The Green Sheet Online Edition

November 10, 2008 • Issue 08:11:01

Value added workshop
Get rewarded with loyalty

By Christian Murray
Global eTelecom Inc.

Customer loyalty is the critical factor in maintaining and growing any business. And now more than ever, merchants need help retaining customers. From retail storefronts to business-to-business (B2B) back-office environments, rewards and loyalty programs can be key to achieving superior customer stickiness in a dynamic, challenging and increasingly competitive marketplace.

Rewards and loyalty programs are not new; neither is finding ways to increase cash flow and sustain repeat business at minimal cost and outlay of resources. But most merchants are not aware of how easy and cost-effective it can be to launch these types of programs.

That marketing pain

Of course, merchants routinely engage in marketing initiatives to enhance brand awareness and gain new business. But, in most cases, merchants struggle to effectively promote themselves due to lack of expertise, inadequate resources and restricted time. Marketing can be an extremely expensive undertaking and often results in limited return on investment.

Understanding this pain-point can jump-start conversations ISOs and merchant level salespeople (MLSs) have with merchants about the benefit of using loyalty programs as a marketing tool.

What sells

A few basic types of loyalty programs exist; they are the most popular and easiest to sell:

• Numbers: Similar to old-fashioned programs in which clerks punch holes in flimsy cards when purchases are made, rewards are earned based on the frequency (or number) of in-store visits or number of specific products purchased. For example, each time a consumer buys a cup of coffee, the clerk swipes the card. After the customer reaches a predetermined purchase level, he or she gets a free cup of coffee. It is a simple but effective promotion.

• Dollars: Dollars are earned as a cash-back balance on cards, based on how much money is spent in-store. It is a similar program to those of credit card issuers that give cash-back rewards based on the amount of card usage. For example, the more consumers spend, the more they earn back. Merchants select the dollars spent and reward levels of the programs.

• Points: Points can be accumulated based on the number of visits, services or products purchased. Points can also be rewarded based on in-store promotions or specific marketing initiatives. For example, each time a customer's car is washed, a value of one club point is loaded onto the card. After five club points are earned, the customer can redeem them toward a complete detail or wax of the car.

It is easy to understand rewards and loyalty programs. With basic knowledge and supporting documentation, ISOs and MLSs will be equipped to approach merchants with the strong value proposition of loyalty programs.

Additionally, when merchants recognize how loyalty programs increase foot traffic and sales, they are more likely to remain with their processors. Therefore, loyalty programs are a strong merchant retention tool and a great way for sales reps to differentiate themselves.

Customer demos

A key ingredient in rewards and loyalty solutions is the collection of customer information or demographics. Most loyalty program providers give merchants access to customer databases.

Having this information allows merchants to send e-mail marketing and direct mail material to registered consumers. This type of database building is not always offered, but it is highly recommended.

Merchants can use this information to promote repeat visits, special events and limited-time offers. Merchants who implement loyalty or rewards systems should consider this type of data collection to foster the success of card programs. Utilizing these options can generate cash flow and new business during slow times or holidays.

The right fit

An important first step in evaluating rewards and loyalty programs is to target merchant types that are sold such programs frequently. Recognizing the specific niches for which these programs are best suited will enhance the value proposition to those targeted merchants and ultimately help close more sales.

Two basic types of markets are a good fit for loyalty programs:

• Retail: ISOs and MLSs should understand what types of products or services merchants are selling before suggesting loyalty solutions to fit them. Then programs can be tailored to reward consumers based on the number of store visits or dollars spent.

• B2B: Many types of solutions can be adapted for this environment, one being an employee incentive program, another being a bonus points program based on employee sales or productivity. Rewarding corporate customers based on monthly purchase volumes is another example.

Programs should be tailored to specific business types. Following are three business categories and the kinds of programs best suited for them.

• Restaurants: Sales reps would most likely want to pitch or offer the "dollar-based" program to restaurant owners who typically want to increase average tickets and promote multiple visits.

• Car washes: Loyalty cards can be used to track visits or specific types of services rendered - from standard car washes to detail services. Merchants can reward customers using points or dollars, depending on what promotions they offer.

• Coffee Shops: A coffee club card can be useful in tracking how many cups of coffee consumers purchase. Merchants can base the rewards on how much purchase activity is taking place

Get busy

Merchants are looking for affordable, manageable ways to market themselves to consumers. By adding rewards and loyalty sales channels, ISOs and MLSs can increase merchant retention levels more effectively than through standard gift card programs.

Sales professionals sell more of what they are comfortable selling. Thus, being able to easily articulate to merchants the benefits of rewards and loyalty programs makes it easier to sell them.

This leads to sticky merchants, helping ISOs and MLSs build dynamic portfolios and increase profits for years to come.

Christian Murray is the Director of Business Development for Global eTelecom Inc. He has more than 12 years' experience within the payments industry. GETI provides check processing and gift and loyalty solutions. For more information, visit www.checktraining.com and www.giftcardtraining.com, or contact Christian directly at 877-454-3835 or cmurray@globaletelecom.com.

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