he convenience store industry is changing rapidly. Today, the lines between c-stores, drugstores, quick service restaurants, and grocery chains have blurred giving customers plenty of options when it comes to purchasing food, beverages, and other household items. With convenience no longer the singular main competitive edge for convenience stores, they need to find new ways to attract and engage both new and existing customers. One of the best ways to do this is through a robust customer loyalty program.
Customer loyalty programs aim to provide customers with an enhanced experience by providing benefits to its members in the form of discounts, free products, special promotions, and exclusive perks. There are many benefits to convenient store operations that choose to implement a loyalty program.
- US consumers have about 3.8 billion memberships with customer loyalty programs.
- 84% of consumers are more likely to stick with a brand if they have a loyalty program.
- 49% of consumers agreed that they spent more money with a brand after joining a customer loyalty program.
While these statistics are impressive, it’s critical for c-store operators to understand how to create a successful customer loyalty program. These programs can be expensive to implement and maintain. By selecting the right type of program and systems, c-store operators will improve their chances of getting ahead of their competition.
THE ORIGIN AND EVOLUTION OF BRAND & LOYALTY PROGRAMS
Customer loyalty programs are not a new concept. In fact, they have been around for hundreds of years. The first record of loyalty programs can be traced back to the 1700s in the United States. At the time, retailers and merchants would give their loyal customers special copper coins that could be redeemed later for discounts.
During the 19th century, the coins became too costly to produce, and companies started switching to cheaper alternatives. One of the early examples were Green Shield Stamps that were given out by companies that participated in the program. Consumers could collect the stamps and use them to purchase special gifts from the Green Shield catalog.
By the 1920s, companies started creating their own brand-specific loyalty programs. The most notable loyalty program at the time was implemented by Betty Crocker, an American baked goods company. The company encouraged customers to save “box tops” from their favorite Betty Crocker products that could be redeemed for rewards and discounts.
DIGITIZATION OF BRAND & LOYALTY PROGRAMS
Early brand & loyalty programs relied on customers to manually collect, track, and redeem their rewards. This was extremely cumbersome. This promoted the creation of new methods such as punch cards (buy 10, get one free) or coupon mailing lists. These solutions were better but still had their limitations.
As technology advanced, so did brand & loyalty programs. In 1981, American Airlines became one of the first major companies to leverage data to track its customer’s purchasing behaviors by awarding airline miles, discounts, and free flights to its most frequent customers. Their AAdvantage frequent flyer program was a huge success and remains one of the most popular loyalty programs in the world with about 70 million members.
Digitization of brand & loyalty programs continued into the late 20th and early 21st century. More companies started gathering customer phone numbers and email addresses to automatically calculate rewards for their customers. This would allow them to target those customers with special offers outside of their stores.
As mobile phones became more prevalent, companies began offering special mobile applications for their loyalty programs. This provided consumers with an easier way to track and manage their participation in the loyalty program. It also gives companies the ability to improve interaction and personalization for each customer. Currently, mobile applications are the most popular method of administering customer loyalty programs. According to one survey, 52% of consumers prefer using a mobile application for tracking and redeeming rewards (up from only 20% in 2016).
THE MODERN BRAND & LOYALTY ARCHITECTURE
There are several key elements that are necessary for the implementation and success of a brand & loyalty program. While every company has customers with different needs, preferences, and expectations, these fundamentals serve as a great universal foundation.
- Member Acquisition - Consumers have a lot of options when it comes to brand & loyalty programs. It’s important for brands to think about what benefits they can offer to consumers that would encourage them to choose their loyalty program over a competitor. Providing sign-up bonuses or incentives is a great way to attract new members. Also, the sign-up process must be fast and easy. If the application process is too difficult, new members won’t bother.
- Data Collection - Modern brand & loyalty programs must have some method of collecting customer data that can be used to create customized experiences and improve the program. Research from Oracle indicated that most consumers (87%) were comfortable with companies tracking their shopping habits if it meant that a loyalty program could be customized for them.
- Frequent Engagement - Consumers are used to the constant barrage of marketing and advertising from numerous brands. They want to hear from the brands they love. One of the best ways to do this is through omnichannel communication. In the past, most companies would leverage one method of communication like email. Today, a combination of messaging through social media, in-app messaging, push notifications, and SMS (short message service) is most effective.
- Customization - Successful brand & loyalty programs can provide a level of customization for their members by offering special messaging and promotions that are tailored to their needs based on their demographics and buying habits. This can be accomplished through segmentation or personalization. With segmentation, brands will create offers that are targeted toward certain demographics. For example, creating an offer for discounted beer for men in their 20s and 30s during football season. Personalization takes this a level further by providing offers that are specific to the individual.
- Innovation - Customers can quickly become bored or desensitized with the same promotions and offers over and over. Brands need to have a plan to avoid consumer complacency by regularly creating new, exciting features within their customer loyalty program.
APPROACHES TO BRAND & LOYALTY PROGRAMS
Every company will have different needs when it comes to designing the perfect brand & loyalty program for their customers. Some approaches will be more successful depending on their type of customer, industry, and reward programs offered by the competition. In general, there are four main types of customer loyalty programs -- points, tiers, value, and fee-based. Most loyalty programs will fall into at least one of these categories, but some are a hybrid of multiple types.
- Point-Based Loyalty Programs - These types of loyalty programs are the most straightforward. Customers are given points in exchange for their activities which can be redeemed for discounts, perks, or free products. Punch cards fall into this category since each punch services as a “point”. Points can be given for more than just purchased. Some companies may choose to award points for other activities like referring friends and family or engaging on social media.
- Multi-Tier Loyalty Programs - Tier loyalty programs allow companies to reward customers differently based on their engagement with the brand. Customers who reach higher tiers can become eligible for better discounts or early access to sales or new products.
- Value Loyalty Programs - Value loyalty programs offer other benefits besides discounts or products. Their intended to connect with customers on a deeper, emotional level. For example, a company can donate a percentage of the customer’s purchase to a charity that they are passionate about. One great example of this was TOMS shoes, who promised to donate a pair of shoes to a child in an underdeveloped country for every pair of shoes sold.
- Fee-Based Loyalty Programs - It might seem counterintuitive, but there are situations where charging customers to be a part of a loyalty program makes sense. Research shows that this can actually produce more sales. In fact, 62% of customers who were a member of a paid loyalty program admitted to spending more
- with that company. Companies like Amazon and Costco have done this successfully. The trick is to make sure that the benefits outweigh the fees.
BEST PRACTICES AND FUNCTIONS OF MODERN BRAND & LOYALTY SOFTWARE SYSTEMS
The technology that you select is just as important as they type and approach to your brand & loyalty program. Fortunately, there are quite a few cutting-edge solutions available on the market.
- Data Security - To have a successful loyalty program, you need to collect and process a lot of data. This could make your company a prime target for cyber criminals looking to steal your customers’ sensitive personal data. Getting hit with a cyber attack can severely damage your reputation and even liable for any resulting damage. When selecting a brand & loyalty software system, be sure that it provides an appropriate level of data security. Since hacks and breaches are often a result of human error, the company should that their team receives proper cyber security training.
- User Friendly- The system should have a user-friendly interface for both the team managing the loyalty program as well as the customer. If the system is difficult to use, customers will avoid it. Chipotle learned this the hard way when they rolled out their Chiptopia loyalty program in 2016. Despite quickly gaining over 3 million members, the program was clunky and difficult to use. After a short time, the company had to abandon the program, but not before giving away over $70 million worth of free burritos.
- System Integration - Companies need to ensure that the program they select to track and monitor their customer loyalty program integrates with their other systems including their CRM software, databases, and other vital applications.
- Advanced Features - A great customer loyalty system will not only track customer data and rewards, but also provide new tools to leverage as a part of the program. Features such as geotargeting, social media integration, and artificial intelligence can change the game of brand & loyalty programs.
TOP BRAND & LOYALTY PROGRAMS
There are numerous examples of brand & loyalty programs that have brought new, innovative approaches. Brands that can think outside the box give themselves a competitive advantage. Here are three examples of companies that implemented industry-leading programs.
- Starbucks Coffee - Starbucks Coffee was one of the first companies to introduce a mobile application as a part of their Starbucks Rewards program. The company understood that the more people used the application, the better data they would be able to collect regarding which stores the visited most frequently and favorite drink orders. To encourage use of the app, Starbucks provided a feature that allowed customers to pay directly from their mobile device. This increased usage of the app and significantly improved the quality of data.
- Shell - Fuel-related loyalty programs are among the most popular According to the 2019 Road to Rewards Report, 66 percent of all consumers belonged to a loyalty program that provided fuel savings. Most loyalty programs reward customers for purchasing only their products. Instead of building their own program, Shell decided to form partnership with the Fuel Rewards Network. This enables their customers to earn discounted fuel by buying movie tickets, meals, and booking travel.
- Chick-Fil-A - Chick-fil-a has an extremely loyal following. Part of this success is due to their tiered reward program. The more purchases they make, the higher they advance in the program. As they advance, they can earn more points and better rewards. For example, a silver status member can earn 11 points for every dollar spent while a red member will earn 12. This strategy encourages customers to make more frequent visits to the restaurant.
WHERE DO BRAND & LOYALTY PROGRAMS GO FROM HERE
According to Excentus, 51 percent of customers admit to visiting retailers more often if they are a member of a loyalty program. Because of the massive benefits to this strategy, it will be even more critical in the future for brands to leverage these types of programs. The question is, where do brand & loyalty programs go from here?
Companies can expect to see an even greater shift toward technology in the future. Brands that have not embraced this change so far will need to get on board quickly. Those that already have a customer loyalty program will likely seek to further optimize their program.
- Artificial Intelligence - Artificial intelligence (AI) will likely play a major role in customer loyalty programs in the future. These smart programs will have the ability to process large amounts of data and automatically tailor offers for specific consumers. This will take personalization to a whole new level.
- New Devices - Currently, mobile devices are the chosen tool for brand & loyalty programs. This will likely change in the future as new devices such as wearable technology and smart cars become mainstream.
- Contactless Transactions – Consumers are demanding more and more options to place orders or pay for products that don’t require human interaction such as self-checkouts and cashier-less transactions. This will include how loyalty rewards are also redeemed.
- Fuel Savings Programs – As electric cars become more common, loyalty programs related to fueling will likely change to provide other types of energy credits.
The Brand & Loyalty Program space is quickly becoming a volatile arena. There could be new technologies that emerge that change the way brand & loyalty programs are implemented. At the end of the day, companies that remain flexible, watch their competitors, and pay attention to feedback from their customers will have the best chance of success.