The Green Sheet Online Edition

September 09, 2013 • Issue 13:09:01

Maximizing loyalty program ROI

By Michael Gavin
Merchant Warehouse

Whether they provide cash back, special offers or another form of reward, loyalty programs are designed to keep customers coming back. And in the United States, such programs have more than 2 billion members, according to The Billion Member March: The 2011 Colloquy Loyalty Census. Decades ago, the airline and hospitality industries began leveraging frequent flyer and point-based programs to recognize and reward their most loyal customers. Loyalty programs spread quickly to the credit card realm, and then to major retailers, grocery chains and fast-food operators.

Over the past several years, smaller merchants like local sandwich shops have accelerated implementation of loyalty programs, whether via punch cards (for example, buy 10, get one free) or through POS integrations typically tracked through key tags.

According to Colloquy's The Rules of Engagement: Loyalty in the U.S. and Canada, the average U.S. household is enrolled in more than 18 loyalty programs. But only 17 percent of program enrollees noted that loyalty programs are "very influential" in their purchasing decisions. So, while merchants evaluate the merits of new and existing loyalty programs, the question remains, how much influence do these programs have on consumer engagement and bottom-line revenues?

Perhaps the challenge lies within the programs – the value delivered to consumers and the communication about merchants' incentives and offers. Do consumers understand how to earn points and rewards, as well as the conditions for redemption? Is the program generic for all, or are rewards tailored to individual needs? Are merchants tracking program effectiveness? These questions highlight just a few challenges in today's loyalty program environment - especially for small and midsize business owners.

Three tips

So what should merchants do? Understanding what it takes to deploy and manage an effective loyalty program is esssential. Following are three tips to assist with that:

1. Have a program: For most brick-and-mortar business owners, loyalty programs help the bottom line. They provide customer engagement and communication opportunities, keep customers coming back, and offer extensions for referring friends, product-specific promotions and more.
2. Invest: Punch cards are quick to implement, cost-effective and simple to manage, but they miss the mark in terms of knowing who customers are (that is, contact information and email address); what they buy (integrated with inventory management); and why they value a specific business. The most successful loyalty programs do much more than simply reward customers with free cups of coffee.

   Merchants must think strategically and appreciate the value of their customer-base data. Loyalty programs are gateways to gather data that enables delivery of relevant, targeted offers and rewards, and opens dialogues with customers regarding new products, merchant expansion and more.

   Previously, this would have been daunting and costly, but thanks to myriad new technologies, including tablet-based POS and cloud-based e-marketing tools, there's no excuse to not think big. With strategizing, planning and leveraging new technologies, small businesses can efficiently and cost-effectively implement programs similar to those of their big-box neighbors.

3. Think mobile: According to the 2013 Maritz Loyalty Report US Edition, 73 percent of smartphone users are interested in interacting with loyalty programs via mobile devices. The application marketplace is flooded with new mobile loyalty options for merchants.

   Mobile app solutions deliver everything from tailored loyalty programs to integrated payments and white-label application development. And mobility offers a huge upside in terms of redemption activity, overall data capture, customer communications and more. Investigating these options is a must.

ACI Worldwide reported in March 2011 that 85 percent of loyalty program members reported they hadn't heard from the merchant promoting the program since the day they'd joined. New technologies deliver abundant opportunities to not only establish loyalty programs, but to do them right. Loyalty programs require a strategy, legwork upfront, and ongoing evaluation and management. For those who do their homework, the return on investment (ROI) will be there, as will opportunities to drive additional revenue.

As Merchant Warehouse Senior Vice President, Sales, Michael Gavin is responsible for day-to-day management of the company's direct sales, as well as leadership of all sales activities within the company's agent channel. He has served as a key leader within the organization since joining the company in late 2000. Merchant Warehouse's Genius Customer Engagement Platform is a single, intuitive platform that integrates every transaction technology, loyalty program and more. Contact Michael at mgavin@merchantwarehouse.com. For information on the company, visit http://merchantwarehouse.com.

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