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Leveraging loyalty
Key ways you can use data to create an unforgettable experience
November 2, 2008
Daniel Sambrano drives past three grocery stores to reach the Stop & Shop in Cohasset, Mass.He loves to use the store's easyShop handheld scanner. Sambrano scans and bags groceries as he goes, and the device displays targeted coupons on its full-color screen based on his previous purchases. When he gets close to the shelves that hold these discounted items, the scanner alerts him.
To use it, Sambrano swipes his Stop & Shop loyalty card when he enters the store. For other retailers like the chain, the easyShop scanner from Modiv Media Inc. represents the next generation of loyalty-card benefits.
Customers crave relevant product and discount information, and to them "pleasant experience" is synonymous with "quick and painless." Tools like easyShop give them just that; not to mention, retailers can (and should) use enhanced loyalty-program features themselves to gain insight into shopper behavior.
With more technological tools like scanners on the horizon, retailers must consider sprucing up their loyalty programs - or implementing one in the first place - if they are to keep up with innovators like Stop & Shop. Here are several key ways to do just that.
What's in it for them?
For loyalty programs to ultimately succeed, customers need to feel they're worth it. To give them that feeling, retailers must utilize these programs to improve the overall experience.
Customers crave relevant product and discount information, and to them "pleasant experience" is synonymous with "quick and painless." |
"The consumer says, 'If I'm going to sign up for the program, carry the card and give the retailer information about me, then make my retail experience better,'" said Phil Rubin, president and CEO of rDialogue, a relationship marketing agency.
To that end, Rubin cautions that true loyalty takes more than discounts or coupons.
"Loyalty comes when there's an emotional connection that will trump even marginal difference in price," he said.
Case study: CVS/pharmacy
Since it launched in 2001, CVS/pharmacy has grown its ExtraCare program to 50 million cardholders, making it the largest consumer-rewards program in the nation. In addition to receiving 2 percent of purchases in "ExtraBucks," customers receive targeted coupons and e-mails with discounts and health and beauty information.
"We designed the ExtraCare program to help make saving money easy," said John Barron, director of relationship marketing for CVS/ pharmacy.
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To fee or not to fee
Many retailers grapple with the decision of whether to charge a membership fee for loyalty programs. Experts say it depends on the retail category and the strategic goal for the program.
While a fee may help offset the cost of the program, it can significantly decrease the amount of information gathered, since fewer people are willing to pay.
"If a retailer needs to learn something about their customers, then an open enrollment works very well," said Rick Ferguson, editorial director of Colloquy, a loyalty-marketing trade publication.
However, if the goal is true customer involvement, a fee may be a good idea.
"A fee acts as a filter," Ferguson said. "The only people who join are the ones who see enough value in signing up. You'll have smaller membership, but they will be more engaged."
"A fee acts as a filter. The only people who join are the ones who see enough value in signing up. You'll have smaller membership, but they will be more engaged." - Rick Ferguson, Colloquy |
Case study: Best Buy
When Best Buy dropped the fee for its Reward Zone program, membership multiplied 10 times. The increased participation allowed the consumer-electronics retailer to target the merchandise and staffing in individual stores to reflect the customers who shop there.
Some stores are targeted to the high-definition TV buyer; others concentrate on home appliances, with less emphasis on entertainment technology.
The larger pool of transaction information also drives communication. "If you buy an HD TV, they will follow up with an offer to get you back in the store to buy a Blu Ray DVD player," said Rubin of rDialogue.
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Use it or lose it
Consumers don't seem to mind providing information if it's used to help them. But retailers should keep the information current, or lose it. Consumers find diaper coupons irritating when the kids are in high school.
A loyalty program only has real value for the customer when the retailer monitors transactional data to be proactive.
"If you have customers who just had a baby, don't wait for them to join the baby club," said Gary Charbonneau, president of WCG Associates. "Use the data to identify when an event has happened that pushes a person into a different purchasing class." Dynamic customer profiles also help keep records updated. Rubin recommends asking questions at each interaction; but it's important to keep it simple.
"Never ask for more than two or three pieces of information at a time," he said.
Additionally, if coupons aren't redeemed at allover a certain period of time, it could be time to trim the distribution list.
"If a retailer can't link sending a piece of communication with usage from an offer code or coupon, it may be a good idea to stop investing in that customer," Rubin said.
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Elephant Pharm uses its loyalty program to reach customers with targeted messages. |
Pharm, the small, Northern California-based chain of wellness stores and pharmacies, has married its back-end inventory-management system with a customer database.
The stores use the G.O.L.D. Retail Supply Chain Suite, supplied by Aldata. Brendan Lowe, vice president, North America for the company, said the system allows Elephant Pharm to adjust its product mix based on the shopping profiles of frequent customers. For instance, the store can alert buyers of organic shampoo that their favorite scent is about to go on sale.
The moral of the story? Like the easyShop scanner, applications already exist to download coupons onto cell phones, and other wireless technologies are in the pipeline that will free shoppers from carrying cards or keychain fobs to show their loyalty.
Retailers that modify their loyalty programs to include such technology and truly engage the consumer will learn that these changes ultimately breed a feeling of trust and bring retailers and shoppers closer.
Gary Wollenhaupt is a freelance writer and regular contributor to Retail Customer Experience.
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