Designing Loyalty Programs During Pandemic Times To Change Behaviour

Designing Loyalty Programs During Pandemic Times To Change Behaviour

Designing Loyalty Programs During Pandemic Times To Change Behaviour

By Marlene Milczarek

 

During these pandemic times, more consumers are working from home, which means fewer stops to refuel and fewer trips per week to a convenience store. Leveraging loyalty programs now can be an important asset to helping c-stores, carwashes and fuel retailers drive the right behaviour – whether it’s higher purchase frequency, retention, lifetime value, referral, or just offering a safer, contactless customer experience.

Enticing customers to be loyal should be a top priority for every business as shoppers cannot be simply replaced with an influx of new ones. In fact, acquiring a new customer costs five to 25 times more than catering to those who are already loyal. Even a very small hike in customer retention can have a large impact on the bottom line.

According to a study by Bain & Company, Inc., a five per cent increase in customer retention has the potential to increase profitability by 25 per cent to 95 per cent. The reason is simple. With each purchase, the likelihood of people sticking around for another order grows significantly. According to a survey from Luxury Institute LLC, repeat customers have a 60-70 per cent chance of making another purchase on a subsequent visit, and prospective clients have a 54 per cent chance of buying after a second visit.

Are loyalty programs really worth it?

When 7-Eleven launched their 7Rewards app-based loyalty platform in 2019, membership almost tripled from nine million to 25 million members – a 278 per cent increase over a two year period, according to the company’s press release. And, the end benefit for 7-11? Their program is driving an additional eight customers per store each day, driving increased store traffic for franchisees and corporate stores.

“Loyalty programs are always really effective tools when a retailer wants to acquire customers, reward them, or understand customer behavior and do more than just a basic one size fits all promotion,” says Steve Allmen, founder and president, Loyalty & Co.

Offering loyalty program rewards and benefits (such as free shipping, or tangible gifts, such as free coffee or a free donut) gives customers a reason to stick around, explains Allmen, or to drive purchase behaviour, even when the competition has better prices. “Take for instance the scenario of when you may need a gas fill-up, and you see two gas stations in sight,” says Allmen. “The one you ultimately select may be the result of a loyalty program incentive because it offers three cents off per lite or you know you’ll get a free wash, so that drives your behavior.”

Changing behaviour and driving differentiation through loyalty programs

As Steve Allmen notes, “it can be as simple as buy nine coffees, get the 10th one free, which brings you back in for that 10th coffee.” Ultimately, “it’s all about changing behaviour and market differentiation.”

While Shell has Airmiles, and Petro Canada offers Petro points, if you look at Esso, they have a very different approach to loyalty. “Theoretically, a consumer could walk into Esso with three loyalty cards in their hands, and use one or all three cards. They may use Esso Extra for fuel rewards, PC Optimium in the c-store, and a Tim’s rewards card for the coffee shop,” adds Allmen.

How should retailers be revamping/rethinking loyalty during these pandemic times?

The true definition of convenience retail is to get someone to understand that you’re more than just fuel. During these pandemic times, with consumers not consuming as much fuel and making few trips the c-store, loyalty experts says retailers should leverage this as a communication opportunity.

Zsuzsa Kecsmar, CCO and co-founder of Antavo Loyalty Management Platform, says “companies should adopt the try to serve, not to sell mentality, and use the loyalty program to stay in touch with customers.”

If we look at 7-11, they’ve taken the opportunity of the pandemic to offer added convenience for their fuel customers – allowing them to pump, pay and be on their way, without taking out their wallet. In June of 2020, the chain rolled out a pilot for fuel loyalty across participating stores in the United States, offering contactless payment options to reduce touch and drive instantaneous savings at the pump – a discount of 11 cents per gallon on the first seven fill-ups, after which members receive a three cents per gallon discount, with the per-gallon discount automatically showing on the pump display.

Kecsmar from Antavo Loyalty says, “if a convenience store has a loyalty program that’s available through a dedicated app, the company could send push notifications to members about upcoming products or hot new deals, and when the lockdown is lifted, chances are high the store will be the first stop on people’s shopping list.”

Allmen from Loyalty & Co encourages retailers to leverage their vendors and shake up what they do: “You can communicate promotions and new products launches; promoting things that may have dropped off in consumer spending and drawing them in with gamification or lottery, anything to get the consumer aware that you’re there and to help them through these times, especially as we’re in lockdown is great.” That may include promoting pre-paid gift cards for men that need last minute gifts for their spouses.

Deciding on a loyalty program that’s right for you and ensuring success

Most convenience retail and most fuel retail in Canada today has a loyalty program in some form, with 71 per cent of companies investing about two per cent of total revenue in loyalty and CRM. Retailers that don’t have it are either exploring it and hoping to do something.

Knowing which loyalty program type fits your brand the most gives you a head start in designing your loyalty concept and increases the likelihood of delivering an experience that your customers will truly love. If you wish to run a successful loyalty program, according to the experts, you have to go beyond offering discounts.

“Convenience stores have a significant advantage,” says Kecsmar. “They can create mystery bags as rewards that customers can buy with loyalty points. These can be goodie bags filled with a random assortment of products you wish to promote. Loyalty members would get a kick out of opening their present. And to top it all off, you can ask them to share their story on social media (or upload the photo of the event to Instagram) to spread positive word of mouth about your brand.”

Allmen from Loyalty & Co. says the core drivers to look at when designing a loyalty program are: Lift in average transaction (did the consumer spend more as a result of being in a loyalty program); frequency (do they shop with me more often) or; are they new to me (never been at my location before)?

They are many companies specializing in the area of loyalty and willing to work with you in developing a solution for your current and anticipated needs, from developing a business case to design and implementation and promotion.

“Make sure you understand why you’re launching or joining a loyalty program,” concludes Allmen. “Like any program, it takes the right thinking and execution. It’s a crowded marketplace, so you have to think about how you’re going to differentiate yourself. We give that advice to all of our clients.”

Marlene Milczarek is a freelance writer and founder/chief strategist of SPINNING IDEAS, a marketing consulting firm based in Acton, Ontario. Her career spans over 16 years in marketing, helping businesses grow revenues, improve their branding and sales enablement tools. Marlene holds a Chartered Marketer (CM) designation from the Canadian Marketing Association (CMA), and has a Bachelor of Journalism from Ryerson University. You can connect with Marlene on LinkedIn: www.linkedin.com/in/marlenemilczarek.

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