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I am sure that at one time or another your company has had does have or has previously considered the pros and cons of a frequent buyer program. Until recently I hadn’t given the topic much thought as I was under the impression that most retailers offered customer award programs in some form or another.
Purpose of Frequent Buyer Programs
Such programs are designed to do three things: foster customer loyalty encourage frequent shopping and reward good customers. I believe that some retailers have begun offering frequent buyer programs simply due to the fact that many Point-of-Sale (POS) systems can now track the “points” automatically thus eliminating the need for punch cards or bar-coded plastic tags that wind up cluttering most key chains. The reality may actually be that they just didn’t want to miss the boat if everybody else was getting on the “frequent buyer” bandwagon.
Cost Considerations
What I didn’t stop to realize is the cost associated with many such programs – until I received a phone call from a client informing me that the company was stopping its frequent buyer program immediately. The reason wasn’t maintenance confusion on the back end or lack of customer interest.
It was cost pure and simple!
“Cost” means the discounts and/or rewards given away as an incentive to remain “loyal” as a customer. For example when a customer spends $350 he or she may get a $25 gift card at a cost of $25 to the retailer – and the cumulative effect of the rewards earned will cost over a year’s time.
Client’s Perspective
My first reaction was “Do you think you will lose customers?” The client’s answer: “No I don’t think we will. Our stores have a loyal following and I believe they will shop with us for the products and services we will continue to offer.”
Then I asked “What about customers already in the program that have accumulated points?” The answer: “We will continue to honor the points our customers have earned but we will no longer offer the current program to new customers.”
Customers
I decided I would do a little research on the topic. I asked friends relatives clients and retailers of all sorts what their opinions were of these programs. The answers I received ranged from “we don’t have one” to “we are considering putting one in” to “we used to do this but found it to be too expensive.”
Rules and More Rules
All of the stores I queried on this topic had a different set of rules on how the program was to be used. Some were straightforward while others seemed somewhat confusing to me. Some computer POS systems do a superior job of tracking the needed customer information some not so much. A few stores still use punch cards potentially creating an opportunity for fraud and abuse. One merchant had a rule that stated even if a customer had accumulated enough points for her particular purchase that day she was supposed to use it on a future trip to the store – understandably a point of contention with some customers.
Several stores had “use it or lose it” caveats similar to flexible benefit programs. One retailer I spoke with discovered that only 50% of those entitled were actually using the benefit. Other point programs have expiration dates ranging from 90 days to annually to never.
Another store merchandise manager told me that their system required a lot of maintenance and back-end confusion and went on to say “Personally it doesn’t drive me to shop.” When asked if she owned the company would she have a program like they have the answer was a resounding “No!”
Ritchie Sayner: Can You Afford Your Frequent Buyer Program?
Ritchie Sayner continued on page 22
I believe that some retailers have begun offering frequent buyer programs simply due to the fact that many Point-of-Sale (POS) systems can now track the “points” automatically thus eliminating the need for punch cards or bar-coded plastic tags that wind up cluttering most key chains.
Published in the July/August 2017 issue of Shoe Retailing Today Copyright © 2017 National Shoe Retailers Association Tucson AZ www.nsra.org. All rights reserved.
To her store. In turn the podiatry patients were telling their friends about the great styles Takashima carried creating a domino effect. The business which Takashima calls “sit and fit and then some” today serves a varied clientele from those who simply want well-made comfort shoes to those who need shoes with some sort of modification. About half her clientele is Asian and the other half is “everyone else under the rainbow.”
The store has had four locations to date the second of which was Uyeda’s home for fifty-eight years. In 2015 when the building Takashima had started off in was sold and demolished she relocated around the corner ensuring loyal customers would have no trouble finding her. Uyeda Shoes has always been within a five-mile radius of where it began.
One of Takashima’s favorite brands is Naot because “They are innovative and they try to keep things fresh. It’s also a pleasure to do business with them. Other brands that sell well are SAS Mephisto Munro and Hoka One One. A new addition is Joya and that is gaining interest as well. I also see a trend toward hiking boots and easy slip-on covered shoes especially for travel.”
Tweaking for Comfort
Takashima also sells Hydro Flasks since water carriers are a must-have in Hawaii. But basically it’s all about shoes and the trend at Uyeda Shoe Store is all about comfort. “The Millennials have been raised in Nikes and demand comfort” she explains. “They want a pump to feel like a sport shoe. I keep telling them that a prom dress is not going to feel like a pair of pajamas. I really have to work to find them a good pair of pumps and then I have to tweak them often significantly to make them as comfortable as they want.
I am truly grateful that the internet can’t provide that service.
That’s probably why I’m still viable in this business climate. Also I love my customers! They have become my friends and I will do whatever I can to make them happy. That is the true gift of having this business. It’s the relationships you make along the way. Uyeda Shoe Store is a one-hundred-and-two-year-old blessing!
Editor’s Note:
SRT is grateful to Finnegan Riechers and Baril Schuemann and Takashima for sharing their stories. In addition to providing solid information about what’s hot and what’s not they’ve collectively also confirmed that small retail environments are very often places where love – of family of coworkers of customers and of course of shoes and of work – grows helping business to flourish.
Ideas to Consider Instead of Point-Tracking
- Some stores feel that having frequent sales and promotions where good customers can benefit from extra savings provides sufficient value.
- Others find that coupons in various denominations with tight usage windows are better motivators.
- Additional options to consider in lieu of frequent buyer programs might include gift-with-purchase or purchase-with-purchase ideas a marketing concept popularized and still very much in use today by cosmetic companies.
I have had store owners tell me that they experience very strong response and much better than average return by using “customer appreciation” letters. These are sent out annually offering varying dollar amounts based on how much the customer spent the previous year. Customer appreciation letters are very effective if set up correctly. Implementation isn’t difficult or time-consuming but is too detailed to explain in this article due to space limitations.
In the end a retailer should regularly review the true value of any frequent buyer program by looking at all facets. Are customers really more loyal to the store because of them? Are frequent…
Buyer Programs Becoming “Generational”
Do they appeal to certain age demographics say customers over age 40 more than others? Should credit be given on all purchases or just full-price purchases? If every store has a frequent buyer program does the program really make a difference? Is our program simple to manage and easy for the customer to understand? An argument could be made that customers should be shopping your store(s) because they enjoy the experience the people who serve them and the selection of merchandise – and not simply because they rack up frequent buyer points that at least in some cases go unused.
Embarking on a New Buyer Program
When you embark on a new buyer program remember it is always easier to add more later than to take things away if you come to the realization that your program is becoming cost-prohibitive. Strongly consider awarding points on full-price purchases only to help minimize what the program costs. When associates fill out a new customer profile for a buyer program they must have (at a minimum) name and email address. Additionally mailing address and phone number would also be helpful. With that information you will at least have a tool to reach out to them in the future.
Review Your Frequent Buyer Program
If you have a frequent buyer program review it today and be sure to find out how much you are giving away in reward dollars. If you are considering one of these programs you must do your homework or run the risk of having to answer the question Connie Francis posed back in 1958 when she crooned “Who’s Sorry Now?”
Ritchie Sayner is vice president of business development at RMSA Retail Solutions and author of Retail Revelations: Strategies for Improving Sales Margins and Turnover available through Amazon. As a courtesy to SRT readers the author is happy to discuss customer appreciation ideas with anyone interested. He can be reached at rsayner@rmsa.com or 816-505-7912.
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Summary of Frequent Buyer Programs
The article explores the advantages and challenges of frequent buyer programs in retail. While these programs aim to enhance customer loyalty and encourage repeat shopping their cost implications often lead businesses to reconsider their value. Many retailers are finding alternative strategies such as targeted promotions and customer appreciation initiatives to maintain customer engagement without the financial burden of traditional loyalty programs.
“Cost means the discounts and/or rewards given away as an incentive to remain ‘loyal’ as a customer.”
Real-World Examples of Frequent Buyer Programs
Frequent buyer programs are widely used by retailers to enhance customer loyalty and encourage repeat business. Here are a few real-world examples of how these programs are implemented and the challenges they face:
- A major bookstore chain offers a loyalty program where customers earn points for every purchase. These points can be redeemed for discounts on future purchases. However the program has faced criticism due to its complexity and the expiration of points which frustrates some customers.
- A popular coffee shop chain uses a mobile app to track customer purchases and rewards. Customers earn a free drink after a certain number of purchases. This system is praised for its convenience and ease of use but it also raises concerns about the cost of providing free products to frequent buyers.
- A grocery store offers a membership card that allows customers to earn points on every purchase which can be used for discounts on groceries. Although the program is popular the store has had to reassess the financial impact due to the significant discounts offered which affect overall profit margins.
