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Creating customer loyalty programs that work

Structuring the program

Retailers can make the loyalty program as simple or complex as they want. Most will agree; however, the simpler it is the better it will work. For instance, most consumers are already familiar with the loyalty programs offered by their local grocery store and/or gas station; therefore, modelling the program after one of these simple platforms can help prevent consumers from becoming frustrated or confused.

When developing its program, A&M Corsons started by researching existing platforms by focussing on those that would not affect the company’s profit margins. By looking at the various programs being offered in the marketplace, it can help a company develop a program that consumers are familiar with.

It is also a good idea for retailers to check with their product suppliers to see if they offer such a program as it can be used to help get things started.

It is also important to determine which items are to be included in the loyalty program. For example, many retailers will allot points to ‘recurring’ sales items (e.g. chemicals), but exclude one-time, large-ticket items such as hot tubs. Points can also be rewarded to retailers based on set dollar amounts.

A&M Corsons, for example, opted for a simple, three per cent discount that is rewarded to their customers once they reach a $350 threshold (this is equal to $7.50). Retailers should be sure to pick a discount level they are comfortable with when starting out. For example, a retail store with average margins between 30 and 40, or even 40 and 50 per cent, may not want to offer more than 10 per cent to keep their customers coming back regularly. A loyalty program should increase the company’s sales, not make it less profitable.

It is important to refer to the company’s goals when determining what items/services to include in the program, which will allow customers to accumulate points. Some businesses do not award points for service work or other larger shop-related jobs, while those retailers looking to expand their service departments will.

Val Vista
To compete with big box stores, smaller specialty retailers need to capitalize on the value-added benefits they offer such as knowledgeable customer service and sales staff, differentiated warranties, and loyalty programs.

Further, now that big box stores are carrying chemicals, hot tubs, gazebos, and other industry-related products, smaller specialty retailers need to capitalize on the value-added benefits they offer such as knowledgeable customer service and sales staff, differentiated warranties, and loyalty programs. These value-added benefits should be touted when promoting the loyalty program. Some retailers even include free ‘at home’ consultation, extra service, etc., in the structure of their programs.

Once the business goals and structure (i.e. how points can be earned and redeemed) of the loyalty program has been determined, it is then time to figure out how it will be integrated and implemented within the company’s existing accounting and POS system.

One way for retailers to maximize their loyalty program is to figure out ways of reminding customers of where they stand and what they can obtain with the points they have earned. Therefore, the receipts printed from the POS system should indicate both the total number of points earned and possibly what awards can be obtained with accrued points.

Without a business management software program, it is best to keep the loyalty program simple by using punch cards such as ‘Buy 10 get one free’ on a specific product. Consumers are familiar with these customer loyalty programs when buying consumable goods such as coffee, pizza slices, sandwiches, etc. Another example would be to offer ‘Spend $200 and get $10 off your next purchase.’

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