I was was asked recently to write an article about loyalty programs in retail stores and to explore why some do not work as expected. Having worked with a wide varietyof retail businesses on managing their loyalty programs through our Point of Sale software, I was able to draw on this experience to share the following thoughts…
Loyalty programs in retail stores are meant to increase sales. If a loyalty program is not facilitating this in an independent retail store then it is probably failing the business.
While some retailers, notably some national retail chains, run loyalty programs to gather data as a more important goal than rewarding customers, at the independent retail level it is usually about business growth.
So why do some such programs created to drive loyalty fail for a retail business?
Here are five common reasons why loyalty programs can fail a retail business.
Little reward for loyalty. This is the most common reason. There is little on offer for the consumer in return for loyalty. If you want shoppers to spend more than they would usually spend in a certain time you have to make it worth their while, obviously worth their while. Use any loyalty offer you have in your retail store to deliver genuine value and through this a real point of difference for your business.
Poor communication around the offer. If the offer is confusing to understand, shoppers may give up and ditch the program. Communication needs to be simple so that anyone can follow and be encouraged to engage in the behaviour you want. The communication in the initial paperwork, emails, posters in-store, indeed everywhere in the business around the program needs to be complete yet as simple as possible.
Not embraced by the business. The best loyalty programs are offered over the sales counter. In the sales team is not engaged then the uptake will be low. It is vitally important that the sales team members understand the role the loyalty program plays in the overall business model.
Too hard. Some loyalty offers are too hard to sign up or use or redeem or all three. Make it simple, compelling and fun. The easier it is for your customers to engage the more likely they will engage. Test the program, ask customers for feedback. Make sure that what you build is truly easy for them to use, redeem and play with. Do not be afraid to evolve the program over time.
Does not drive loyalty. The program must reward customers for spending more than they would in a fixed timeframe. There is no point rewarding customers for what they would do anyway. This is not loyalty on their part. So, a program which rewards average behaviour is a failure for the business.
Take time to structure any loyalty rewards program in your retail store. Understand what your competitors, large and small, are doing. Create a program which is sustainable, offers genuine rewards, is fun, easily understood and will bring the sales lift which is so important to your business.
Once you have the program running, track engagement and commercial results. Adjust the program as the performance data indicates.
A good loyalty rewards program can transform any retail business. We have agood loyalty rewards program in our software and back this with good management help.