As we’ve wondered aloud in several recent articles, while customer relationship programs continue to proliferate – especially in newer growth areas like retail – what kinds of programs are being launched? Are some of them really “loyalty programs” at all?”
Leading us to ask, the ultimate question: “When is a program not a program?”
A common retail program design today is the value or preferred customer card, where the customer must use the card to get discounted pricing on selected items and, in some cases earn credit towards future purchases. One can debate – as we have – that such programs are simply strategies for large retailers, particularly supermarkets, to restrict the availability of temporary price reductions and thereby improve the bottom line.
Whether discount cards are really loyalty programs or not, such programs should bring benefits to both customer and marketer. But the implementation of these programs is often flawed at the store level, defeating the purpose of the card.
We’ve all seen it: a customer is ready to pay at the checkstand when the clerk asks the standard question, “Do you have a preferred card?” Sometimes the answer is no and the customer does not want to sign up. So far, so good; the whole point of the program is that, ideally, only the “right” customers (only the most valuable or vulnerable to competition) will get the discount.
But our retail clerks are trained to please (at least, as customers, we hope they are). So the employee grabs a generic preferred card from the side of the register and scans it. Sometimes employees scan a card without even asking the customer. The customer now gets the discount; the store takes a markdown they may not have wanted to take; the transaction is not trackable to a customer; the store has no useful knowledge about the sale or the customer; the store cannot target messaging or discounts to the customer.
All the purposes of the program have now been defeated.
True, consumers benefit from getting the discount, but because the transaction isn’t tracked, the customer misses out on any future or accrued benefits.
That many “preferred card” programs fail to deliver on the promise of loyalty is not simply the fault of clerks and customers. The marketers who design and operate the programs are also to blame. By simply using the cards to deliver (and restrict) temporary price reductions, stores using this kind of program fail to take advantage of the greatest potential of customer relationship programs: the targeted use of customer knowledge. When discount card programs are properly used, the retailer gets a wealth of transactional information about each customer. Using this information to communicate and deliver relevant information and offers to each customer, the retailer has tremendous opportunity to shift share, get customers to try new brands and products, and concentrate their category spending at one store or chain. By delivering real value and communicating relevant information, retailers can give customers good reasons to stop splitting their shopping. Smart marketers can use programs to create substantial “opportunity cost” to get customers to think twice before shopping elsewhere.
But data collected is not always data put to good use. In many cases a program will collect an abundance of information... which then enters the “black hole” of data warehousing, never again seeing the light of day, where it should be used to direct the right communications to the right customers. In other cases, such as our example of the clerk swiping a generic card, the data coming into the system is tainted. In either case, the effective use of customer data is undermined, and the hoped-for marketing results from the program are never realized.
For any program that tracks customer behavior, it is essential that both the program design and the field implementation take care to avoid these common pitfalls. Both marketing strategy and store operations are essential to program success.
By Jeff Barnhart for Metzner Schneider Associates.
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