To Know Them is to Love Them:
The Evolution of Customer Loyalty in Specialty Retail

– Don Capman, President,
   J.D. Associates

As a retailer, what do you think about when you hear “CUSTOMER LOYALTY”? It’s certainly the latest buzz in specialty retailing. But it really started to gain momentum in the early ‘90’s. When most of us think about customer loyalty, we think about how we can create a loyal customer base that will continue to shop in our stores with increased regularity and respond to our “customer incentive programs”. In this article, I propose that we look at a fundamentally different approach to customer loyalty. Rather than ask how loyal your customers are to your store, ask how loyal you are to your customers.

When I think of a customer loyalty program, I think of a customer friendly store that offers me extraordinary service, personal recognition, convenience and clear incentives. However, all too often, that is not the case.

Here are just a couple of examples of customer loyalty programs that backfire and can actually drive customers away:

• Do you remember the ‘good ole days’ when a key chain was used to carry keys? Not any more. Today, most of us carry key chains loaded down with customer loyalty cards from a variety of stores. Most of the time, we realize that we get discounts or coupons when we use these cards, but sometimes it’s not clear what, if anything we get! How often have you gone into a grocery store with a full cart and forgotten your ‘so called’ customer loyalty card? INSTANT ANGST AT THE CASH REGISTER! You know that you will be penalized by paying the higher price, and you mumble that you will never go back to that store again. Furthermore, no one helps you out of the jam. You are stuck!

  
  It is because of this backfire in a well intentioned customer loyalty program that Albertsons, a large supermarket chain, has decided to eliminate the customer loyalty card altogether in one of its regional divisions. They now focus on “BEST PRICE WITHOUT A CARD!” As we will discuss later, there are, however, other ways to effectively deal with a lost or forgotten card and not throw the baby out with the bath water.

• Another example of a backfired loyalty program takes place daily in the large warehouse discount stores. For the privilege of shopping at the warehouse store, I pay $35.00 per year to become a revered MEMBER. I then proceed to fill my oversized shopping cart with products that are certainly going to last me at least a year. I proceed to checkout and prepare to leave. But as I approach the exit door, I observe a line of other MEMBERS who are suddenly all suspected felons being required to go through a shopping cart inspection to make sure that nothing is being stolen. They finally let everyone go unless the dreaded door alarm sounds, demanding the attention of not only the shopping cart inspector but all of the other suspected felons in line. I believe a total body search is the next step in improving customer loyalty. Wouldn’t you agree? A little reminiscent of the airlines these days?

Although it may sound like customer loyalty programs cause more problems than they solve, if they are run correctly and with the customer experience in mind, loyalty programs can be of tremendous value to any retailer, large or small. What are some simple questions we should consider when implementing a customer loyalty program?

You might consider starting with some of the following:

• Who are my target customers? Every store has a certain segment of the population they are trying to reach. If you are a ‘lifestyle’, haute couture women’s boutique, it is safe to say that you are not trying to reach the hip-hop segment and vice-versa. It is very important to understand your target population so you can address their needs.
• Do I know my companion shoppers? Companion shoppers are generally people who don’t buy for themselves but accompany your target customer or make purchases independently for them. When creating a customer loyalty promotion these “companions” could be very important to your bottom line. Take, for instance, a man who buys for a significant other. You could have a loyalty program with incentives as well as special promotions that make it worthwhile for the companions to shop your store more often. A simple promotion like ‘men’s night’ complete with refreshments and “shopping coaches” is a great customer loyalty program that can go a long way.
• Do I like my customers? Well, you and I know, “to know them, doesn’t necessarily mean to love them”, but if we don’t like most of our customers, we’re in the wrong business. Customers want to feel special. They want to feel that you care about them personally and are happy to see them when they come into your store. Get to know them as people and not just as ‘wallets’. Once you get to know your customers, you can build loyalty programs around their profiles.
• Do I regularly and proactively ask my customers about their likes and dislikes and do I listen to their opinions? When you have identified your target customer, do you talk with them and listen to their ideas about your store and merchandise or do you buy what you think will sell based on your own likes and dislikes? Knowing your customer will help you buy right and create winning promotions.
• Does my target customer understand the benefits of my loyalty program? As previously mentioned, I quite often wonder why I am letting the clerk scan my loyalty card. I see absolutely no benefit to the card and, in fact, see it as an inconvenience. Your customers should want to participate in the loyalty program because they can see a clear benefit in doing so. This gives them a goal and brings them back.
• Is my customer loyalty program “customer friendly”? Unlike the examples of the warehouse club and the supermarket, the customer must want to participate in your loyalty program. If you have a program that makes use of a customer loyalty card, make it easy for them to participate even if they forget their card. NEVER penalize a customer for missing one of your loyalty requirements and NEVER make your customer feel like a felon. They should always feel respected, wanted, and rewarded accordingly.

These are just a few of the questions that will help you develop a loyalty to your customers. Most POS applications have customer loyalty program add-ons, which can be purchased from your business partner. Setting up a customer loyalty program is relatively easy to do. Developing a loyalty to your customer takes work and time.

Mark your calendars for the upcoming April 24th webinar - Customer Loyalty for Retail Pro.

Should you wish further information on customer loyalty programs, feel free to call me at 978-840-2096 or email me at donc@jdapos.com.