According to a recent survey we did, we discovered that most of our clients have some form of loyalty VIP program in place. Assuming you have one, you need to monitor it.

What you are trying to do with such a program is to increase the number of sales of high-margin products proactively.

So what you want is a scientific list of what people that are using your loyalty VIP programs are doing with it. I strongly suggest that you do not just rely on gut feel and its not hard to get such a list from our POS software as it collects the sales information on your customers’ purchase histories. This allows you to identify what your loyalty VIP program is doing.

One report that I suggest you look at is "loyalty vs Non-loyalty sales", in cash register reports marked here in green.

Now if you go into it, although it has plenty of options, just keep it simple for now and put in the last 12 months and run it.

Now out will pop put a comparison list of exactly what the loyal VIP and regular customers are buying.

In particular look at the profit field, it is not uncommon now for over a third of profit in a modern retailer to be from these VIP customers. What is interesting is that they are much more profitable per visit than regular customers.

Now also there is a row there of %Gross Profit. This is for you to see what high margin items people are buying and to allow you to identify possible products for your VIP customers to buy.

Lastly, there is a row of costs so you can see precisely what these VIP customers cost you.

The overwhelming majority of our clients would have some point of sale loyalty program  in place in their shops. 

As a rule loyalty scheme, to do it properly should cost about 1% of sales. So, if your shop is doing $500,000 a year, your budget for a loyalty program is about $5,000.

Years ago Garth Brennan from our company wrote an article here about it, that was published by National Newsagency magazine.

What I found surprising reading this article is how relevant it still is 15 years later.

Discount Vouchers is the most straightforward system to implement. You can set it up in moments with our system. If you want to test it out, I would suggest using a holiday season and running it for the length of the holiday season and see how it goes. It does work, but we only recommend you do it for a limited time, say a week maximum. Otherwise, what will happen is over a long period, this program will result in you discounting every product in the shop and so producing customers who demand these discounts.

Moving forward 15 years, I found a useful review of successful loyalty programs in the US today here.

These programs are all very successful. What they have in common is they work with customers by engaging with them. They all work on a VIP points system, which gives the customer benefits and perks for being a member. 

This is what some of our clients do. Some have in their loyalty program about 8,000 members with those numbers its worthwhile doing some serious marketing.

If you want to see what some SMB retailers have done check out one of our clients with over 12,000 likes on their facebook page here.

The current edition of the point of loyalty is now out. Its the seventh edition and I thinks it is the best review of loyalty marketing for retails in Australia. What it is a consumer research study into the Australian loyalty program written by people who know their stuff. Plus much of the report is based on facts not opinions which I like.

A free executive summary is available here which I would say any Australian retailer should have a read.

Here is what I got out of it.

Most Australian shoppers (89%) are now involved in a number of loyalty programs.

This figure, however, is dropping although it does appear to be hovering at about 50% active over the years which means that about half of the Australian Shoppers are actively involved in loyalty marketing for points.

The next item shocked me.

28% of these loyalty shoppers admitted that they purchased something that they did not need to earn points, and that figure is significantly up on last year.  

And the reason why is because these people think of the points as cash.

Anyone that wants to argue that Australian Shoppers are tired of points and just want cash are dead wrong. The majority of shoppers today, see these points as cash. Makes sense, if say in a coffee loyalty program where you get a free cup of coffee after buying ten cups, well that eleventh cup is money.

Finally, how best should retailers contact these people?

Answer: Overwhelmingly by email. Any loyalty program should involve the collection of people's email address.

If you think about it, a lot of these are not frequently coming to your shop. If you want to contact them, email is your best and cheapest option.

Anyway have a read, make your mind up and please let me know your thoughts,

I was reading an article that I thought was very interesting here and I think retailers will find it an interesting read even if like me they have some doubts about some of the points.

Here are some points I agree with

) Customers don't want or need loyalty Customers are not loyal.

) Why should customers want to be loyal? Why would people limit their range and options voluntarily? Unlike your pet, they have all the power anyway, so why should they give that up? The average customer can extract as much value from a retailer as a loyal customer, so there is not much benefit in being loyal anyway.

) Loyal customers are demanding customers.

) There is a cost in satisfying the demands of an existing customer. Give a loyal customer 10% discount, and after overheads, you got nothing out of the customer. Few of us can afford even 5% discount.

Here are four observations that I have noticed with loyalty marketing

) Since the economic incentive of most rewards programs is small, few customers are going to go well out of their way to take advantage of a rewards program. The main benefit is the information that the retailer gets on their customers. The information benefits are estimated at 1% of sales so almost all rewards programs work on 1% of sales. This is the retail benchmark. It is not as many think the increase in sales as such.

Most importantly they want their customers' email address to market too. If I send out a thousand emails every two weeks and I get a 1% response rate, I have 10 sales every two weeks.  If my basket size is $50, over the year, my newsletters have generated $13,000 extra income. 

) Most loyalty programs in my experience end out being taken up by people that were going to buy anyway at full price so offering people in the shop already discounts is very dubious. What you want is a loyalty program that will bring them to your shop.

) Many successful retailers like ALDI do not have a loyalty program. Conversely, Coles and Woolworths are more successful and they do have such programs.

) Very few customers that come or leave you do so because they are dissatisfied with the product or service they are receiving. Give them bad service or faulty goods, yes they will leave you but that is another story.

Hope these observations help at the very least give you food for thought.

Have you ever wondered why when you go to some shops they ask you if you want an email receipt after they have printed out for you a receipt? It is not saving paper as they have already printed it.

It is marketing, something you can do too.

Here are some figures that show the marketing potential 

• While open rates are at a staggering 70.90%, Mailchimp’s newsletters were measured at 17.19%.
• The engagement rate is 8.93%, compared to 2.70% for regular emails.
• The Average Attention Span is 185% higher than regular Emails

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People do read these emails.

Why not send an email receipt and include a marketing notice together with the receipt to advertise specials, discounts, upcoming events or other messages?

Here are some more advantages 

• Receipts do not get lost.
• It helps you gather customer email addresses so allowing you to contact them with email and hopefully gain visits and purchases.
• It puts your shop in front of the customer again when they read their emails.

Aldi, here has made an extraordinary attack, on Coles and Woolworths, claiming that they are not worth chasing.  They have made a calculator to show how small the benefits of these people's rewards program.

I think they are right.

However what the article goes on further to say is that "60 per cent of Australians saying it influences where they shop and 36 per cent of people admitting they spend more because of the schemes" so for such small rewards people are being influenced.

To me what it says is that your loyalty program offering does not have to be much to get decent results and there is no denying that it does have an effect.

Thinking about it here are some reasons why someone would pick not to have a loyalty program.

Much of these difficulties are particularly true in the set-up phase of the program

Costs

Our point of sale software gives you the tools you need to run such a program, but you will need to provide your customers' benefits to make it work. 

Work and skills

It is work.

You do not feel your organisation has the social media skills now days required to make it work plus the management expertise to make it work. It needs constant thought and fine-tuning to find out what is working and what is not working.

Customers' information

You do not feel that you can get enough peoples information to make it work for example you think you cannot get enough peoples email addresses. You need about 500 to 1000 people to gain critical mass.

Lack of time

Busy enough AS IS and they do take time to set up, and they will take time to manage. Based on our clients' comments, an hour a week. 

Commitment 

Once you have a loyalty program in place, they can be difficult to stop if they do not work out. Customers can get upset if they feel that you are cheating on them. Always remember if starting one that you do need an exit clause. 

The other problem can be if you feel that your organisation objectives may change shortly and you cannot make the commitment.

You have infrequent customers

We have a client in a holiday area, and they tell me that the people are always changing and that they see most of their customers for about a week or two and then they are gone. The locals are only a tiny part of their business. 

Offers cost you

The expected cost of the proposal is higher than the expected return. The overwhelming number of customers will buy anyway from you at your prices, so there is no point in offering any benefit as such as all it is doing is giving away value to my existing clients who is willing to pay full price.
 

So What Alternatives are there

Here are some ideas.

Nothing

Often nothing is the correct response. Why interfere with something that is working,

"If it is not broken do not fix it".

Discount vouchers

This is where you offer every customer a discount when they buy products in your shop at the next sale. Here is how to set it up in our system, which would give you an incredibly powerful discount voucher system.

Be warned that these discount sales programs are much more expensive then loyalty programs, but they do produce results. See here for numbers.

Guerrilla Marketing

If you are near a major operator that brings in traffic consider how to be able to piggyback on their operation. Let them do the work in getting customers coming to what you are doing here is trying to divert some of their traffic to you eg near a supermarket, a coffee shop might do well. 
 

Some people to buy your products need a kick; some come anyway. A straight 10% discount offer as such is often killing your margins.

If you get an exciting product, this has proven to be a successful method. What you need is your retail email mailing list and point of sale system like ours that can handle VIP marketing.

Firstly send everyone out an email with an offer for the goods. Hey, we just have now this XYZ product.

Those that did buy send them shortly afterwards an offer to buy a second one at say 5% off. See how you go, if they liked one then they may want another.

Awhile later those that did not respond at all, send them an email with a 10% off 

If you are still stuck with stock after a while, well you have nothing to lose by offering 20% off to all.

See if you can do something similar in your business.

The idea being Instead of giving a straight discount, going through the previous purchase histories of your customers and then personalise your offers.

It will help you maximise your margins