New year, new loyalty: Five lessons you might have missed in 2014
By Jenn Reichenbacher, Senior Director of Corporate and Channel Marketing, Merchant Warehouse
Black Friday: an opportunity for businesses to take their profits out of the red and into the black. At least that’s how it’s supposed to be. But this year, many stores saw lackluster results. The common problem? Offering huge discounts in the days leading up to Thanksgiving, assuming a one-time effort could turn profits around. By the time Friday arrived, consumers didn’t get the same feeling of capitalizing on the best bargains as years past. And their loyalty to a specific store? Nowhere in sight.
So what’s a store to do differently the next time around? Further slashing prices during that coveted stretch from Black Friday to Christmas isn’t the revenue-generating answer businesses are looking for. But a good loyalty program could very well be.
If you didn’t adopt a loyalty program in 2014, this is one New Year’s resolution that’s sure to pay off, and we have the numbers to prove it. Last year, Merchant Warehouse polled over 100 small business owners and managers and 700 shoppers to get their take on loyalty during the back-to-school season — the second most lucrative time for businesses after the winter holidays (which brought in $601 billion in 2013).
The core finding? Implementing a loyalty program is a far more reliable and long-lasting strategy for gaining happy, repeat customers than slashing prices left and right.
As you’re planning for the year ahead, consider injecting some loyalty into your 2015 plan. Here are five lessons you can take with you into the new year to make sure you’re at the top of customers’ minds from January all the way through December.
Sales are temporary, but a good loyalty program is forever
In our back-to-school survey, 91 percent of shoppers said a reward or promotion would encourage them to take their business someplace new. Fifty-three percent also said price is the biggest driver of buying decisions. But competing with other stores’ sales isn’t the only way to bring shoppers in the door. Staying connected with customers via a loyalty program is a more reliable way to always be at the top of consumers’ minds.
Another thing to note: a history of meeting revenue goals doesn’t necessarily indicate future success. While the final results aren’t in just yet, the National Retail Federation predicted holiday sales to grow 4.1 percent to $616.9 billion, up from $591.7 billion in 2013. This sounds promising, but don’t assume you’re going to get a big piece of that retail revenue pie without upping your efforts. Those billions generated from holiday sales last year might be distributed differently in years to come, and loyalty is the best way to create a shopping experience that draws in new customers and keeps everyone coming back time after time.
It benefits some unexpected things (like email open rates)
You’ve used loyalty to establish customer relationships and you’re starting to see an increase in repeat customers, but that’s not where the advantages end. We found that rewarding shoppers for their purchases has the potential to give market share a 20 percent boost.
But wait, there’s more: our survey also found that members of a business’ loyalty program are 40 percent more likely to click “open” on promotional emails. After that, there’s a 20 percent higher chance they’ll click again to access your site. Moreover, when a loyalty member receives an email, they’re also 10 percent more likely to make a purchase.
There’s still time to be an early adopter
While the benefits are not exactly a secret, retailers aren’t taking advantage: our back-to-school survey revealed that 70 percent of retailers had no rewards program in place. What’s more, only 34 percent said they’d give loyalty a try next year.
Retailers who do have a loyalty program in place are reaping the benefits: 97 percent saw a positive experience and plan to continue their loyalty offerings in the year ahead. Now is the time to take action—before every retailer out there figures out the effectiveness of this tool.
Punch cards are out; Social media engagement is in
Our survey found that creating an engaging online experience that incorporates social media is the most effective way to get and keep shoppers’ attention, and often leads to both web and in-store purchases. In fact, nearly half of the shoppers surveyed said they preferred engaging with stores via social media during the back-to-school season.
But it isn’t just about offering coupons. A successful approach to building loyalty via social media means delivering content that gives consumers the feeling of exclusive access. Offering incentives for follows, likes and shares is an easy way to get them to take a genuine interest in your brand, and catch the attention of like-minded, prospective shoppers they engage with on social media. It also creates an environment where shoppers are likely to stick around, eager for future promotions. Couple that with great content and you’ll be able to build a large and loyal customer base via social media.
Loyalty provides actionable customer data
You could blindly push out promotions and analyze their effectiveness after the fact, or you could take a more methodical approach. Injecting data into your plan takes the guesswork out of the equation, giving greater visibility into the attitudes of shoppers and even guiding inventory decisions. It comes as little surprise that 65 percent of the businesses we surveyed who already had a loyalty program in place are also using some type of data-tracking tool.
Customer data can even connect your online and in-store experiences. For example, if a member of your loyalty program keeps checking the price of an item on your website, you could use this information to offer an item-specific coupon if they check it out in store, helping you close the sale.
The bottom line: targeting already-loyal shoppers with exclusive deals based on their buying habits is a win for everyone involved.
A new year means a new opportunity to rethink your strategy for fostering a dedicated customer base and meeting revenue goals. While now is a time to look back on what went right and what could have gone better in 2014, it’s also a time to start planning for the next big retail opportunities. Valentine’s Day ($17.3 billion), Easter ($15.9 billion) and Mother’s Day ($19.9 billion) are right around the corner, and stores that reward loyal shoppers are more likely to draw in new customers and keep them there long after that first sale.
(Photo by John Haslam.)