What’s in it for me? Customer loyalty programs

You be the customer.

Store A has superior service, great product, fun in-store events, and fair prices. Store B also has superior service, great product, fun in-store events, and fair prices, but store B also has a Frequent Buyer Club that rewards members for their loyalty with coupons and discounts. Which store would you choose?

If you’re like the many shoppers we speak with each year, you’d probably go with Store B: over 60% of customers we surveyed this year told us rewards programs definitely influence where they shop. And when asked about the value of frequent buyer programs, retailers tell us that “Member” customers tend to spend more at each transaction (up to 15%more) than “non-member” customers. Stores with the highest market penetration are those with the largest frequency of customer purchases; when done well, frequent buyer programs attract customers.

Frequent Shopper Cards, Loyalty Clubs, Rewards Programs – whatever you call them – are favorites with today’s customers, but only when they can see the immediate value of the program. “What’s in it for me?” is the big question customers wrestle with before they join any club. If the program only benefits the store, why should customers bother to join?

That’s a big question. There are lots of loyalty programs out there, and many of them aren’t very good, so we decided to hold a focus group to ask consumers to tell us what they like, and don’t like, about loyalty programs. And just as we suspected, customers do not give you credit for creativity. They like simple, easy to understand programs. Participants do not necessarily expect a price break, but they do enjoy receiving an occasional deal, new product information, and special in-store privileges. Here are a few of their favorites:

Chico’s Passport Club: After spending $500 you receive a 5 percent discount on all purchases, free shipping online; invitations to exclusive sales, in store parties and private events, birthday bonuses, and more. Our focus group especially liked that Chico’s offers additional incentives when they introduce a new member to the club. (Remember this for your own program – customer referrals are of tremendous importance.)

American Express Member Rewards gives you one point for virtually every dollar you spend on your card; points have no expiration date and there's no limit to the number of points you can earn. Our focus group liked the frequent references to “Member” benefits – being a member sounds more important than just a customer.

DSW Shoes Rewards was voted best retailer rewards program by Kiplinger.com. Members (there’s that word again) get certificates for every 1500 points earned, enjoy two double-points shopping days each year, receive special offers and birthday gifts, plus an All-Access Pass to a members-only page. Focus group participants also like the members-only page and the fact that you don’t have to carry a card – purchases are tracked by telephone number.

Southwest Airlines Rapid Rewards program is simple: Fly eight roundtrips within 24 months and receive a free roundtrip ticket.

Memories Live On, a California scrapbooking store’s “Big Spenders Club” was voted “Best in the Valley”. Their club has three discount levels shoppers can reach; members are also handed a 40 percent off coupon each month. Did you catch that? Members are handed a coupon – they must come into the store to pick it up, and you know what that means! Once they’re in the store with coupon in hand, you know they are going to stick around to redeem it. That’s one smart move.

Convinced? If you’re ready to implement your own rewards program, here’s how to get started:

q Check out your competition’s loyalty programs. Visit their stores and their websites –in some cases we found more, and sometimes different, information on the website than we found in the store. Make a list of the things your competitor’s offer and use this list as a guide in creating your own program. (Hint: sign-up for competitors’ programs as well.) This will give you the inside scoop on what’s going on in their stores.)

q Review the benefits of your favorite loyalty programs – retailer, airline, credit card – the kind of company doesn’t matter, the things you like about the club are what count. List these features as well.

q Determine how you will implement your program. Will it be a punch card or key tag? Will you create your card on your own computer or will you sign-up with a company that provides turn-key loyalty programs? If a turn-key program sounds good to you, check out Ideation Gift’s “Power Pass Card Program” at http://www.powerpass.net. It’s a customizable program that can be used to provide instant gratification – many retailers have had success using it like this: the Power Pass card holder spends $50 and instantly receives a $5 coupon. If a key tag program sounds good to you try PunchableKeyTags.com.

q Determine the information you will collect and create a form for customers to fill out (make this available in-store and on your website). Use this form to gather customer information including personal interests, birthdays, anniversaries, etc. This will help you target customers for future ads and promotions. Make sure that you collect e-mail addresses! Let customers know they will receive special offers that are only available via e-mail. This will force you to create a strong e-mail blast program – very important today in connecting with customers while keeping advertising costs down.

q Create signing to hang in-store and on the windows, plus buttons for associates to wear announcing your new program. The bigger the excitement surrounding the program, the more customers will want to join.

q Highlight members in your newsletter and in a special section on your website.

q Use your POS system to collect data on what your loyalty program customers purchase. This information will help you with future purchases by allowing you to zero in on what your best customers tend to buy, and when they are likely to buy it. You can also use this data to alert customers when their favorite items are in-stock or on sale.

Should you have a frequent shopper program? Absolutely. What’s in it for the customer? Rewards for their loyalty. And what’s in it for you? How about a store full of happy customers creating positive word-of-mouth advertising? It’s one thing to hear customers tell their friends they like your store, and quite another to hear them bragging about your store – that’s loyalty.

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