Multi-Unit Franchisee Magazine Issue II, 2014 | Page 66
CustomersCount BY JACK MACKEY
Loyalty Deserves
Its Own Rewards
Create a rewards program that works
for you – and your customers!
T
he best loyalty programs do
four things:
1) help you continuously engage and remain “sticky” with
your existing customers;
2) allow you to understand your customer’s buying behavior with you;
3) drive more revenue, greater retention,
and higher lifetime customer value; and
4) make customers feel appreciated.
This was the consensus from the 2014
IFA Convention, where I joined a discussion about loyalty programs with a diverse
group of franchise organizations. These
included foodservice, hair salons, home
healthcare, dry cleaning, and specialty
services from lawn care to maid service
to printing and shipping. Leaders and
franchisees from these companies shared
a common question: What are the best
customer loyalty programs?
Loyalty or rewards programs?
In wrestling with this question, it is clear
that so-called loyalty programs are really
rewards programs. Most grocery brands,
for example, invite you to get their shopper card so you can get discounts on items
you purchase. Signing up means providing
your identity and personal information
up front. Then you agree to share your
purchasing data by using the card when
you shop. You can’t get those discounts
without signing up for the program.
That’s the deal.
So shopper cards are not just rewarding for the customers. The grocer trades
what is valuable to them (access to customer data) for what is valuable to customers (savings). Customer purchasing
data and demographics are quite valuable
to every franchise business as well. But
investments in technology are the ante
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MULTI-UNIT FRANCHISEE IS S UE II, 2014
to get in the loyalty (rewards) program
game in a serious way. Grocery chains
were early adopters of advanced technology in the B2C world. They invested
in real-time POS systems that integrate
with marketing. That’s not the case in
many franchise systems.
Richard Simtob of Zoup! summed up
the challenge this way: “Everyone wants a
loyalty program, but no one wants to pa y
for it! But I do like the idea of rewarding
people for frequency. I just don’t like to
give away free stuff.” Alas, for customers
to receive rewards someone has to give
rewards.
How to fund a program
How do you fund all the administration and free rewards that come with
such a loyalty (rewards) program? Large
companies like Starbucks and Dunkin’
Donuts have found that offering their
own app helps pay for the costs of their
rewards program. That’s because when
customers pay for repeated purchases using the app, instead of a credit card, the
business saves millions in swipe fees. It
works like this: Customers download the
free app, but to activate it they have to
1) share information about themselves,
and 2) load the app with a stored-value
gift card. Subsequent transactions draw
down the pre-payment and are outside
the banking system.
Chris Vitale, CEO of ZNAP QSR Solutions, explained how to further leverage
that idea. “Starbucks and Dunkin’ Donuts
sell millions of gift cards in the holiday
season. Then they encourage the gift card
holders to register their cards to protect
against losing any remaining value if they
lose the card. Registration leads to flipping that stored-value plastic card into a
reloadable gift card. At Dunkin’ Donuts
that means enrollment into the new DD
Perks Rewards Program; at Starbucks it
goes into the My Starbucks Rewards app.
By using the stored value gift cards for
mobile payment, the credit card transaction fees are eliminated.”
Alternative approaches
If you can’t make that kind of investment,
there were a number of rewards programs
the group shared that aren’t as ambitious,
but that demonstrate easy ways to start.
Donna Reeve from Regis Canada said
the company has had success offering a
free hair coloring as a reward for purchasing a certain number of haircutting
services. This reward works because hair
coloring is a premium service that many
Regis customers aspire to, and truly value. The pursuit of this perk does drive
stickiness and higher lifetime value for
some customers.
Another example came from Greg
Carlucci, who works for Agile Pursuits
Franchising, owned by Procter & Gamble,
makers of Tide. Even though the parent
company is large, its Tide Dry Cleaners
brand is just getting started, with about
20 units operating. Each location gives its
top 25 customers a holiday gift basket as
a thank-you. It’s a pure reward with no
strings attached. The 80-20 rule justifies
giving the most perks and spending the
most on retaining your most profitable
customers.
Tide Dry Cleaners also provides firsttime customers with an immediate reward
bag containing free samples of other
P&G cleaning and household products
(Febreze, Bounce, and Cascade to name a
few). This unexpected gift creates a highimpact first visit to Tide, which increases
the likelihood to return and to spread
positive word of mouth.
Remember, the best loyalty/reward programs make customers feel appreciated.
SMG Chief Evangelist Jack
Mackey helps multi-unit
operators improve loyalty and
drive growth. Contact him at
816-448-4556 or jmackey@
smg.com.