Five Steps to Master Loyalty Strategies

In an industry historically characterized by a lack of customer loyalty, an increasing number of convenience stores are joining industry leaders, like Wawa, Speedway and Sheetz, in introducing and enhancing their loyalty strategies.

BP last summer launched a revamped program, now offering three unique loyalty card options for drivers to earn rewards. Other convenience retailers are focused on introducing online ordering services, in-store beacons and mobile apps. 

Deciding which initiatives will be most effective can be challenging considering that executives have their choice of countless levers to construct and enhance a winning program — earning mechanisms, reward values, in-store initiatives, and more. Add in the fact that many executives don’t have insight into which of these actions will truly drive incremental profits, and the task quickly becomes even more complicated.

So, how can convenience stores get the most out of their loyalty program? The answer lies in the following five steps:

STEP 1: Encourage Data Exploration to Generate Ideas

Regardless of whether executives are thinking about launching a program or if the program has been around for years, it is important to have answers to fundamental questions when designing customer-centric strategies, such as:

• Who are our most valuable customers?
• How does purchase frequency vary by customer segment and by store department?
• What is common about lapsed customers?

Without access to data and the agility to leverage it, however, getting answers to these questions is incredibly difficult. To empower decision-makers to answer these questions, convenience retailers need to make data accessible to business owners, such as category managers. Leaders can then encourage these individuals to leverage the insights to generate better, fact-based ideas on what strategies will work best for their customers.

STEP 2: Test Ideas In-Market to See What Really Works 

While many ideas look good on paper, it’s impossible to know what will actually work without first trying ideas in the real world. As a result, executives must evaluate each proposed initiative through small-scale, in-market tests, in which they try an idea with some stores or customers and then compare performance of that group to data from a similar group of stores or customers that did not receive the treatment.

Some companies may be most interested in uncovering what marketing campaigns are most effective at driving signups. Others may want to explore offering differentiated services and soft benefits, like “badges” or access to exclusive in-store events, to supplement points and discount offers.

In either case, rigorous in-market testing is really the only way to glean the insights necessary to inform intelligent rollout decisions — ensuring each initiative delivers value to customers and to the company’s bottom line.

STEP 3: Don't Settle for "One Size Fits All" Campaigns 

Convenience stores can greatly improve the effectiveness of their programs by moving beyond measuring overall program effectiveness for “go” vs. “no-go” decisions to identifying the types of customers, stores or markets that respond best to each initiative.

With this information in hand, convenience retailers can target initiatives to only the customers or stores that will generate a positive response, while also tailoring the initiatives to achieve the most benefit.

STEP 4: Analyze Every Initiative

With many initiatives in-market at any given time, it can be difficult to analyze each thoroughly and accurately, and even harder to then leverage the findings to design and refine initiatives going forward.

However, failing to do so can lead to operators re-running unprofitable offers, and costly marketing campaigns that only hurt the bottom line.

To set themselves up for success, convenience stores need to put in place a rapid, automated capability that enables accurate analysis of each loyalty campaign. Equipped with insights on all offers and programs — rather than a select few — decision-makers can make smarter decisions about which ideas are working best and which need to be refined going forward.

STEP 5: Build an Innovation Funnel

Our experience of running thousands of in-market experiments every year indicates that nearly half of all tested ideas are not profitable, meaning that convenience retailers who rely on a few “big bang” ideas to build their loyalty program are not setting themselves up for success.

To make sure the odds are in their favor, operators need to build an “innovation funnel,” a formal process for continually collecting lots of ideas, testing them and implementing the ones that work.

A successful innovation funnel is one in which ideas are collected from a broad range of sources and stakeholders, including talking to customers and managers in the field, and reading up on what leaders in other industries, including retail, hospitality and restaurants, are doing to bolster their loyalty programs. C-stores need to collect enough ideas in the funnel so they can throw away the ones that don’t work and refine and target the ones that do.

There is no doubt that bold action and well-honed instincts can be helpful in building a loyalty program that meets customer needs. However, when the difference between success and failure of an initiative can be difficult to discern, facts and data are essential to separate the  winners from the losers.

Getting real and reliable information about program performance in a rapidly changing environment can be extremely difficult, and obtaining it next month or next quarter is often too late. Executives need better, faster and more accurate insights today to maximize the success of tomorrow’s initiatives for all convenience retailers looking to win in loyalty. 

Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.