Choosing the Right Loyalty Program Means Knowing Your Customer

JERSEY CITY, N.J. — With so many different kinds of loyalty programs filling the convenience store space, retailers have to distinguish themselves from the masses to be successful. And to do so, they must focus on one key component: their customer.

Before implementing a loyalty program, convenience store retailers should evaluate the various programs in the c-store arena and the components of each program. Then, they should ask themselves what sort of program is right for them, according to Kimberly Otocki, content marketing specialist, and Christina Hurley, strategist, data insights, for Paytronix, who both served as presenters for the “Choosing a Loyalty Program That’s Right for Your Brand” webinar, hosted Tuesday by Convenience Store News.

“A well-designed program does not guarantee success [and] a poorly designed program can spell disaster,” advised Otocki.  

The marketing specialist explained that a well-designed program should not only motivate customers, but also drive profitable incremental behavior, and it is one that fits with the retailer’s brand. A well-designed program should excite a brand’s team so they will encourage customers to sign up; enable retailers to run compelling, relevant and targeted promotions; and leverage vendor funding to drive more profitable results for the brand.

The top five types of c-store loyalty programs today are:  

Coalition Program. This program works across multiple retailers, where customers earn and redeem points across multiple brands. Customers earn points in two ways: automatically by shopping and using their coalition card, and by activating specific offers online or via the app. Points add up to dollars or rewards that can be saved and redeemed at participating stores. An example of this is Plenti.

Proprietary Automated Clearing House (ACH) Card. A merchant-branded debit card is linked with a customer’s checking account, and customers earn instant rollbacks at the pump by using the card or mobile pay. Multiple promotions are used with this program. An example of a proprietary ACH card is Cumberland Farms’ SmartPay.

Fuel Brand Loyalty Program. The primary focus of this program is to drive fuel sales, where customers earn X-amount of cents off per gallon at the pump, which is a “great way to attract customers,” Otocki noted. An example of this program type is the Shell Fuel Rewards Network.

Grocery/Gas Loyalty Program. A sister brand to the fuel brand loyalty program, this program allows customers to earn points at the grocery store and redeem them for cents off per gallon at the gas station. Giant Eagle is an example of a grocery store that participates in this kind of program.

Dedicated Loyalty Provider. Usually brand-specific, this program type gives retailers multiple options for the types of loyalty programs and promotions they can run. The brand has multiple platforms to engage its members through this program, including card, mobile, or registered phone number. Examples of this are Speedway's Speedy Rewards and Thorntons' Refreshing Rewards. 

Loyalty programs are not one-size-fits-all, Hurley expressed. When designing a loyalty program, c-store retailers should consider three constituents: get customers their first reward fast, reward good behavior, and design a loyalty program for “silver” customers.

DESIGNING A LOYALTY PROGRAM

Defined as the 50- to 90-percentile on the customer pyramid for increasing loyalty penetration, "silver" customers need to be aggressively recruited into a loyalty program, and can be influenced to visit a retailer more frequently through layers and promotions. Silver customers are the “bread and butter” of a c-store retailer’s loyalty program, according to Hurley. 

The top 5 percent to 10 percent of customers on this pyramid are the first to join a loyalty program and will receive the most value out of a loyalty program, but they will be the hardest customers to influence to increase visits.

“It’s really hard to drive incremental visits out of these [customers] because they’re already coming in, either daily or weekly. Or every time they need a fill-up, you are the place that they’re going. …They will still get a lot of value out of your program, and you can use this as a competitive advantage so you will not lose them and have them go to one of your competitors,” Hurley said.

In the 10- to 49-percentile, customers will not find a c-store’s loyalty program as motivating because they’re not frequent shoppers. Through additional layers and promotions, c-store retailers can drive behavioral changes among these customers.

C-store retailers can change customer behavior in two ways. One is through the core program effect. This is the “published” part of a loyalty program, where retailers relay what customers can expect from the program. The published part of the program tends to be what customers talk about, compare with other programs, etc. The second way is through layers and promotions. The goal of this strategy is to directly and profitably change behavior through more visits, different purchasing occasions, recommendations, and bulk-buying.

Through customer segmentation, c-store retailers can maximize vendor funds that allow them to drive trips, as well as incremental purchases. This is done through six published components of a c-store loyalty program. They include:

• Earned points. This correlates to buy X-amount of products, earn bonus points.
• Fuel discounts. This correlates to buy X to receive X-amount off per gallon. “[This is] effective in terms of driving people who are typical of buying only fuel at your store and influence them to make purchases in-store that they may not already be prone to,” Hurley explained.
• Clubs. An example is a punch card. Layers are put in place in addition to earning points, especially on products specific to a brand.
• Member pricing. This component boosts enrollment and teases out price-sensitive customers. “[This is a] very effective way to reach customers,” Hurley said. “Visually, it shows customers who are not part of the program what they would be saving and featured benefits if they were a member.”
• Sweepstakes. Customers buy products to earn entry into a sweepstakes, or redeem points to enter. Sweepstakes drive incremental visits and incremental purchases.
• Tiers. This component drives value to a brand by motivating customers to get to the next level of the program.

“Not all c-stores will want to get involved in all six components,” Hurley stressed. “C-stores need to evaluate their customer base, strategy and positioning, and decide what makes sense for them.”

A replay of the full webinar, sponsored by Paytronix, is available by clicking here.