Residential Lighting: Why are loyalty programs important?
Malcolm Fowler: They allow lighting showrooms to gather data about their customers. In the enrollment phase, you collect demographic and preferential data. And in a card-based, real-time program—where the customers’ cards are swiped every time they make a purchase—you capture purchase data, which helps you to segment customers in order to reward them. We stress using real-time marketing programs at the point of sale, since this can benefit a merchant at relatively low cost. Printing coupons on receipts when members reach certain point values or giving them points for purchases made during a specific time of the month or the year are both ways to change customers’ shopping habits.
RL: What is a “Growalition”?
MF: Essentially, a Growalition is a loyalty program with a strong membership and strong “currency” looking to expand its accumulation and redemption locations. Generally, the “foundation” program is a large retailer, airline or hotel chain. For example, if a group of lighting showrooms got together to offer United Airlines Mileage Plus points, they would be participating in a Growalition, purchasing points from United and giving them as rewards to Mileage Plus members who buy products. Now, I don’t know that United is looking to expand its Mileage Plus program in this way. But if they did, it would get quite complex for the showrooms to figure out the intricacies of how to move the points, how much to pay United for them and how many to give customers per dollar spent.
RL: What kind of loyalty programs could our industry implement?
MF: One approach is a gift card program. Gift cards have a built in loyalty factor—they cannot be spent at any place other than your store. If your customers purchase gift cards for friends and family, they are passing on their loyalty to your business. You could also reward customers with a gift card, so they come back to your store. In retail, we’d say you need someone to come into your location and make a purchase four times a year in order for a loyalty program to make sense.
RL: Will more sophisticated programs be available in time?
MF: Loyalty implementation depends on the capabilities and equipment available at each store. If a merchant has electronic means of tracking customers and can record purchase histories in a database, then they can capture information about their best customers and communicate bonus and comeback offers to them. The challenge on the loyalty side is that we don’t yet package these programs for the single-store and small-chain level—although we probably will in the near future.
• A circular coupon may generate a 0.3 to 1 percent response rate, but a loyalty program coupon can generate a response rate as high as 40 percent.
• Eighty percent of loyalty program participants say their memberships definitely impact their purchase decisions.
• Seventy-four percent of people say they buy less from a company once they leave that company’s loyalty program.
Source: Ernex, Maritz Loyalty Marketing