If one word describes the current state of retail and loyalty, it's evolution.
Retail is undergoing rapid transformation in several sectors. While the convenience retail sector is enjoying its third straight year of record profits, grocery and other traditional brick-and-mortar retailers struggle.
Amazon continues to dominate the space with the addition of same-day grocery delivery from Amazon Fresh and two-hour delivery from Amazon Prime Now, causing massive reconsideration of the industry's understanding of "convenience." Changing expectations and consumer behaviors have also been catalysts for retailers in the electronics, appliance and apparel sectors as they beef up online and in-store experiences for today's convenience-driven shoppers in order to remain competitive and relevant.
The silver lining for convenience store retailers? Millennial shoppers are now more likely than any other customer groups to buy food and other items at convenience stores.
But for convenience retail operators to maintain the momentum of the last three years, they must continue to innovate around meeting their customer’s needs. Some retailers are deploying effective loyalty programs that attract new customers, retain existing customers, and increase average basket size and spending frequency.
These retailers have learned that simply having a mobile app isn’t enough to change customer behavior. They recognize the need to deliver personalized experiences and offers at the right time across channels — and to do so requires an investment in technology infrastructure and expertise.
Successful loyalty programs are difficult to execute. They require relevant content, strong customer engagement, in-store execution, and a seamless customer experience.
To deliver, convenience retailers are often navigating in unchartered waters and engaging in technology platforms and vendors that are foreign to them.
A late 2016 Excentus survey of several hundred convenience retail operators identified common challenges linked to their loyalty programs, including:
- Programs that are overcomplicated for store employees (68 percent) and shoppers (62 percent) alike
- Too many vendors involved in loyalty program operations (60 percent)
- Limited mobile capabilities (49 percent)
- Frequent technical issues or outages (46 percent)
A CHANGE OF PERSPECTIVE
While loyalty is a difficult challenge, the opportunity remains. I keep returning to a statistic from Convenience Store News’ 2016 Realities of the Aisle consumer research study, in which one-third of convenience store shoppers said they would enroll in a loyalty program offered by their preferred store, but the store did not offer one. Another 15 percent indicated they were aware of, but had not yet enrolled in an existing convenience loyalty program. That's a true opportunity for store owners and operators.
So, what’s preventing operators from offering loyalty programs and tapping into this customer base?
Many smaller operations lack the scale, technology or expertise to run both a successful store and a successful loyalty program. This inhibits their ability to provide the types of rewards, offers and promotions that make stores competitive and attractive to customers. These operators realize the value of loyalty, but they often lack the means to implement robust loyalty strategies.
Many convenience retail operators that have launched programs are reassessing their current loyalty strategy because the programs have not met retailers' expectations — they are not boosting customer engagement or profitably changing customer behaviors.
Three strategies can help retailers thrive and support the types of loyalty programs, offers and promotions that today’s shoppers demand:
1. Use Data to Create Value for Your Customers
Successful loyalty programs use the data they capture to profitably change consumer behavior. Valuable data originates from a variety of touchpoints, including but not limited to shoppers' purchases, shopping frequency, spending patterns, preferences, mobile app activities, location, redemption activity, email interactions, and engagement patterns.
Successful loyalty programs must be built on data from all channels and all customer touchpoints, enabling managers to use it to: understand what their customers want, and when they want it; provide personal and unique experiences that drive loyalty; and measure the impact and results of their offers, promotions, campaigns and competitive positioning.
Rich data can give operators the omnichannel insights they need to bring new customers through the door, attract new brands and promotions to their programs, and retain the loyalty of existing, valuable program members.
Why have a loyalty program if it's not being used to understand what customers want and then give it to them?
2. Understand the Investment Required for a Loyalty Program
Operating a convenience store and operating a loyalty program require different skills and experience. Convenience store operators often don’t have the time, expertise or connected technologies to make loyalty programs run while keeping the doors open 24/7. Moreover, they often lack the technical expertise to manage and troubleshoot loyalty programs, or store associates might not be well-trained in how to explain and promote programs, rewards and offers to shoppers.
Ideally, loyalty programs benefit from a single stable, underlying platform that manages all aspects of loyalty, including data capture and analysis, offer and promotion execution, member communications, rewards earning and redemption, marketing and technology integration.
In the Excentus survey mentioned earlier, half of the convenience retailers said they rely on two to three vendors, and 36 percent use four to five vendors to manage loyalty activities, including CRM, mobile app, email, rewards management, payment and analytics. Moreover, 85 percent said they supported improved coordination and communication across vendors to improve loyalty program operations. Convenience retailers must recognize the time and resources required to coordinate activities across vendor partners.
3. Position Loyalty Programs for the Mobile Marketplace
Today, most successful loyalty programs have a mobile app — especially now that shoppers are increasingly paying for items, earning valuable points, redeeming rewards, and engaging with marketers directly from their mobile devices. There's magic in the smartphone, which allows operators to deliver rewards and loyalty based on how consumers use the mobile channel.
Smartphone-enabled geolocation, for example, is particularly important in the convenience sector, tied as it is to impulse purchases, fuel vendors, and fuel discount programs that are usually location- or brand-dependent.
Mobile apps help consumers keep track of their rewards and redemption options, or find nearby offers and locations easily as they travel. The smartphone can serve as a real-time, personalized marketing channel based on any number of data points: location, preferences, previous purchases, historical patterns, tiers, and more.
Innovation will continue to be paramount in the ever-competitive and constantly evolving convenience retail market. Successful customer loyalty programs can effectively increase value to customers and retailers alike — if the right investments in tools, technologies and expertise are made to understand what shoppers want and to act on that understanding.
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.