers complain about retail loyalty programs for years, so we were not surprised that our recent research confirmed this position. Looking at the chart we find that 74 percent of consumers somewhat or strongly agree that ‘retailers need new and better ways of rewarding loyal customers’.”

We love loyal customers. It is in rewarding those customers that we have the opportunity to turn them into raving fans. We must not lose that opportunity.

Loyalty programs are a “selfless acknowledgment of your store’s appreciation for your customer’s continued patronage and support with a gift or service of substantive or meaningful value ,” says Paschel. That chosen gift should not have any strings attached to it – otherwise it isn’t freely given. It also should be able to be used immediately – which differentiates it from a bounce back coupon. (A bounce back coupon is a coupon given to a customer offering a discount on a purchase to be made within certain future time constraints.)

Our goal is to reward our customers for making the right decision and choosing to shop with us. Look at your own behavior. Are you motivated simply by discounts, miles or points? No. Those don’t necessarily cause you to change your behavior and drive out of your way to go to a store.

Loyalty is inspired by making an important difference in your customer’s life. It will necessarily include a shock, surprise and awe component.

It isn’t hard. You only need to know one thing. What matters to your best customers? Go to your computer and pull up the list of your customers sorted by sales volume. Look at them. Picture them. What is important to them? What type of lifestyle do they lead? What do they buy from you? Start a list. Force yourself to write down at least 25 entries. You will see commonalities. What could you gift them with that would make a meaningful impact?

For a toy store, it could be sending a great age appropriate gift to the customer’s child on their birthday. The difference that makes is that you are recognizing the importance of their kids in their life – and you know that they will be shocked. For any store, it could be tracking their purchases and giving them a percentage of that total back as a discount off of future purchase. The shock, surprise and awe component of that can be that YOU keep track of it for them. My client, My Favorite Toy Store in Illinois, does that and actually sends their customers a look-a-like check in the amount of their discount. Their customers love that – and them!

Don’t think it has to only be about giving inventory away. Never underestimate the value of specialized knowledge to someone who is pressed for time. For a women’s fashion store, it could be a special report about the next season’s must-haves – in all areas of fashion not just the ones that you sell. The report could include the latest trends in home accessories, colors and so on. If fashion and design is important to your best customers, then use your resources to pull together that information for them. They will be in awe of the fact that you are genuinely passing on knowledge that they care about – not just about items you have in your store.

Think outside of the box about delivering the loyalty gift. In a wine store, the owner could put together a report about a new vineyard or area of the world that is producing wine. Then she could record the report and make a podcast or send the customer a link to a mp3 recording. Think about what knowledge you have that you could share with your customer and how to share it.

I posted tips from this article on Facebook and immediately got this response from Jane in California. “If I’m having the service shopping experience – that’s focused on ME, (her emphasis) I don’t even ask the price. And nothing in the big-box free-for-all is worth it. The merchandise is cheap in every sense and the experience is brutal.”

“..Focused on ME..” That is the secret. Your loyalty program must be selflessly focused on your best customers. That is what will shock, surprise and awe them. No one does that.

And you will find that your customers are begging to award you their loyalty because it saves them time. They know where to go to get their need fulfilled – to your store. They don’t want to expend effort and have to make choices about where to go. They already know, like and trust you. They want to shop with you. If you reward them by making a difference and providing shock and awe, they will reward you with their continued loyalty and business.

Your Profit Retail Action Plan:

1. Grab hold of this opportunity to keep your best customers your best raving fans.

2. Pull up that list of customers that I talked about earlier. How many? Usually I find that there is a natural break between the top tier of customer’s purchases and the next. Keep in mind the principle defined by the Italian economist Pareto, aka the 80/20 rule. It is generally true that 20% of the customers generate 80% of your business. You might not want to reward that many customers to start but perhaps look at the customers that account for 10% of your business.

3. Write out that list of shared values.

4. Brainstorm with your staff what you could do today to reward those customers.

5. Finally, let me know what you decide to do. I can’t wait to hear how creative you are.

© RETAILMavens Inc.   All Rights Reserved.

Leave a Reply

Your email address will not be published. Required fields are marked *