Understanding the Customer

Experts and studies confirm over and over that for most people, price is not the only thing that drives a customer’s enthusiasm for your loyalty program. There are two other important factors to consider.

First, customers love choice and to feel some level of control. Take the original, very successful, first loyalty program: S&H Green Stamps. Customers loved that they could choose their reward and had a feeling of control by the flexibility afforded to them based on the number of stamp books they filled. Allowing flexibility, choice and control may build engagement from customers.

Second, customers love ‘status’. They’re proud of the points they’ve earned. Sometimes the bragging rights of reaching a premium points level is as exciting to them as the reward they get for it. It’s a matter of distinction. They are a VIP, a top customer, a valuable asset to you. Put some meaning behind earning rewards. When rewards appear too easy to earn, the allure of the program diminishes. Finding a perfect balance between the perception of status of earning rewards and making it too difficult is a fine line that may be tricky to walk. But it will be well worth it when you see the results of striking that chord.

Get creative with your loyalty program. Don’t make it too easy or repetitive. And don’t make it so complicated that the customer can’t understand it. Make sure he/she knows what she’s working toward and treat them accordingly when they reach it.

Communications Marketing – Something to Check Out

I ran across this service after a webinar I attended about mobile marketing. The information I read on the website indicates this would be a great compliment to your customer loyalty program. They offer ways to proactively communicate with your customers, including mobile marketing and gentle reminders, etc.

The website is www.soundbite.com. We are not affiliated in any way. I am simply passing along what seems to me to be a great idea. If you would like further information on creating an effective customer loyalty program, call or email me anytime or visit our website, www.powerpassloyalty.com.

August 4, 2010 Tip of the Week

Due to the fluidity of activity in any given retail season, it may be difficult to determine a solid number for ROI on your customer loyalty program. However, there are some things you can track to make sure your offers are what your customers want, and therefore effective in bringing them back. Track: sign-up rates, redemption rates, and defection rates. If you keep a close eye on these numbers, you will be able to see what is working and what your customers perceive as valuable, and make changes as necessary.

In order to make sure you’re spending your loyalty marketing dollars efficiently, you have to know how well your program is working. Keeping track of the percentage of customers who use it will give you tons of insight.

Characteristics of the BEST in Customer Loyalty Marketing

A recent report from Aberdeen Group compiled results from several studies on Customer Loyalty – specifically cross-channel, rewards, promotions and ROI. I found the information contained in the report to be interesting, and I want to share some of it with  you here.

Retailers who have the best results with their customer loyalty marketing are best in the following categories:

• Utilize customer data to deliver personalized promotions
• Utilize social media and online communities to maximize brand interaction with customers
• Offer rewards to their loyal customers based on how often they shop, making an effort to not simply cut prices in order to make a sale
• Customer loyalty is not confined to the brick and mortar store, allowing customers to reap the rewards of their loyalty plan through the channel of their choice
• Track loyalty program redemption rates
• Track loyalty program sign-up rates
• Align loyalty offers with seasonal merchandising, pricing and promotions in all channels
• Use a loyalty processing application at the point of sale, allowing the retailer to process a loyalty card, redeem loyalty rewards, and generate receipt-based coupons for the customer
• Utilize database marketing
• Provide employee incentives based on loyalty redemption and registration
• Run a balanced loyalty program incoporating rewards, discounts, and merchandise promotions

Important points to consider:

There is so much more to implementing an effective customer loyalty program than offering free stuff or discounts. That part of the program is what I refer to as the front end of it. Retailers also must concentrate on the back end, or else you’re leaving money on the table. According to Aberdeen’s report, only 37% of retailers surveyed use the data collected at the point of sale to personalize offers and market to their customers.

Another important point to consider is the effectiveness of focusing on frequency instead of dollars. “By increasing the frequency of customer visits, the retail organization will gain more up-sell and cross-sell opportunities,” cited from the above-mentioned Aberdeen report. Retailers need to get away from the thinking that cutting prices or giving price discounts is the only way to drive customers back to the store.

How do you know if your loyalty program is working if you don’t track its effectiveness? Your program should give you the ability to know what percentage of your customers are participating and which rewards are being redeemed so that you can adjust accordingly. Otherwise, you’re not spending your marketing dollars efficiently.

Your customers should be able to reap the benefits of your rewards program through whatever channel they choose – in the store, on your website, from their mobile device, etc. From the Aberdeen report, “Changing customer needs for marketing deliverables must be addressed; as these changes are met, retailers can expect to remain top-of-mind, and increase their wallet-share…. As customer sales channel preferences and affinity behaviors continue to evolve, retailers must evolve as well.” Translation: You have to move with the times. Don’t be afraid to change, and don’t put up barriers to communication with your customers by resisting technology.

I hope the information from the Aberdeen report as summarized here is helpful and acts as a reminder that we must continue to evolve and improve our marketing strategies. If you would like further information or assistance with implementing an effective customer loyalty  marketing solution, contact me via phone or email anytime, or visit our website, www.powerpassloyalty.com.

July 14, 2010 Tip of The Week

Create rewards campaigns that focus on certain segments within your product lines or certain customers. It’s okay to have one general program that encompasses your entire store and customer base, but add to that with special programs for certain areas.

For instance, a retail gift store might offer a buy ‘x’/get 1 free for a certain line of candles. A specialty candy store that also sells smoothies could do the same type of thing for the smoothies or for a certain piece of candy. A book store might offer a promotion specifically for book clubs.

All of these things can be done in addition to your standard whole-store every-day loyalty program. They can even be campaigns you run seasonally instead of all the time. Bringing out special campaigns is a great reason to get in front of your customers again to get the word out.

Keep Your Loyalty Program Fresh

Do you have a run-of-the-mill rewards program? Something like: “spend ‘x’ amount and receive a $’x’ discount on next purchase”? When is the last time you examined your loyalty program to see if there might be a way to freshen it up a bit? If your business serves more than one need for your customers, you have an opportunity to segment across specific types of customers and their attraction to your business.

For example, if your store is a pharmacy that also carries gifts, over the counter medications, vitamins and other supplements, and more, you could create a reward program specifically for those customers who purchase their nutritional supplements from you. Further,  start a care-club for customers with specific medical conditions, such as diabetes or high blood pressure. If your business is a cafe or restaurant with a focus on morning and lunch, offer a buy ‘x’/get 1 free for your morning coffee drinkers. In addition, keep your lunch customers happy with a reward program that allows them to earn a free lunch.

A different approach to these ideas might be to use your reward program to give customers incentive to visit other areas of your store, or for your morning coffee customers to come back for lunch. A pharmacy could offer a discount for the gift department with every 5 prescriptions filled, introducing a customer who normally only comes in for meds to  other parts of the store. The cafe could offer a lunch special to morning coffee drinkers to get them acquainted with the lunch menu.

The examples above talk to two specific industries, but they apply to virtually any business that sells more than one product line or service. The point is to segment your reward programs across your different streams of customers. If you need help with creating an effective customer loyalty marketing program, or just ideas to freshen yours up, contact me for a free consultation.

July 7, 2010 Tip Of the Week

Clean your customer database regularly. A great way to do this is to offer customers a reward for updating and confirming their information. Run a campaign for a month-long promotion offering a free (sample of…; piece of gourmet chocolate; whatever – something that is easy to give away and attractive to the customer) for every customer who stops in and updates their information with you during that month. Have the reward available for them to take with them. Don’t make them wait for something in the mail or for an email to redeem.

Promote your campaign everywhere – signage in your store, Facebook, Twitter, your website, bag-stuffers, emails, etc. Make sure your employees know to ask every customer for updated information during that campaign period.

July 1, 2010 Tip Of The Week

Add tiers to your reward program and give customers a choice of redeeming their 1st tier reward when they reach that level or keep earning points and reach the 2nd tier,which offers a bigger reward.You can set multiple tier levels. However, make sure getting to the next level is attainable, and help customers along the way by offering special ‘stuff’ to those who have passed tier 1 and are on the way to tier 2. For example, send an email to all of your tier 1 customers offering them a free sample of (____) with their next visit, or free gift wrap, or anything of value that doesn’t cost you much to offer. The key is that only customers who are at a certain level in your rewards program get this special offer, and it should be an unexpected perk.

Giving your customer choices and unexpected pleasures keeps them actively engaged, helping to ensure they don’t wander elsewhere for a new discount once they feel like they’ve “completed” your program. You don’t ever want your customer to feel like they’ve finished and have to start over when it comes to your rewards program.

Repeat Purchases Do Not Always Equal Loyal Customers

The definition of loyalty is “A feeling or attitude of devoted attachment and affection.” We all know people love value. It is easy to assume value means price cuts, and price is definitely an important factor in the customer’s decision to buy, but we need to be mindful of three things: 1) all of your reward levels or choices should not be price-oriented; 2) customers should have a choice of reward; and 3) set reward tiers, giving care to not make the next tier seem unattainable. We want our customers to be loyal to us, not just coupon hunters.

In an article on thewisemarketer.com, “Top ten ways to improve a loyalty scheme,” dated June 21, 2010, the author points out, “be careful with price-oriented rewards, which can turn the potentially loyal frequent guest into a discount-focused customer.” A loyalty program that encourages frequent purchases by offering a coupon when they reach a certain level will certainly accomplish the objective, but what happens then? Will your customer turn to your competitor for a discount, or will they be loyal to you and continue to work toward your reward again? Maybe a better idea would be to give the customer a choice between two or three rewards, and make only one of them price-oriented. Another choice could be a free sample of another product you sell. Free is always a great way to introduce your customers to other lines you carry that they may  not have purchased yet. Find out what means value to your customers and give them choices, which actively engages them in their entire experience with you.

In addition to non-discount-oriented rewards and giving your customers choices, continue to keep customers engaged and actively participating in your loyalty program by building tiers for them to move toward. Set another level for your customers to look forward to, but make sure getting there is not too difficult. Think of it like this: You’re at a water park and one of the attractions is a huge, wonderful, thrilling slide with three levels. You climb up the steps to the first level and you have a choice to slide down and start that climb back up again, or keep going and have an even more thrilling slide down. You’ve made it this far, why not go ahead and climb to the next level? It might be difficult to get there, but they have a landing place halfway up for you to take a break and get a drink of water. So you go ahead and climb to that second level. You make it there and you have yet another choice…. you get the picture.

The article mentioned above goes on to state,  “once customers hit a reward tier, they consider whether they can make it to the next tier or whether it’s easier to get rewards from  a competitor.” When you set up your rewards program, think about that. Give choices: ride down the first slide, or keep going. If the choice is to keep going, make sure getting to the  next level is attainable. Give them help along the way. Perhaps that help could come in the form of a special, unexpected loyalty appreciation promotion or event for customers in between two levels; or free gift wrap/shipping/any-add-on for customers past that first level.

To summarize, the following steps can be used to develop an effective rewards program that will encourage loyalty instead of creating a coupon-seeking customer:

1. Actively engage the customer in your rewards program
2. Offer rewards that aren’t necessarily price-oriented
3. Give customers choices of rewards  at each level
4. Give customers the choice to take the reward or keep going to the next level for a bigger reward
5. Help them get to the next level

Comments and ideas are welcomed here. Retailers can learn a lot from each other, so please share. If you would like more information on how POWERpass can help you create an effective loyalty program, contact me or visit our website at www.powerpassloyalty.com.

Take Responsibility for Customer Loyalty

Last week I was at a gift industry buying meeting where the attendees were buyers/owners/managers of retail stores, and the exhibitors were vendors taking orders for their product. I was talking to a buyer one evening over dinner, and she shared a story with me that absolutely floored me. She went up to a vendor to look over the product line and possibly place an order. Her store has carried this vendor’s product before. She told the sales rep about her experience with one of the items not selling well in her store. She told me she thought the rep might offer suggestions or possibly some sort of promotion or different item. Instead, he shrugged his shoulders and said, “ok.” No encouragement, no understanding or sympathetic ear, no clue that he might even care how his product performed for her. This is sadly too often the case between buyers and sellers. Sellers see buyers considering not buying, and accept defeat.

Take, for instance, the plight of an independent store or downtown business having trouble competing with the big-box chain down the street. Almost every town has a ‘buy local’ campaign, and it is very necessary to do everything possible to bring awareness to the community of the harm that can be done by allowing a big chain retailer to come in and wipe out the little guys.  But if you are that little guy, you have to do more than scream “buy local,” and then shrug your shoulders in defeat when  you see your customers migrating toward the enemy. You have to show your customers that you care about them in addition to asking them to care about you.

There are countless ways to go the extra mile to show customers you care, but the most important thing to the customer is value. The definition of value is, “to consider with respect to worth, excellence, usefulness, or importance.” Creating value doesn’t mean cutting prices. It simply means giving your customer incentive to choose you over your competition every time.

If you don’t already have some sort of rewards program in place, that must be your first plan of action. Customers will be willing to make the effort to come to you, even if the big-box might be cheaper or more convenient, if they know they are earning a reward with their purchases. The reward has to be something of value to the customer. You can also use this opportunity to demonstrate the advantages of personalized service that they can’t get at the big-box. It would be really nice to think your customers stay loyal to you just because you are local and they have known you for a long time. But the fact is, they also need a valuable reason to choose you over and over.

Big-box chains are not going away. We are never going to convince consumers not to shop in them. We can, however, keep a big enough share of our customers’ wallets to thrive in this economy. We can have a loud voice in the movement to educate our communities, but we must also be proactive and creative in activities to retain customers. The responsibility falls on the retailer to make customers WANT to shop with you, not just make them feel like they have an obligation to. Don’t quit trying when you see the lure of the competition gaining ground.

If you are an independent business owner I would love it if you would share any suggestions you have, or ideas that have worked for you for customer loyalty marketing and retaining customers.