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Loyalty Program

POS SOFTWARE

​For many years, the study "For the love or money" has been the best study of Australia's customer loyalty and loyalty programs. The 2022 edition is now released. You need to pay for the study itself, but the executive summary is free and accessible here.

It is worth a read if you are a retailer thinking about a loyalty program. 

About 88% of Australians enrolled in at least one loyalty program. The average is 4.3.

About 46% consider themselves active, which is up on last year. That is a lot of people, about 40% of Australia active.

Have a read. I am confident you will get a few thoughts.

 

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POS SOFTWARE

What is commonly done is to measure a customer's spending in a loyalty program in a retail shop. Then compare these figures to the average customer.

I am sceptical.

The spend is not profit.

Yet many so-called retail experts quote this as a critical measure of how successful the loyalty program is as they rarely get profit figures. So this is the best they can do.

The other issue is that one supposes that members of your loyalty programs are already spending more in your shop. So, in most cases, they are spending more with you already. The extra problem here is that they do it to gain more rewards in their purchases, so you are often discounting your products to people who are buying them anyway.

If you are running a loyalty/VIP program in your shop, here are some KPIs; I recommend looking into them.

In my experience, even vague figures are better than none.

Budget

A professional marketer will budget a loyalty program's cost at 1% of sales. Sometimes they will take it to 2%, but it is too much to do anything higher without the suppliers' help. If you are doing a million turnover in your shop, you are looking at about $10,000 cost maximum. 

You need to know whether you are getting $10,000 back in profit.

Membership

Examine your membership. How big is it? Is it growing or declining? Where are the members coming from? Existing customers or new customers? If it's existing customers, then your program is dubious.

To determine this, you need names.

Are you just giving a discount to existing customers?

Email list

The email addresses are said to be worth 2%. If you are not collecting these email addresses, your loyalty program is down 2%. In today's market, you must communicate with your customers. You have to find a way to get your customers to come back. This is the key to profitability.

Usage

How many are using it, and at what frequency?

Member spending vs. non-member spending

The primary purpose of a loyalty program is to get you more customers and get them to spend more. Is it? So do not just check the sales totals but also the basket size, profitability, etc.

Pre-membership vs post-membership spending

What do you need to know that it is working?

The figures can be gotten here.

​Use your data, not the seat of your pants.

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If you’re a retailer not running a loyalty program, what does it cost you?

Let us do a guesstimate.

Say you collect a 1,000 email addresses of your customers.

Say you send out a monthly email newsletter to them. This costs you nothing.

At a super conservative value of 1% effectiveness, say with $20 profit per hit. That is a $200/month profit on 1,000 members of your loyalty club.

In one year, you have about $2,500. Its paid its way.

Plus, it puts your name out in front for no cost.

 

A card promotion advertised through a loyalty program resulted in

-No of transactions increased 20.7%

-Total average weekly increase (overall) on cards was 44.5%

-Average card basket size increase 19.8%

Plus, there were extra purchases as customers bought more than cards.

Read more here.

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POS SOFTWARE

The current report of probably the best loyalty analysis in Australia is now out at For Love or Money™ 2021. It is in its 9th edition. 

If you want, a free and quite detailed executive summary is available there too. One point for sure if you get it, it will give you much to chew over. It did me.

Looking through the report, I noticed that the active participation rate is down. This is not a COVID thing, as it's been going down since 2015. In 2015, 59% of Australian shoppers used a loyalty program. Today it is down to 43%. Also, transactional loyalty programs, where the customer gets money, are down in 2019. Then, they comprised 76% of all loyalty programs; now, in 2021, they are down to 69%. I am not surprised as these schemes often end out giving away margins with little reward to the merchant. 

Far too often, the customers in loyalty programs will often buy the items anyway. Hold this thought as important later.

Still, after going over these reports plus what I know, here is a guestimate of a budget of what a modern loyalty program would cost you.

Your customer's name and emails addresses, buying history and their permission to use the information in your loyalty program are considered to be worth about 1%. So most loyalty programs tend to hover about this figure. If they go much over this, it is generally because of suppliers help. For example, you promote a supplier product in exchange for them giving you a lower price during the sale. 

So if we are looking at million-dollar sales in a shop, your budget   (1%)  is $10,000. Say your expenses of running the loyalty program is $2,000. Then we have about $8,000 worth of product discounts to give away. 

Now based on the report, only about 48% of the people using your loyalty program are buying because of your loyalty program.  

So if your margin is 30%, to cover your $10,000 expenditure, you need to get about $70,000 of turnover in your loyalty program. 

The formula here is (Turnover required) = (1% of turnover)/((margin%)x48%) 

In this case, the discount you would be offering your customer =$8,000/$70,000  about 10%. 

If the margin you are pushing is 50%, then you need about $40,000.

The discount you could offer your customer much better, about $8,000/$40,000 or 20%.

So push a higher margin item in your loyalty program.

Note few professional marketers get profitability figures. Only only transaction amounts and they work on average industry needs. Your views might be different on this as you have detailed financial figures and specialised needs.  

Also, consider that a loyalty program is a minor factor in your customer loyalty. It is minor. A factor far more important is your relationship with your customers. 

Still, this gives you a starting point.

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POS SOFTWARE


 

For four hours on Friday evening, many Coles supermarkets had to close. This was because they had technical issues with their POS Software processing payments at the point-of-sale. 

If Coles had our Multi-Shop POS Software with replication, this would not have happened. Which highlighted one interesting observation made by Xero CEO to me that often "small business today has better technology than big business".

Still, this outage would have cost a lot, plus Coles would have suffered a  loss of goodwill. What happened is what we call in business - a pain point. So we can see how they used their loyalty program in response to this pain point. The very next day they offered their customers "triple flybuys points...purchases" also free delivery to online shoppers who spend $50 or more.

It shows the flexibility of loyalty points, that as required, it is easy to adjust. I have also seen it to encourage shoppers on slow days when they offer something like "double point on...."

If you have not yet got a loyalty program, I can assure you that it works well in all business sizes. So check out this quick video.

 

Then take a look at the free loyalty program and free CRM offered by our POS software.

 

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This highlights the problems with loyalty rewards that do *NOT* have computer auditing to the account.

Yesterday the Woolworths receipt hack received wide coverage.

What it is that a person collects receipts from the bin or trolley in this case. They then claim the benefits of the shop's loyalty program using these receipts. 

Here, the person did not even think she was stealing, nor do many in the public. 

The result is that the retailer pays to the person who may not even shop at the store the benefits. This payout can be very high. For example, on discount vouchers, merchants are advised to set the payout at 50% of the profit. Here you would be giving away half the profits to a person who does not even shop with them.

It goes much deeper than that. 

Loyalty rewards programs do not get much in the way of scrutiny. Security is often very lax as the rewards are not cash. That makes it open for abuse. This lack of oversight attracts thieves.

What you need to do is examine your loyalty programs for any such potential loopholes. 

Then Make Your Reward Loyalty Program Secure

 

 

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One of the most popular and successful loyalty programs in our software is issuing stamps. 

Here is a typical offer. A person comes into the shop and buys something. Every time they buy, they get a stamp in our case an electronic listing too so here after ten (10) visits on the next trip, they get something. 

This sort of offer works for anything, greeting cards, coffee, pet food, haircuts, etc.

Now follow where the problem arises

At first, the customer comes in and buys a product. They are notified of the offer, so they get a card. One item stamped so they are 10% into it (1 stamp out of ten), and they work their way to ten. But here is the issue, once the person has their free article, they start again from zero. Starting from zero does not motivate people much.

So here is a better way to do it.

Make program active on the 12 visits. 

Here is how it should be done.

- When the person first comes into the shop and buys something, they get one stamp for joining. They then get a stamp for their first buy. So they are starting with two stamps. This gives them the feeling that they are getting closer to their reward as now they are 17% (2 stamps out of 12) through it. 

-Once they redeem their free item, they get a new card with one stamp credited for rejoining the program. They get another stamp for the free offer they redeemed. This overcomes this problem of them starting with zero as now they are at 17% again.

Give it a try and see how you go. Then let me know.

 

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What is clear now that many retailers immediate and top priority in their loyalty programs is customer retention. Any increase in sales by upselling and getting them to buy more often is now all secondary. 
Not surprising as customers are up for grabs now. 


People are now buying brands that they never purchased before. They are buying from people that they never dealt with before. 

This is the kicker; they have been doing this for months and will continue to do this for more months and something done for months is a habit creation,

We are in the middle of a retail transformational period. 

Questions:

Are those people you lost, going to come back to you?
New people coming to you now are they going to stay with you? 

I have clients who are shut. I see that they are on pushing their store to their former customers on social media. Telling them, they intend to re-open.

Why? 
Answer because they do not want their customers to forget about them.

The first step at the front of the shop like here,

when they are buying, at the point of sale, make sure they know you have a loyalty program.

Then make sure that they can sign up immediately. 

 

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Right now because of coronavirus. We are in the middle of a shopping frenzy for toilet paper.  Shops have entirely sold out even though many are getting daily deliveries.

Explore search interest for Toilet paper by time, location and popularity on Google Trends

{links were removed}

I confess I do not understand why, if someone had or suspected to have it, yes I could understand them mass hoarding, a family with two (2) weeks isolation needs a supply but not this?

 

Old-timers and farm boys know of an old solution, do you remember this?

Anyway, the problem some of my clients face now is that they have customers coming in trying to buy toilet paper and they have none to sell. One of them sent me a checklist of what his chain sent on what they suggest that you do if this happens to you.

1) Try to get more supply, do your best. One of my clients managed to get some commercial toilet paper from a cleaning company. Its not good stuff but at least he got something.

2) Accept the importance of the issue to your client, whatever you think, to the customer, it is crucial, and it is your responsibility to act on the issue.  Tell them the truth that you are trying your best. If they want as supply comes in, that you are prepared to keep some for them in a special order.

3) Above all, stay calm.

 

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Here is the KPMG’s November survey of 18,520 consumers from more than 20 countries which shows the use of Loyalty programs by country.

Australian are the most significant users of loyalty programs in the world, with 61% usage.

 

You can read the full report here

One point I did find particularly interesting is that 

"More than six out of ten Millennials say they prefer to donate their loyalty rewards to a good cause than redeem them personally vs. 40 percent of Baby Boomers."

In other words, about half the population are happy to use the loyalty program if you were to donate their proceeds to charity. This may be an answer to the problem of getting people that only use your goods and services infrequently to get motivated in your loyalty program. I know that Amazon gives its clients a list of charities and ask them to select one, you may try that too. Check out the Amazon program here it may give you some ideas.

 

 

 

 

 

 

 

 

 

 

 

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