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03/27/2015

How to Use Loyalty Programs to Drive Foodservice Sales

The foundation to build a loyal foodservice customer base must first and foremost begin with a high-quality prepared food offering. Only then can loyalty marketing programs be developed and launched to help convenience store operators create deeper emotional connections with their most valued foodservice customers.

While only a few in the convenience store industry — such as Sheetz Inc., Wawa Inc. and Maverik Inc. — have loyalty marketing programs in place that include a foodservice focus, most industry programs primarily target customers with fuel rewards instead. Several Convenience Store News How To Crew experts, however, believe c-store loyalty marketing programs of the future should focus more heavily on foodservice and beverage programs, especially in an industry that views foodservice as a vital strategic sales and profit driver.

“My question to the [convenience store] community is this: If you actually buy into the fact … about the critical need to develop foodservice as the primary go-forward driver of the c-store business [vs. fuel], then why not turn your loyalty program focus on its head and position foodservice first in your loyalty marketing planning?” asked Maurice Minno of MPM Consulting Group, a member of the CSNews How To Crew.

An environment of low pump prices, gasoline rewards and discounts may not resonate as much with customers as they do when gas prices are high. Given the price volatility of gasoline, it is incumbent on convenience store retailers to include other strategic marketing incentives and rewards in their loyalty programs that include important in-store categories such as foodservice, according to our expert panel.

And loyalty programs are so much more than incentive offers to get customers to increase their shopping frequency or encourage new product trials. Loyalty marketing is “more about your brand and creating a distinctive, long-term and deep emotionally bonded relationship with your most valuable customers,” Minno said.

One How To Crew retailer noted that a successful loyalty marketing program must alter a customer’s behavior in some positive way or it risks simply becoming a customer appreciation program that just costs the retailer money. “Loyalty programs can be extremely effective in any marketing plan, but the structure of the program is where [operators] need to spend time,” he said. “Retailers need to create programs that will make their best customers spend more when they are in the store and/or come into the store more frequently.”

Loyalty program strategies should take both marketing and merchandising into account, according to David Bishop, managing partner with Balvor LLC and a How To Crew member. “From a marketing perspective, loyalty strategies should enhance the relationship between the shopper and the retailer, whereas the merchandising view would be to increase spending levels,” he said. “How a retailer approaches both will be different in terms of execution, but the power is in implementing plans to deal with both.”

While many c-stores currently use low-tech and easy-to-execute club card and frequent shopper punch-card programs, these should not be confused with technology-driven and database-driven loyalty marketing programs that capture customer data and purchase behavior.

“Frequent shopper programs help develop and reinforce habits, which is very relevant to convenience retailers given the routines that many shoppers go through every day unconsciously,” Bishop said. “The downside is these programs may not help create stronger emotional connections, which means the shopper could defect if he or she becomes aware of, and is exposed to, a better offering.”

The beauty of true loyalty programs — although they are more expensive to build, execute and manage — is they can support different customer rewards based on past purchases and overall program status, according to Minno, who added that program member communications, promotions and rewards also can be individualized and specialized.

Other benefits of true loyalty programs are that they can offer a broad array of program alternatives, facilitate product recalls, and enable operators to segment foodservice customers and offer customized marketing initiatives, he noted.

While foodservice loyalty programs are still in their infancy in the convenience store industry, Minno said most successful programs call customers to action with a trial purchase of a specific or new product, and offer “hooks” for future purchases. Retailers should reward customers for their first trial purchase and provide easy-to-understand rewards for future purchases that resonate with the customer, are attainable and build value over time, which will stimulate repeat purchase action and brand loyalty, he said.

The program should also “provide customers with ‘upward mobility,’ [presenting them] with a clear path for how they can attain higher and higher loyalty program levels and status,” Minno said. He added that programs should also:

  • Promote sustained new purchase behavior with highly targeted and personalized communications;
  • Stimulate a positive, fun and fulfilling brand-centric experience that customers ultimately highly value and crave; and
  • Empower and continuously enrich a robust consumer purchase history database that allows fruitful, ongoing data mining to capture consumer trends and insights that can help operators craft innovative loyalty program promotions.

APP INTEGRATION

Several How To Crew experts point to Starbucks as the gold standard in foodservice loyalty programs. Starbucks recently integrated a payment option and other marketing activities into its multi-tiered rewards program and also increased reward levels based on how customers engage with the brand. For example, Starbucks offers its mobile app users a higher level of incentives and rewards than it does to its loyalty card users.

“Promoting the app [as Starbucks does] helps not only build usage, but also gives retailers the opportunity to utilize even more tools to drive sales with things such as geo-fencing, beacons in the store and augmented reality,” Bishop said. “It also improves the customer experience by making the checkout easier and quicker, while paving the way for other opportunities to make connections with the customer.”

As loyalty programs in the foodservice industry evolve, more retailers will develop and launch apps that fully integrate payment options and rewards programs with other offerings to increase and strengthen customer connections, and boost convenience and engagement, according to our How To Crew panelists.

In the news recently, Wawa has linked its Wawa Rewards program to its new Wawa Mobile App, which is now available for free through the App Store and Google Play. The new Wawa app, however — similar to the Sheetz and Maverik apps — does not allow shoppers to place food orders or make purchases with a credit card. Unlike the Starbucks model, customers must purchase a Wawa gift card in order to make purchases with the app, and they must spend $50 on a gift card to earn a reward. Via the Wawa app, customers can manage their Wawa gift card, register a Wawa gift card to earn rewards, check their card balance, reload their card anytime and redeem Wawa Rewards. In addition, the app enables customers to find stores, check fuel prices in real time, view nutrition information and connect with friends using social check-ins.

The next iteration of c-store apps will most certainly add ordering and payment capabilities, like Starbucks currently offers, but these programs are more costly and require strong management and focused execution.

“The use of a card or app automates the loyalty program and makes it easier for the guest,” said How To Crew member and former retailer Ed Burcher of Burcher Consulting. “This is the key — make it easy and become part of the customer’s routine, or the program will not be used with the frequency needed to change behavior. The other component is to allow guests to redeem accumulated points for products, which rewards your loyal guests with value back.”

SHOPPER INSIGHTS & TECHNOLOGY

Most retailers develop loyalty marketing programs to enhance sales, but they also do it to gain access to important shopper data and insights.

“Loyalty strategies that provide strategic shopper insights can produce even stronger economic value than focusing only on rewards,” Bishop said. “A loyalty-based program enables this for most retailers and being shopper-centric in their analytics is the catalyst for bringing the program to life.”

Loyalty programs yield vast amounts of data on customer habits and needs. For retailers to leverage this data, “they should develop profiles of individual customers and create targeted offers that increase the lifetime value of that c-store consumer,” said Tim Powell, a foodservice consultant with THINK Marketing and a member of the CSNews How To Crew. “Marketers then need to decide on the type of loyalty program to employ, such as rewarding consumers in a sought-after age group, income level or gender. Still, it’s fundamental to reward your heaviest users.”

The data can help retailers gain a deeper understanding of who is buying what, and reveal opportunity gaps. A retailer can then begin to develop a process for learning why others may not be purchasing these products. “For example, a retailer may identify that females under-index relative to prepared food purchases,” Bishop said. While the data won’t reveal why that is, “it will help the retailer focus on what to test based on data-driven opportunity gaps.”

The biggest issue facing c-store foodservice marketers is the ability to collect market basket data, tie it to a customer loyalty database and act on that information in a way that is both timely and meets the specific needs of the loyalty program, according to Minno.

Most if not all of today’s point-of-sale systems marketed to the c-store industry use the NACS XML Data Interchange Standard for market basket data, and most provide for system integration with current loyalty program technology companies.

And of course, there are myriad companies that offer loyalty programs. Before selecting a program partner, retailers should clearly articulate their goals for the program and how they want it to evolve over time. This will ensure that the solution partner a retailer selects will be able to keep pace with its future needs. “Knowing what you want and having it before you need it is the key,” Minno said.

Many retailers also underestimate the important role strong database management plays in a loyalty marketing program. “Loyalty is just one piece of database management. In order to make it successful for the long term, it is a good idea to have a role created specifically for database management,” Powell said. “Many retailers ignore the costs and overhead of such programs and it is essential that it be structured and operated effectively.”

Other loyalty program costs to consider include recruiting new customer members, initial sign-up offers, administration, marketing costs and cost of interaction (if there are help lines, for example), he added.