Loyalty programs benefit customers because they provide discounts and rewards for items that the customer wants and needs. Just as important is that with the right strategy these programs benefit retailers and manufacturers as well, says Peter Albers, executive vice president of marketing and digital for Ohana Companies, Wilmington, Del.
“The redemption of rewards allows for the collection of a great deal of customer data – from basics such as contact information to more complex trends such as buying habits,” Albers says. “This data, if properly analyzed, can lead to a wonderful opportunity to build an incremental sales channel and allow for powerful follow-up and targeted marketing campaigns.”
The critical factor is the collection and analysis of the data, Albers adds. “The customers are already giving you data to generate more revenue, but you have to be able to tie the data back to the customers.”
Customers joining loyalty programs typically provide critical demographic information, enabling companies to target customers with similar profiles. Once in the program, customers provide purchasing habits every time they present their loyalty card. From this information, merchants can tailor rewards designed for particular customers, Albers explains.
For example, a coffee shop can learn that a loyalty customer comes in twice a week and buys a large coffee. A reward that benefits both the customer and the coffee shop is one that offers some amount off of a sandwich or pastry – as long as some profit margin is still maintained – on the customer’s next visit. Another possibility, Albers suggests, is offering a fourth coffee if the customer buys a third one in a week. The idea is to prompt the customer to make the additional purchase in order to get the reward.
The data is critical in such instances because the additional coffee offer to the customer above would cost the merchant money if made to a customer who buys a coffee six days a week, for example, Albers says. The more frequent customer should receive a different offer. Similarly, a much less frequent customer probably needs a different offer in order to make an additional purchase.
Rebates can provide an entry into a business’ loyalty program, Albers adds. The rebate can draw the occasional customer who might not come into the store unless receiving a significant deal, such as a large percentage off an expensive item. The rebates are much simpler to fill out and redeem than they were years ago, and provide the merchant with important demographic and contact information for the customer. From that information, the merchant can tailor rewards related to the rebate purchase. For example, a person buying a washer could be offered a reward for the subsequent purchase of a dryer.
“Before rebates meant the merchant sold one more unit,” Alberts says. “They were complicated. You came home, filled them out, mailed them in and hoped you would get a check a quarter or two later. Now the feedback loop is very short.”
Most of today’s rebates enable customers to enter any information online, providing the merchant with quick information and providing the customer with a much faster reward, which Albers says is critical in making the rebate a part of a loyalty program rather than a gimmick for a short-term sales boost.