Customer engagement and loyalty programs are terms that are often used synonymously. While they are closely related concepts, they are not necessarily interchangeable terms. Loyalty programs can be an important piece of a customer engagement strategy, but they are really two separate things.
Loyalty marketing or customer loyalty are names that have been used for the industry over the past twenty years. In more recent years, the concept of loyalty has changed dramatically as most retailers have adopted programs and there’s a better understanding of the different customer behaviors that lead to brand loyalty.
Convenience stores and retailers are realizing more than ever the only true loyalty that exists among consumers is to religion, family, country, or political views. Careful to set the bar of expectations at the correct level, customer engagement focuses on creating incremental patterns, moving customers to more frequent and valuable patronage that exhibits more loyalty to the businesses they frequent. Customer engagement is the starting place for generating customer loyalty and provides a framework for loyalty programs that can work for any brand.
It may sound simple, but it is important to realize that engagement is a predecessor to loyalty. This means engagement must come first before consumers can have encounters with the brand and begin developing a relationship.
Customer experience is more a facilitator of engagement, and ultimately loyalty. If your company website is poorly designed or is missing key features, you certainly won’t have high levels of engagement. In a physical store, the atmosphere should feel clean, welcoming, and easy to navigate the instant a customer walks in.
A good customer experience leads to more sustainable engagement, which leads to developing groups of high value, loyal customers. If you don’t have customer experience finely tuned, you won’t have sustainable engagement, and ultimately, you will not create as many loyal customers as you potentially could.
Background of Loyalty Programs in Convenience Industry
Loyalty programs have been around for a long time. They started in the hotel industry, then moved to the airlines, then to banking. Some brands in the c-store space have had loyalty programs for decades. However, as an industry, developing customer-oriented marketing programs that can be thought of as loyalty programs has been a phenomenon that has quickly advanced in sophistication over the past 5 years or so.
Convenience stores have all the elements needed to be successful in engaging and developing strong customer relationships. Loyalty programs, in theory, should be successful any time you have stores with high visitor frequency – and perhaps the best example of a high frequency retailer is convenience stores.
While most visits typically result in a low average transaction value, visit frequency is high and gross margins on inside sales are strong enough to support customer incentives. Consumer packaged goods (CPG) companies are increasingly willing to fund specific product offers, which adds to the value of any program. The opportunity to communicate with customers on a frequent basis means a lot of “test and learn” scenarios can be played out. Moving forward, the c-store industry will begin to see more experimentation among loyalty program models, leading to greater success as they advance.
Common Customer Loyalty Implementation Errors to Avoid
Often, c-store business leaders are not fans of loyalty programs because the examples they see suffer from poor design and execution. Considering the investment required to develop high-value customers, these same executives want to be sure they will reap the expected results.
While some businesses get loyalty programs and customer engagement right, many tend to struggle, especially if they are just starting to implement a new program. Others have loyalty programs in place but see little payoff. That doesn’t mean loyalty programs do not work. It simply reinforces the importance of a sound loyalty strategy coupled with strong execution.
There are three main areas where convenience stores fall short while implementing a new program.
- Less than adequate customer perceived value
- Trying to please everyone
- Lack of training / low employee engagement
1. Little to No Perceived Value
It is important for retailers to understand that their program must stay fresh and draw the attention of the customer. If customers shop the store, see signs about downloading an app, hear a pitch at the register about the program, but don’t really understand the benefits of participation, they may exit the store without giving the program consideration again.
Authenticity, transparency, and clarity are essential words that need to be embraced by retailers to make their programs effective and profitable. Consumers are increasingly savvy and sensitive to the feeling of being manipulated. They assume retailers will have loyalty programs and have higher expectations for these programs than in the past. They also are keenly aware that retailers want their data and see loyalty programs as the vehicle to collect personal information. In essence, consumers are much more skeptical today, so the value they see in loyalty programs has to be stronger than in previous years.
This means the brand needs to communicate a loyalty program that is crystal clear, easy to understand, and offers a compelling path to rewards. Just how many cups of coffee does a customer need to buy before getting a reward worth one dollar? When tangible rewards seem out of reach, it has the opposite effect of loyalty. Customers emotionally move a few steps away from the company.
Further, the program must make sense with the brand. Some programs seem boring and appear just as another point system that doesn’t foster a connection with the brand. In these instances, there is little to no incentive for the consumer to buy-in, except the potential for future discounts. Often, little or nothing occurs to actually change consumer behaviors or their feelings about the brand. Businesses that create brand-relevant programs offer rewards which leverage the uniqueness of their own position in the marketplace. They make the program fun and relevant to the customers who walk in their stores.
2. Trying to Please Everyone
In the customer loyalty world, we use the phrase “casting the net too wide.” This can be a fatal mistake for new programs. The concept of loyalty programs is to help identify the better or best customers. Finding out who your best customers are is a great start, but it doesn’t end there. The goal is to find ways to add value and better serve these groups so they keep coming back and increase their customer lifetime value for the business.
If you try to design your program to fit the entire universe of people that might frequent your business, your resources will be spread too thin. As a result, you won’t have enough resources left to spend on these high value groups. Understand your target audience and those folks your company is trying to attract.
The key metrics of your loyalty program should be tied closely to the objectives, goals, and strategies of the organization. Your efforts should be spent targeting higher value customers first without alienating lower level groups. Find the balance that supports what your company aims to achieve.
3. Lack of Training / Low Employee Engagement
Several factors can affect the success of a new loyalty program, but one of the most important is employee training. If the training of customer-facing staff is not thorough and continuous, their pitch to the customers lacks the required authenticity and ends up sounding like a scam to get an email address.
It can certainly be difficult to get this right, especially since convenience stores operate in a high turnover environment. It’s easy to give up on training because it becomes too challenging. Even though on-site marketing with pump-toppers and window signage are effective, reinforcement of the program value from employees can make the difference between success and failure. Getting this right from the start and prioritizing it allows companies to see the right level of engagement in their programs.
Need to Improve Your Loyalty Program?
These common loyalty program issues are often the main reason convenience store retailers call on us for help.
At Impact 21, we provide in-depth analyses to identify friction points and program weaknesses. Our vast experience with retailers enables us to identify and execute the most effective solutions for improving your customer engagement and developing a more profitable customer base. Contact us today to get started.
Practice Leader, Customer Engagement & Loyalty
Bill Hanifin is a Certified Loyalty Marketing Professional (CLMP), with 20 years designing, operating & evaluating customer loyalty and data-driven marketing programs on behalf of leading organizations around the world…