It's not easy acquiring information about your customers. It might seem a little awkward inquiring into their buying habits while they're checking out the latest digital cameras in your store, or trying to finagle their email address out of them at the cash register. Most people are wary of giving away too much personal information, and as much of a nice guy or gal as you may be, at the end of the day your customers are just looking for the best deal and the most value—not to assist you with your marketing efforts.
But what if you could both get what you wanted by combining the two? Loyalty programs seem to be a win-win for both the retailer and the consumer, offering customers monetary benefits and other in-store privileges, while retailers rack up valuable personal data and contact information that help drive future marketing initiatives.
To What End the Rewards Program?
There are several reasons retailers may jump into loyalty and rewards programs, whether it's prepaid promotional cards, financial incentives (such as a percentage off of certain purchases), or preferred-customer status with access to special services. "First, they're trying to increase their overall revenues or profits," explains Carlos Dunlap, Maritz Loyalty Marketing's vice president of business intelligence. "For instance, in town here we have Creve Coeur Camera. If Creve Coeur wants to get more of your business, they would maybe sign you up in their VIP club and therefore give you some kind of incentive to use Creve Coeur as much as possible, if not exclusively."
The second reason, says Dunlap, is so retailers can identify who their customers are. "A loyalty program is there to track loyal behavior," he says. "You have to know who your customers are and when they transact with you. It gives the retailer the ability to look at who their best customer is and who's not a best customer."
Tracking purchasing behavior also allows you to customize your marketing plans, since you can't approach every customer the same way. "It gives you the opportunity to profile customers, to see that this specific customer with this specific demographic makeup and financial makeup uses these kinds of services," says Dunlap. "Let's take Carlos, who is an avid digital photographer. He takes digital pictures and comes in once a month to print out 100 pictures. Occasionally he'll buy a new card, a new lens, or a camera. Jennifer, on the other hand, may be a little different—she may be more into video or into 35mm; she loves to do more of the artsy stuff, like weddings. The message that might appeal to Carlos would be an offer for 10-cent prints, or two prints for the price of one; the marketing message geared toward Jennifer might involve an 8x10 package. The loyalty program allows you to observe and take action."
Loyalty programs are also a means to implement enhanced communications. "If someone signs up for a loyalty program, they're usually saying to you, ‘I give you permission to communicate with me about things that are relevant, about things I've shown an interest in as part of this program,'" says Dunlap.
Of course, not everyone who signs up for your VIP club is going to remember to whip out their card when they shop, but the payoff for the retailer can still be substantial. "Of everyone who signs up for a loyalty program, somewhere in the neighborhood of 50 to 60 percent are actually active in the program and use it," says Dunlap. "The other 50 percent may sign up and you may not get any activity out of them; they may have only signed up once because you gave them a 10 percent discount to sign up. It doesn't necessarily appeal to everybody, and that's O.K., because not everybody is your best customer. It's still an advantage because it's more people than you had participating previously."
And while you can set up a clipboard on a table imploring your customers to sign up, it's your employees who will prove to be your most vital assets in achieving loyalty-program success. "Signing up at the point of sale is the most effective way," says Dunlap. "It helps to have the employees who are talking to your customers on a daily basis so they can become advocates of the program. Advocacy and loyalty is the holy grail, as in having employees who are advocates and not just pushing the program because they're told to say at every transaction: ‘Do you want 10% off your purchase? Join our program.' Instead they'll be saying, ‘This is really cool, this program will save you a lot of money and give you a lot of benefits.' Having employees who are advocates is the best way to get customers enrolled in the program; then once they're enrolled in the program, you need to treat them right and according to what it is you promised them. Then they'll go out and tell others all about it, how your VIP program is really cool and what they get out of it."
Tomax, a provider of real-time merchandising and store execution applications and services, is a company that deals in just such programs. The Tomax Retail.net suite helps retailers connect the dots, providing timely, relevant, actionable information to improve retail results. El Amal, a 60-store chain drug retailer in Puerto Rico, uses the Tomax Customer Loyalty solution, powered by Retail.net, to attract and retain a loyal customer base. The retailer's Pasaporte a la Salud (PAS) program, supported by Tomax Customer Loyalty, provides its members with special promotions, pricing, discounting, rewards, and incentives. Additionally, Customer Loyalty enables El Amal to track customer behavior at the point of sale. "Tracking what people buy is very important," says Tomax CEO Eric Olafson. "You have the ability to capture line-item data on customers, on which you can perform analytics. Retailers can see what might motivate the customers."
Customers have been responding positively to the PAS program. Overall, a member of the PAS program's transaction amount is approximately 45% larger than "non-loyal" customers. Moreover, loyal customers visit the store and make a purchase about 35% more than non-loyal customers.
In the December 2006 issue of Photo Trade News, Stan Bedford and his Bedford Camera & Video, with six locations in Arkansas, was chosen as PTN's Dealer of the Year. Bedford customers benefit from the store's prepaid print card program, an initiative that was started for the Christmas 2004 season, according to company president Jeff Beauchamp. "The prepaid print cards are printed on heavy cardstock and signed by a store manager," he explains. "Because they're on cardstock and not the kind that is swiped electronically, the balance is tallied on the reverse of the card. We've gone through approximately 12,000 to 13,000 cards at $40 each." Beauchamp asserts that using this production method is cheaper and easier, since it's all paid for up front.
Harold's Photo Centers (Iowa and South Dakota) has also embraced a multifaceted rewards program, geared to encourage digital prints and get people online. "For many years, we have used a stamp card for film rolls that gave a free roll processing after eight rolls processed," says owner Bob Hanson. "As digital started getting popular, customers started asking about their stamp card. We established a new rewards card that works with our Computyme POS. After the customer is entered into the system, for any digital print purchases in sizes 4" though 8" and for CDs, one point is awarded per dollar spent. The customer may redeem the points for other digital print services—each point is worth $.05. The customer has a scannable card or keyring tag, but we can also look up a customer by name or telephone number. The points also have no expiration date."
Each customer that enrolls in Harold's rewards program is also given a free introductory membership in its Photo Finale online print ordering system. "This allows the customer to share digital images, as well as order from home," says Hanson. "Of course, we've then captured the customer's email and home address for marketing purposes. We've used the program for about two years and have about 15,000 customers enrolled. We attempt to mention the program to each digital customer, but we often don't get a chance—and the customer shows us their card right away. We have online customers adding their number to digital orders.
"Our sense is that the amount of reward is not very important, as long as the program is very easy for the customer. Everyone appreciates being thanked." PTN