Small Operators Break Down Barriers to Navigate the Loyalty Landscape

Frequency of customer interactions, basket size and differentiation are among the challenges for smaller chains and independent retailers.
Scrabble tiles spelling out customer loyalty brand trust

NATIONAL REPORT — "When you consider that 84 percent of consumers are enrolled in an average of five loyalty programs across merchants, it might seem like boosting your loyalty program participation would be easy. As any c-store with a loyalty program knows, this is just not the case."

That quote from "Maximizing Loyalty ROI with Everyday Payments Data," an e-book from payment processing and data insights company PayiQ, lays out the task at hand for convenience store operators striving to build loyalty with today's consumers.

While 91 percent of consumers say a personalized loyalty experience is worthwhile, 69 percent of loyalty users have left or become inactive because they didn't perceive the program as being valuable, according to a survey from Wakefield Research commissioned by PayiQ. Add in the fact that 49 percent say they will leave if they are not rewarded quickly enough, and the high hurdles c-store operators face become even clearer.

[Read more: Updating Loyalty Programs for the 21st Century Customer]

All stores, of course, must work to break those barriers; however, they are especially daunting for the industry's small operators who have fewer resources than their larger competitors.

Identifying the Challenges

Understanding what a small operator faces is the first step to implementing processes and programs that will help them engage customers and generate long-term loyalty.

Frequency of customer interactions and the amount shoppers spend are two issues that put small operators at a disadvantage compared to the bigger players on the block, said Michelle Wildenauer, senior vice president of strategic services for The Lacek Group, a data-driven loyalty, experience and customer engagement agency headquartered in Minneapolis.

"It is easier to engage customers and generate loyalty when customer interactions are frequent and there is meaningful customer spend. Frequency keeps the brand top-of-mind and provides brands with opportunities to shape and reward customer habits. Spend provides funding for meaningful loyalty rewards," she explained, noting that small stores — especially those with a limited geographic footprint — may have lower frequency and spend. "They'll need to look for ways to engage their audience in between transactions and deliver member benefits and rewards that are low cost but have high perceived value."

Differentiation is another hurdle, according to Jeff Opp, sales director of independent and new markets for Temple, Texas-based McLane Co. Inc., one of the largest distributors in America.

"It can be difficult for a small operator to differentiate their store or their product mix and to create unique offerings and experiences that drive engagement and loyalty," he said. "I would recommend that small stores implement a consistent pricing strategy around buying more to save — [for example], buy an item to save money on select items."

A transactional business model focused on convenience and speed of transaction is also problematic for small operators. "Consumers today show loyalty to brands that engage them both rationally and emotionally," said Wildenauer, noting that eight in 10 consumers in a late 2021 survey by The Lacek Group indicated that emotional benefits help maintain engagement in a loyalty program. Transactional programs alone don't create an emotional connection with customers.

"The problem with programs based solely on rational benefits is they're ripe for disruption — and easy to break," she further explained. "One email from a competitor offering a deep discount for a first-time visitor just might sway those seemingly loyal customers."

How to Accelerate Loyalty

Engaging customers in ways that not only keep them happy on their first visit, but also engender loyalty that will generate many trips to come is clearly an important task.

There are several ways small operators can work toward achieving this goal:

Focus on ways to create emotional engagement and humanize the experience

This approach is key considering that 71 percent of consumers say they would share their personal information with a loyalty program if it meant getting a more personalized experience, according to PayiQ research.

Wildenauer suggests creating a sense of community through local or regional efforts — things like "member days" when the local sports team wins or first access to local events for top-tier members. And because the c-store customer's experience often occurs at the pump with little or no human interaction, she recommends implementing new business models that bring the in-store experience to the member "like what quick-service restaurants have done with mobile order and pay, and curbside delivery."

Incorporate unique elements of your brand or product offering into your loyalty strategies

Are your stores known for a certain beverage or food offering that differentiates you from the competition? "Build your loyalty proposition around this or create fun reward options or redemption windows around these items," Wildenauer advises.

Develop an ecosystem that delivers a more robust and holistic member experience

Creating a loyalty playbook for merchandisers that are interested in delivering targeted offers to members is one suggestion. Wildenauer also recommends "working with merchandisers to reallocate a portion of their marketing funds to program currency," and conducting customer research to understand paint points and needs, and then solve for these through brand partnerships.

Supply chain partners can be an integral part of the ecosystem, too, Opp stressed. "Smaller stores with smaller budgets or limited resources can remain competitive by leveraging their supply chain partner and taking advantage of vendor loyalty programs," he said, noting that McLane has helped independent operators grow into small chains and small chains grow into large chains by providing insights into product mix, merchandising and technology tools.

Consider alternative loyalty strategies

Wildenauer recommends creating new programs and promotions, and then testing them in limited markets prior to rollout to gauge customer response. One example: "Test a subscription program where members pay an annual fee for enhanced services or rewards — complimentary beverage with every visit, fixed price for gasoline for a limited duration, bottomless coffee, etc.," she said.

Leverage technology to create greater customer engagement

Technology is perhaps the most effective way to build a truly robust, successful loyalty program. Yet 89 percent of executives are concerned that their current technologies, platforms or databases are not providing the tools they need, with 51 percent reporting that their loyalty program cannot offer personalized rewards, according to PayiQ.

For operators looking for help on the technology front, Wildenauer advises them to "ensure the loyalty program is seamlessly delivered through the app, and consider integration of loyalty earn and redeem functionality with the digital wallet. Add utility to the app to generate engagement in between transactions. Prioritize functionality that provides both functional and entertainment value. And deliver geolocation messaging when members are near stores to drive incremental visits."

The ability to access secure, first-party data in real time — key to being able to tailor offers to individual customers — is also an important component of the technology picture.