Magazine Article | September 17, 2008

Revitalize Your Loyalty Program

Source: Innovative Retail Technologies

By updating your loyalty programs, you could be increasing sales.

Integrated Solutions For Retailers, October 2008

Targeting and retaining in-store customers has never been an easy task for retailers, especially in today's rapidly expanding multichannel selling environment. The Aberdeen Group reveals that 93% of retailers execute loyalty programs as a standard offering for their Web, brick and mortar, and catalog channel customers. Such campaigns include, but are not limited to, point perks, rewards, frequent buyer offers, and private label credit cards. Of those retailers that have programs, 74% report 'partial to no tangible improvement' in their customer loyalty programs compared to their competitors. If your store falls in this category, here is a look at some of the indispensable features and marketing tactics that can improve your loyalty program.

Rid Your Store Of Paper Enrollments
Most of today's loyalty enrollment applications are paper-based. Paper-based enrollment applications are not a reliable source for garnering accurate customer data (e.g. mailing addresses and e-mail addresses). Consumers typically fill out the least amount of information possible just to get the card. "Store clerks really aren't trained to make sure the customer has provided accurate information on the form," says Jeffrey Grider, president and CEO at Capture Resource, a provider of data enrollment capturing technology. "In addition, people fill out applications with phony names and addresses [e.g. Donald Duck and Disneyland] just to get a card." Since most loyalty programs are simply discount programs, employees sometimes distribute cards without receiving a completed application. Therefore, electronic enrollment is a key to gaining and retaining accurate data. Self-service enrollment kiosks enable the customer to fill in one piece of accurate identification information like home telephone number. The kiosk uses a Web service to connect with public phone directories to automatically populate the rest of the information, eliminating the concern for bogus data.

Make Loyalty Cards Interactive At POS
Another key feature necessary to acquire valuable customer information is to swipe the loyalty card at the POS. In order to further your own loyalty program, make the point of contact (i.e. swiping the card) right there at the POS. "When a cashier swipes a loyalty card at the POS, the customer is getting immediate feedback on the current point balance," says Malcolm Fowler, senior VP at Ernex, a marketing company that uses technology to create and build loyalty programs. "Instead of waiting for the balance in their monthly statements, customers should know right at the end of the transaction where they stand." This benefits the retailer as well. "Retailers really need the registration of the person who's carrying a loyalty card," Fowler explains. "Accurate customer registration information will allow the retailer to better determine purchasing behavior. As retailers get more sophisticated in their efforts, they have to attribute purchasing behavior to an individual in order to change their purchasing behavior. If you don't know the individual, you can't change their purchasing behavior." 

Understanding purchase behavior will help the retailer, but how does the consumer truly benefit from participating in a loyalty program? Stuart Kiefer, VP of loyalty solutions at First Data, a provider of merchant services, explains, "I can build products all day long that merchants love, but if the consumer doesn't adopt it, it doesn't matter. The first way to create the most consumer benefit is to be able to provide rewards in real time at the POS." Kiefer advises retailers to offer benefits and discounts that can be offered on the current transaction at the POS instead of issuing points or miles. Actively creating that benefit at the POS can make the customer feel valued.

Maximize Marketing For Increased Loyalty
Loyalty programs create a new marketing channel, and the POS creates a new medium for communicating with customers. "Loyalty programs aim to build share of wallet," explains Fowler. "Therefore, retailers create a long-term value relationship with their customers — one that explains spending habits that keep customers close to the business." Steve Pruitt, VP of sales and marketing at Teraco, a graphic arts-oriented manufacturer of plastic cards, states,  "Aside from the obvious increase of sales, there are many marketing benefits to be realized from loyalty programs. Start by luring customers in with good gift designs. Special features such as textured inks, scented inks, and special shapes can be very enticing. This should be accompanied with creative packaging, merchandising, and product placement."

Retailers want consumers to buy everything at their store instead of going from store to store to buy products. For example, many people go to discount stores to purchase paper products (e.g. paper towels, toilet paper), even though these items are sold at grocery stores. "Retailers need to do one-on-one marketing through loyalty programs so consumers have a reason to purchase everything at one store," explains Grider. "The only way to make that happen is to know the customers and know their shopping habits. The benefits can be very easily documented through average visits per week, average spend, and average basket size."

Loyalty programs are a valuable tool to learning your customers' purchasing behavior. If your loyalty program needs improvement, consider implementing electronic enrollment applications to obtain accurate and useable data. Ramp up your one-on-one marketing programs to keep your loyal customers in your stores. And, remember that providing a good quality experience for your customer is a simple and cost-effective way to keep your best customers coming back.