Loyalty programs will shift customer behavior in your favor.
“Companies with successful loyalty programs deliver a clear value proposition to target customers without trying to be all things to all customers.”
Loyalty programs are everywhere in the retail industry. Customers interact with them multiple times almost every day—whether shopping at a grocery store, buying a cup of coffee, or purchasing a new DVD.
Retailers have many questions when it comes to implementing a loyalty solution. Do loyalty programs really work? Can a loyalty program change how people behave and get them to spend more money with that company? Can loyalty programs reduce the likelihood that customers will shop at one of your competitors?
Many retailers have implemented loyalty programs. The retail loyalty market is fairly broad. In some segments—such as grocery, for instance—loyalty programs have become ubiquitous.
While retailers have lagged other industries in terms of implementing customer relationship management (CRM) systems and strategies, loyalty is a hot area. An Oracle loyalty study found that retailers that can develop and sustain distinctive loyalty programs that change customer behavior will create a true competitive advantage.
KickBack Rewards Systems develops loyalty programs with the needs of retailers top of mind. Kickback’s innovative solutions and unique approach to loyalty have proven to:
- Decrease price competition
- Build trust and positive customer relationships
- Decrease marketing costs
- Strengthen the brand
- Increase the share of wallet
- Increase sales
- Decrease customer defection.
There is a clear need for loyalty programs in the retail industry. However, rather than simply mimicking current programs, which will only lead to a competitive stalemate and increased costs all around, retailers—both those planning to introduce a loyalty program for the first time and those wanting to tune up their existing program—should design loyalty program offerings to yield true competitive advantage. This is one area where KickBack exceeds the expectations of its retailer partners. KickBack’s experienced Customer Relationship Managers will help business owners determine:
- Groups to target
- Exact behaviors to encourage
- Incentives to offer to each of these groups in order to change their actions
The loyalty strategy should be holistic and address how each of the key levers — marketing, rewards, and service—should be targeted at and provided to each member segment. In addition, a company must have a clear understand of what it wants to accomplish both today and in the future.
At its base level, the loyalty program is a way for retailers to understand their customer base beyond a cash transaction. KickBack’s loyalty solutions begin with helping retailers create a vibrant profile of their customers by gaining a comprehensive understanding of who their customer is. This vital information includes:
- Contact information (such as name, address, marketing preferences)
- Demographics (such as household members)
- Shopping preferences (such as customer-stated preferred items/categories/stores)
- Past transactions (such as past purchases and redemptions)
- Service history (such as calls and e-mails to customer service, in-store interactions)
Retailers can then use this information to segment the members (for example, moving beyond tiers to even more narrowly segment the members by lifestyle, purchase patterns, life stage, and so on).
Putting Data to Work for You
Loyalty programs are designed to change members’ behavior by providing an interlocking series of benefits and rewards. Companies can provide a variety of incentives, from special discounts to improved service to free items. The main rewards currently offered by retailers, according to Oracle and Forrester Research, include:
- Value/frequency promotions (such as spend $200 and get a free turkey, or buy ﬁve meals at a restaurant and receive the sixth free)
- Special sale times
All of these rewards are geared toward cost savings for the member. Discounts and rebates are important parts of the loyalty reward structure. Ninety percent of shoppers say that their initial reason for joining a loyalty program was to save money, Forrester found.
Discounts/rebates can be especially important for specific member segments that the retailer would like to keep as customers (such as frugal families). They are also valuable in targeted situations, such as increasing the purchasing frequency of an infrequently purchased item.
Retailers can do this by implementing a rewards strategy that uses a variety of coordinated and targeted incentives to cost-effectively change specific behaviors.
KickBack’s loyalty solutions help retailers identify guidelines for creating these targeted rewards offerings, such as:
- Providing benefits that appeal to each targeted group’s unique needs and desires.
- Focusing on rewarding desired changes in behavior, not just giving members rewards for taking actions they would have taken anyway.
- Maximizing vendor participation in order to offer larger rewards at lower cost.
- Encouraging members to unify their purchases by offering increasingly valuable rewards the more they spend.
- Offering rewards that are cost-effective and provide both immediate and longer-term incentives.
- Influencing customers at multiple points in their purchase decision-making cycle (for example, when they are in the car, when they enter the store, while shopping, and when they leave the store).