Loyalty Programs for Brick & Mortar Stores: Time For a Few Changes?

When shopping at the local branch of a kitchen supply chain yesterday, I missed using a coupon that was languishing in my email inbox. At the cash register, I was asked for my email and my reply was that they already had it. It’s rare that I don’t get asked for my email when paying at any store nowadays, as part of the checkout process. I usually refuse. Why? Because my email address, even the one for all my junk mail, is worth something to the store. Is there a reason they should get it for free? But I digress. The kitchen supply store should have already known who I was, offered to honor their emailed coupon, and as a result, gotten my new credit card info and the details of my purchase. As it was, I left bitter and the store had no idea something had gone wrong.

But I’m getting ahead of myself here. Loyalty programs operate on a known exchange: the merchants get returning customers and their purchase history and customers receive special offers and even freebies in return. The transaction usually takes place at the cash register.

the transaction sometimes starts with an offer sent by email to lure the customer to the store and it usually ends at the cash register.

Here are a few challenges with the way many stores currently implement their loyalty programs:

  1. There is rarely any connection between online and in-store purchases.
  2. The connection between a customer and his loyalty account is a physical card. I, for one, am tired of carrying too many cards in my wallet.
  3. The difficulty in redeeming awards. Customers need to be aware of their rewards and show the cashier proof instead of the cashier getting that information from their loyalty card.
  4. Stores have no idea who the customer is when they walk through the door. If I buy only camping products at REI, should the store know that and help me find what I need?
Too many cards I never use.

Too many cards I never use.

Some of the benefits I see for mobile-based loyalty programs:

  1. A customer won’t forget his card and they won’t be forced to spell out their email every time they check out. They’ll self-identify with their phone at checkout if the process is easy and rewarded.
  2. Rewards and offers can reside inside the app and can be realized without the hassle of searching email or remembering to bring a postcard, motivating the customer make a purchase.
  3. Rewards and offers can be dynamic and location-based, drawing a customer into a store with a tempting offer.

There are also long-term benefits to stores for with app-based loyalty programs:

  1. They can figure out what makes customers return to a store. This is easy to track when a customer provides the coupon he’s using at checkout via the app. A/B testing can determine what drives individual customers.
  2. What makes them accrue loyalty points and what would they like to earn points for. Over time, the store can see what plan gets customers into the store faster and what plan increases purchase frequency and amount.
  3. What offers and rewards are easier to redeem and how often they are redeemed. A/B testing can help here, too.

Some loyalty programs I’ve seen that do parts of this:

  1. REI offers a percent back on every purchase, at the end of the year. Thus, it’s always in my interest to provide my membership information.
  2. LEGO does this really well, making it clear how I accumulate points, sending me emails and offers with my points clearly stated, and offering to redeem the points earn every time I swipe my card, without my saying a word.
  3. Starbucks is mostly clear about how I accumulate stars and how many stars equal a free drink. They’re also easy to redeem, residing on my card, but I need to remember to ask for them.

Loyalty programs that don’t inspire my loyalty:

  1. Sports Authority, where I’m not sure what percentage I get back from my purchase (if at all) or if I only get a reward above a certain amount spent. They also make it very difficult to redeem their rewards. Instead of just redeeming them at a swipe of my loyalty card, I need to show an email. Also, their rewards expire, putting more pressure on me to remember to present the email in the right time frame.
  2. IKEA would like me to swipe my loyalty card at every purchase but only gives a discount on a limited list of items each period. This means that it only makes sense for me to swipe my card if I’m buying any one of those products. If I’m not, there is no incentive. That said, one can only get IKEA products at IKEA. Is there a point to a loyalty program?
  3. CVS: after countless swipes I have yet to see a single reward. What I do get is a yard-long receipt with offers for products in categories I never buy. I don’t bother swiping any more. I also do my drugstore purchases elsewhere.

Finally, do stores even need loyalty programs any more to track purchase history? I doubt it. Nordstrom knows who I am by the swipe of my credit card. It always sends me a receipt via email, even when I don’t ask for one, and occasionally sends me surveys based on my product history. I get nothing in return from them (unless you count an email receipt as a benefit.) This isn’t a loyalty program, it’s just tracking.



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