Buying or Earning Customer Loyalty

Which would you rather hear?cf-brand-loyalty-survey-results-infographic

“I love you, because of all the stuff you give me”

“I love you, because of the way you make me feel”

If you think about those two lines, it should be obvious, but many “loyalty” programs continue to be built on “free” stuff and not on experiences.

Most SMB retailers I talk with agree with the idea of building brand loyalty through experiences instead of “swag”, so why don’t they? The three most common reasons I hear are;

  1. Most of our customers are not part of our loyalty program
  2. Its much too expensive to create unique experiences
  3. Our highest point customers are not always our most profitable ones

I would suggest all three stem from improper metrics which impact the reward structure. A well designed brand loyalty program starts with understanding your current customer base and determining what you wish to accomplish and how you plan on measuring it.

Your Point of Sale system should be able to provide you basic data at a unique customer level on transactions and sales volumes and depending on your system, more detailed information like contribution to overhead, category and product profile. Start with this information and try to identify how discounts and coupons impact your customers choices and analyze traffic patterns. Take a look at employee level reporting to see if certain sales associates skew the numbers and look into what they are doing that positively or negatively impact the numbers, as the case may be. This should all be a matter of running a few reports and reviewing them; if not please see some of my other posts re POS machines and glorified calculators.

So now you have an idea of what you wish to accomplish with your program, be creative about the experiences. What are you selling, and it’s not the product I am talking about. What do you represent to your customers? How do you differentiate your store from the competition?  How can you enhance the positive attributes that define your business?

Two experiences that retailers were offering that particularly struck me as innovative and effective come to mind;

 A retail store that, after doing some analysis saw that their sales numbers did not merit staying open before 1pm, however the owner needed to be there to take care of business issues. After running some reports on customer activity, the owner sent a mailing out notifying their highest volume customers that they would now be open before 1:00 pm only for their VIP customers which they were one of, and they could either set an appointment or just knock on the door to come in and look around. To entice these VIP customers to make appointments, the mailing went on to say how during the event if they made an appointment that a showcase would be created specifically designed for the VIP based on their past purchases and new product received. Incredibly sales during this time period went up as many VIP customers took advantage of this offer and typically brought friends with them. In almost every instance, when an appointment was made, the average sales and units per transactions went up. Understanding their traffic and their customer habits allowed this retailer to offer a personal shopping experience that did not cost anything extra yet boosted their profitability substantially.

Another business owner, a restaurant operator, offered customers who generated a minimum number of points each month (which equated to $1200/month), a guaranteed table regardless of availability. Anyone reaching that amount of spending would be guaranteed seating at his popular restaurant within 15 minutes. He was unable to determine the impact of the promotions but the 14 people who attained this status, included having a dozen personal assistants who, to maintain the perk, would always ensure that this restaurant was their go to place for reservations. It also allowed him to ensure he had 30,000 plus in business from 14 sources, and to create this experience cost him nothing.

So loyalty programs are absolutely useful in building brand loyalty, the key is to use your POS system to generate meaningful reports so that you can set goals and targets, and then use some creativity to create great experiences to build customers who are not just loyal but real evangelizers of your business.

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About Kevin

1001 opinions on how retailers leverage data to manage their inventory, employees, supply chain and optimize their customers' experiences. Have equally as many about red liquid in wine bottles, especially those from Napa Valley and the Santa Rita Hills.

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One Comment on “Buying or Earning Customer Loyalty”

  1. Tyler Smith Says:

    I never thought of it that way. In your opinion, what is the best way for a primarily internet-based company to use a VIP/Loyalty program?

    Black and White Copies

    Reply

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