Loyalty Programs Are a Two-Way Street
Loyalty programs are the darling of retailers. They are a low cost, proven way to entice customers to make return trips, and retailers are keenly aware of how much
more expensive attracting new customers is compared with retaining existing ones. Promoting loyalty seems to be working for retailers: the Customer Insight Group recently reported 26.7% growth in the number of U.S. loyalty programs from 2010 to 2012.
Retention is tough. Competition abounds; shoppers are more keenly aware of pricing variations from store to store, in large part because of handheld devices they can use to “showroom.” Loyalty to a particular store goes out the window, often, when a 10% discount can be found down the street, or online. In fact, 61% of retailers told Retail Systems Research that customer retention was their greatest challenge last year. Although loyalty programs are increasing members, the amount of participation in the programs by members is roughly 50%: Most people are not active in the programs they are enrolled in. What a lost opportunity!
Loyalty programs provide retailers a list of people who are basically saying: “Yes! I want to hear more about your products and services!” This is, obviously invaluable. The mistake that many retailers make is that they take the consumer for granted. They do not adequately reimburse their most valuable asset — the customer — for either their business or for sharing their shopping data. That doesn’t go unnoticed by shoppers: ClickFox found that 62% of consumers don’t believe that the brands they’re most loyal to are doing enough to reward them.
So, what could retailers do differently?
- You have a treasure trove of information on each individual shopper. Use it to send out personalized offers. Loyalty is not a one-way street. Remember, shoppers are not only handing over money in exchange for a product or service, but they also are spending time and sharing personal information. Providing extra value — whether in the form of discounts or special events — is a great way to gin up loyalty.
- Partner with other retailers offering complementary products. In the Northeast, for example, supermarket chain Stop and Shop offers coupons and discounts on in-store items to loyalty members, but it also offers a percentage off on Shell gas.
- Everyone wants to be special. But there are those who really are really special. And they should be recognized. For instance, McKinsey
notes that the hotel chain Starwood, for instance, reports that its top two percent of guests are responsible for 30 percent of the ompany’s profits. Starwood rewards these “megatravelers” with differentiated levels of pampering. McKinsey reports: “Those who stay 100 nights are awarded the ultimate luxury of being assigned a personal Ambassador, a personal concierge who is available 24 hours a day, even sometimes when the guest is not staying at a Starwood hotel.”
As with any meaningful relationship, loyalty depends on trust. Retailers should only ask for and store (securely) information it plans on using. Customers should feel confident that handing over personal information does not place their identities at risk.
There are some new loyalty solutions for retailers, such as AppCard, that help encourage repeat customers. In the case of AppCard, the enrollment process is eased as customers are automatically enrolled in a program. Retailers can discover who is promoting their businesses, and reward their most loyal brand advocates. Such apps help retailers understand their customers through real-time analytic reports, and retain customers through personalized offers, with no integration through POS systems.
