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BY
CHRISTINA ZARRELLO
Loyalty’s New Paradigm
Designing programs that help improve recency, frequency and shopper satisfaction
Loyalty marketing programs, which recognize and reward the best customers of
a retail business, provide opportunities
for shoppers to receive discounts or free
items from their favorite retailers. In today’s tough economic climate, cashstrapped consumers are tuning in to loyalty program in massive droves and are
leaning on loyalty programs to stretch
their budgets further by earning rewards
for their purchases.
Loyalty programs have undoubtedly
become both extremely valuable and a differentiator for shoppers when determining where they will make their purchase
decisions. Loyalty schemes also provide
significant value to retailers. By encouraging shoppers to visit a store and providing
incentives for them to purchase products
through promotional discounts, loyalty
schemes can help retailers drive profits
and increase their market share.
Smart retailers are recognizing that
loyalty programs provide extremely valuable information about their loyal customers. Retailers today are incorporating
valuable shopper metrics and sales data
that can in turn, enable them to improve
frequency, recency, conversion, retention,
market basket size, customer segmentation, margins and, most importantly, customer satisfaction. This is the new paradigm for achieving customer loyalty. If reSPONSORED BY
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tailers adopt the new loyalty paradigm,
they will ultimately benefit since shoppers
will be more likely to spend in their stores.
“Conditions are ripe for marketers to
use loyalty data across the enterprise, enhance value propositions and adopt innovative loyalty models such as coalitions, as
they seek to revive lapsed members and
turn engaged members into profitable,
loyal customers,” says Rick Ferguson, editorial director, Colloquy.
MEMBERSHIP EXPLODES
To put some numbers against the idea that
membership in U.S. loyalty rewards programs is exploding, the 2009 Colloquy
Loyalty Census reports that the retail sec-
tor, led by specialty retailers, grocers,
mass merchants and department stores,
today constitutes the largest collective
market for U.S. loyalty reward program
memberships, outstripping travel-hospitality and financial services memberships
Retail loyalty program memberships
have reached 701 million, representing 39
percent of the U.S. loyalty market. That
compares to 556 million in travel-hospitality, which includes airline, hotel, gaming,
car rental and cruise programs, representing 31 percent of the market, and financial
services credit card programs at 422 million for 23 percent of the market.
“In our 2007 Loyalty Census white paper, we predicted the next loyalty battle-
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SPONSOR Q&A
A D V E R T O R I A L
Retail Customer Loyalty
Q&A: Building Loyalty Across Multiple Channels
Q
Loyalty programs were once thought to depend on cards, points and
redemption discounts until retailers realized these were just giveaway
programs. Thinking beyond the card, where do you see opportunities for
retailers to build customer loyalty?
Today’s shopper is accustomed to being treated as an individual.
They expect to be recognized and marketed to based on their individual choices. They also expect to have a seamless shopping experience across all channels. The successful retailer will build a marketing approach that can deliver customer specific offers reliably across
all channels.
With some creativity and the right technology, retailers can deliver the right promotion to the right shopper, taking a large-scale
loyalty program far beyond cards and points. The marketer should
picture the shopper in action. For example, the marketer knows that
a particular shopper visits the store once every five days and frequently buys sliced meat at the deli but has never tried the retailer’s
fresh sliced bread from the bakery. The marketer decides to offer the
shopper a free loaf of bread the next time they buy meat from the
deli. This individualized incentive helps increase the shopper’s loyalty to the store, while potentially adding a store-brand item to the
shopper’s weekly deli purchase.
With customers spending less and markets shrinking the feeling is that
every shopper who remains loyal is worth her weight in gold. What can retailers do to keep their best customers satisfied and retain their loyalty?
First, the retailer needs to understand who their best customer
is and why they are their best customer. Is the customer loyal because you are the closest store? Does the shopper seem to shop a
particular department more than the average shopper, indicating
they have found something in your store that they can not get elsewhere? Understand as much as you can about how this customer
sees your store.
Next, try to determine how to use this information to keep this
customer loyal to your store. If this customer seems to have found
something in your store that they enjoy, make sure it is available as
regularly as possible and even give it to them for free.
The retailer should also analyze his current ability to deliver a loyalty program, including considerations such as: whether their organization understands the benefits of loyalty; whether there is sufficient
customer information available in a usable format; whether or not their
marketing team knows how to analyze the customer information; and
what the limitations are of their program to deliver targeted content.
Based on this analysis, the retailer will be better equipped to develop a
short and long term plan with the goal for enhancing loyalty and improving the customer experience.
The key to retaining loyal customers, converting casual shoppers into frequent shoppers, and growing the shopper base is the “wow” experience. How
should retailers create extraordinary shopping experience to inspire loyalty?
Retailers should explore which innovative products and services
to deploy in order to help improve operational efficiencies and cut
costs while still maintaining a shopping experience that wows customers and helps build shopper loyalty.
Self-service technology is one way retailers can maximize operating efficiencies while enhancing their customer’s shopping experience. For example, self-checkout is a win-win for retailers and
their customers. Wait times rank as a major factor in customer satisfaction and some retailers have seen a 40 percent reduction in average queue time and throughput gains of up to 20 percent after deploying self-checkout technology.
With the ever-increasing sophistication of today’s shopper, it’s
also important to create and offer promotions consistently across
multiple channels so that customers have strong incentives to repeatedly shop at the same store. To best accomplish this strategy,
retailers should consider a comprehensive offer management solution like NCR Advanced Marketing. With this solution, retailers can
craft incentive offers based on basket size, item mix, loss leaders or
other parameters. The promotional message can then be delivered
across multiple channels such as email, the Web and point of sale.
NCR Advanced Marketing allows retailers to easily coordinate and
manage offers, points programs or incentives and then view realtime results - all from the managers’ desktop. ■
SPONSORED BY
NCR Corporation provides software, hardware, consulting and support
services to help organizations in retail, financial, travel, healthcare
and other industries interact with consumers across multiple
channels. www.ncr.com
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ground would be in retail and we were
right,” says Kelly Hlavinka, Colloquy partner. “With the travel category in maturity
and the financial services category likely
to contract, we expect retailers to be at the
forefront of innovative loyalty marketing
for years to come.”
According to the 2009 Colloquy
Loyalty Census, the retail sector reward
program shopper membership roles are as
follows:
• Specialty Retail: 191.3 million
• Grocery: 153.3 million
• Mass Merchants: 124.8 million
• Department Stores: 92.8 million
• Drug Stores: 73.9 million
• Fuel-Convenience: 51.2 million
Diving deeper, here is what the overall picture looks like for each segment:
• Grocery’s 153.3 million membership
count represents a 23 percent increase
since the 2007 Loyalty Census, as the
shift away from two-tiered pricing and
toward promotional currency continues. Wal-Mart remains the dominant
U.S. grocer, though grocers big and
small are fighting back with a renewed
emphasis on shopper data and customer- centricity.
• In the short term, department store
investment in loyalty programs will suffer, mainly because most still are tied to
store credit cards and those portfolios
are in dire shape. Once the recovery begins, the smart players will exhibit renewed focus on improving the customer
experience, and that focus will depend
on effective use of shopper data.
• Colloquy is quite bullish about the
drug store sector, despite the economy.
While most retailers are experiencing
double-digit sales declines, retail pharmacy sales increased 1.5 percent last
year. Drug store operators have consolidated and now realize that the loyalty
program is the best device for tracking
individual behavior.
Colloquy pegs the number of overall active
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“ Conditions are ripe for marketers to
use loyalty data across the enterprise,
enhance value propositions and
adopt innovative loyalty.”
memberships in U.S. loyalty programs at
792.8 million. Definitions of active memberships vary from company to company;
but a typical example is a member that has at
least one instance of activity, such as earning points on a purchase or redeeming for a
reward, within a 12-month period. The
792.8 million number means the rate of active membership is relatively flat at 43.8
percent, compared to 39.5 percent in 2007.
All demographic segments appear to
be tuning in to loyalty and rewards-based
programs, according to the study’s findings, however, 18-to-25 year old millennials represent the fasting growing demographic. Millenials (age 18-25) represent
a soaring 32 percent growth rate in terms
of their participation since last measured
in 2007. Women as a demographic are up
29 percent in the same time period.
“Millennials represent a golden opportunity in a time of economic darkness for
loyalty marketers,” says Hlavinka. “This
demographic is receptive to the wish-list
of loyalty initiatives — eager to join programs, eager to build relationships with
their favorite brands and eager to engage
with new media channels. This shows a
powerful opening for loyalty marketers to
build sustainable loyalty with the next
generation of American consumers.”
LOYALTY AT IT’S BEST
Innovative retailers such as CVS,
Sephora and IKEA run well known loyalty programs that are highly successful
when it comes to converting shoppers
into buyers.
CVS devised a highly successful loyalty campaign in 2001. CVS customers
opt-in to participate and receive mailers
featuring special coupon offers and
health information. They also receive
exclusive cardholder savings on select
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SPONSOR Q&A
A D V E R T O R I A L
CRM as ROI Enabler
Q&A: Increase Profitability While Inspiring Increased Customer Loyalty
Q
Loyalty programs were once thought to depend on cards, points and
redemption discounts. Thinking beyond the card or giveaway program,
how can retailers build customer loyalty?
CRM can help connect retailers more directly to their customers in
all channels. Sophisticated CRM solutions enable cost-effective customer marketing by leveraging personal data and purchasing history.
Data can be used to tailor selections for each store to create a unique
store ‘personality.’ Merchandise thus mirrors the needs of customers
who shop there vs. stocking stores based on a ‘head office’ template.
Relationships can be built pre-sales, and via up-selling and postsales’ activities. Customers come to know that the right product mix
will be available at the location they frequent and at a price they are
willing to pay. Greater financial returns and brand reinforcement result as customers have more positive experiences.
Q
With customers spending less and markets shrinking, what can retailers
do to keep their best customers satisfied and retain their loyalty?
Intelligent use of CRM can help your staff ‘warm’ market to their
customers to create and build consistent, meaningful and mutually-beneficial customer relationships. When all customer points of
contact are as focused, niche targeted, responsive and compelling
as possible, sales and merchandising staff, along with store and
channel management, can utilize the high quality data for their
own and customers’ mutual benefit. Allow each store to have a
unique and tangible ‘personality,’ based on customer demographics and buying preferences for each outlet. Time-constrained consumers will keep a retailer top-of-mind if they consider them a reliable resource that pinpoints their needs.
Q
What tools and strategies can retailers deploy right now to make a difference in customer loyalty retention, conversion and purchasing frequency?
Retailers must deliver value in exchange for customer loyalty.
Let customers know that they have cross-channel shopping options. Present all the benefits they receive by signing up for your
programs. Send highly customized personal emails and direct
mail. Target coupons and create promotions based on customers’
actual shopping habits. Invite them to in-store or web events and
demos with guest experts, celebrities, as well as to charitable
events and new product releases that mirror their interests. Sales
receipts can be used to notify customers of upcoming events or
specials. Continuously tweak in-store and online product selection
based on proven recent trends.
Q
The key to retaining loyal customers, converting casual shoppers into
frequent ones, and growing the shopper base is the “wow” experience.
How can retailers create shopping experiences that inspire loyalty?
Scan a downloadable bar-coded ‘shopping list,’ and allow customers to present their e-loyalty card and e-coupon via their
PDA/phone on checkout. ‘Talk’ to customers’ mobile devices and
inform them about loyalty promotions and activities when they enter the store. Let them use their ‘electronic wallet.’ Scan drivers’ licenses to sign up members vs. entering data manually. Install a
POS Mobile solution for ultra-fast checkouts, no-fuss returns, and
to instantly enroll shoppers in new CRM initiatives.
Q
In what ways can executional and operating excellence be used to further
engage customers?
A consolidated CRM, POS, BI, mobile POS and mobile computing
solution, when fully-integrated to an intelligent, robust, reliable
and cost-effective ERP solution, will enable complete end-to-end
organizational transparency. Give staff enterprise-wide all the
tools they need to meet and capitalize on customers’ needs. Also
provide exceptional solutions that allow staff to moderate costs,
optimize merchandise and enhance profitability. By knowing your
customers – and by them knowing you – your business can keep
pace while adjusting to ever changing conditions. Marketing programs can finally measure consumer response. And intelligent CRM
solutions can provide retailers with the data they need to be valued
by their customers. Allow every customer to see you as a retailer
they can count on, whichever location or channel they use. ■
SPONSORED BY
Steven Greenwood is Vice-President of Magstar Inc.,
developers of Magstar Total Retail, a top enterprise
retail solution for SMB’s. Steven can be reached at:
1-877-332-3335 or at www.magstarinc.com.
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merchandise, and “Extra Bucks” for
purchases they make during designated
shopping periods.
“We’ve tested this program in six markets and customers responded very positively,” said Larry Zigerelli, executive vice
president of marketing at CVS. “Seventyfive percent of surveyed customers in
these test markets indicated they shop at
CVS more often because of ExtraCare.”
The Sephora Beauty Insider program is
another highly successful loyalty program
that promises its customer the “red carpet
treatment” when it comes to personalized
beauty, and ask its shoppers, “Wanna be a
beauty VIP?” Since 2006, Sephora has rewarded its most loyal customers through a
special newsletter that offers membership-only deals, freebies and other exclusive perks online and in-store.
Home furnishing giant IKEA added a
suite of self-service kiosks earlier this year
so its customers could sign up and join the
IKEA family loyalty scheme while shopping at its store. IKEA sought a system that
would facilitate a quick, easy and instant
way for customers to apply to its IKEA family loyalty scheme and implemented a suite
of Xen X5 kiosks. The self-service kiosks
offer customers the convenience of signing up in-store and, in addition, loyalty
scheme customers benefit further by being
the first to know of upcoming promotions,
sales and events via on-screen information
targeted solely at them.
“We are very happy with the IKEA family registration kiosks that are installed in
all Belgian IKEA stores,” said Tim
Schroons, IKEA Belgium. “They allow us
to have a much more efficient way of recruiting new IKEA family members without the presence of a co-worker being required. This versatile solution allows us to
recruit new members and have existing
members print out a temporary card or update their customer profile in a userfriendly way.”
TIPS TO DRIVE LOYALTY
For retailers looking to transform their
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“Millenials are receptive to the wishlist of loyalty initiatives – eager to join
programs, eager to build relationships
with their favorite brands and eager to
engage with new media channels.”
loyalty programs into highly successful
campaigns, IRI recommends the following action steps that retailers can take to
drive shopper loyalty.
Planning: Shoppers are making most
decisions before they enter the store.
Retailers should shift merchandising and
promotion strategies into people’s homes via
traditional media and online social media.
Price: Shoppers demand good prices
and quality in what they buy. Retailers
along with manufacturers should redouble their collaboration strategies to offer
consumers the best value possible.
Product: Shoppers are buying familiar
products, so new product experimentation is at an all time low. Retailers can increase shelf space of existing brands at the
expense of new products.
Promotion: Shopper direct marketing
has arrived and will become a strategic
differentiator. Retailers should develop
new media strategies that will ensure
consumers’ maximum exposure to marketing messages.
Place: Shoppers are looking for the
best deals wherever they can find them.
Loyalty to a channel/banner is only as
good as “what have you done for me lately?” Retailers must review and update
the value proposition of products and
stores.
“To be a success in this recessionary
environment, you must anticipate and
respond to change before it happens,”
says IRI Consulting and Innovation
President Thom Blischok. “This is instrumental in establishing long-term
shopper loyalty even after the economy
gets back on track.” RIS