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What Makes Loyalty Programs Click

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The first thing to remember about loyalty programs is why they exist. The intent is to reward your biggest customers—the 20% that account for 80% of your sales. The goal is to keep your core customers coming back and adding to this coveted base of marketers used to call “heavy users.”

By design, loyalty programs provide rewards based on purchase quantities so they’re not going to please customers who don’t purchase in volume. Category managers need to understand some customers will be disappointed by the reward levels. That’s OK. The program won’t please everyone. It just needs to please your biggest customers.  Some loyalty programs fail because they try to please everyone.

Some loyalty studies analyze and examine rational and emotional drivers, but these have more to do with brand loyalty, not loyalty programs. Your top customers buy your product or service because it satisfies their needs. The rewards program helps to keep them coming back. So when you create a loyalty program, consider what successful ones do.

Keep it Simple

Loyalty programs can get complicated in a hurry. Make it easy to understand and quick to join. Most importantly, it should be really simple to participate.

When Starbucks changed their reward program from a simple 12 Star program (buy any item 12 times and get one free) to the 125 Star program (earn 2 stars for each dollar spent), social media lit up with angry customers. It didn’t help that participants now had to spend more to earn the same reward.

Offer High Value Rewards

Many programs fail because they offer rewards with low value or require a level of purchasing beyond what even their top customers could easily reach. Striking the balance can be tricky. You must reward your biggest customers, but you need to minimize costs to meet profit goals.

For Xbox Live customers, Microsoft sent them a gift reward on their birthday. Good idea, but it was worth only 25 cents — causing more negative backlash than goodwill. Remember these are your core customers who represent the majority of your revenues. Reward them accordingly.

Innovate

Innovation drives growth. Whether it’s innovative new products, services or loyalty programs. For example, why not reward customers who have been loyal for 5, 10, or even 20 years? These customers like to be appreciated, but rarely are. They may not represent the top 20% of your sales, but consider how they’ve contributed over many years. E.G. a bank could offer rewards like free checking (without restrictions) or a free safety deposit box for customers reaching certain milestones. Budget issues? Recognition is free and always appreciated.

Expand your rewards

Keep it fresh. Think of new ways to reward your customers. Originally Amazon Prime offered just free shipping for $99 a year, but added other benefits such as live streaming music, movies and TV shows and more. Remember the CPG adage: If you don’t satisfy your customers (especially your best customers), someone else will.

Online Grocery Shopping: Boom, bust or something in between?

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Despite all the excitement about the potential for online grocery shopping, most consumers still prefer buying their groceries at the store. In fact, less than 4% of groceries are bought online. It’s not the fault of grocers. Most now offer online ordering for delivery or curbside pick up at the store.

So why are consumers reluctant to buy grocery products online?

Old habits die hard

The weekly trip to the grocery store is a deeply ingrained ritual. Many enjoy the hands-on shopping experience. Brick-and-mortar stores are still seen as delivering more strongly across all areas of shopper expectations, including freshness, price, personal engagement and returns.

Trust

This is probably the biggest hurdle. Most surveys indicate that “shoppers don’t trust others to pick the best or freshest items”. Allowing someone else to choose their produce and meat is hard for most shoppers. They just don’t trust others to make those choices. The grocery industry has invested heavily in online infrastructure, but hasn’t come up with a viable strategy to gain shopper trust.

What if the number of online grocery shoppers never rises above 10%?

 For most grocery retailers, whose business model is designed for brick and mortar sales, that would probably be OK. In a business of tight margins, online ordering adds costs from delivery and handling to website maintenance. But even if the percentage of online shoppers remains low, grocery retailers will still want to maximize their online market share.

So, what’s the strategy?

It appears, at least in the near term, online grocery shopping could be more of niche segment. So, category managers may need to focus their marketing strategy. For example, thirty-something Millennial families might be a good segment to target. Many have two incomes and young children. They want the convenience of grocery delivery and can afford to pay for it.

Plus, Millennials are now the largest segment of the workforce and are the driving force for growth in categories like produce. They’re more likely to be open to changing their shopping habits vs. older groups because their buying rituals aren’t as deeply ingrained.

Meal kits are popular with this group. Like online grocery shopping, meal kits might be a bit over-hyped, but consider what industry leaders are doing. Kroger has an in-house meal kit, called Prep+Pared, which it started expanding last December. Albertsons acquired meal kit maker Plated last year. Some Plated kits are available in Safeway and Albertsons stores, with a full rollout planned for later this year. Walmart is also offering meal kits on store shelves and online.

Busy Millennial parents might appreciate the ability to order a meal kit online at work and grab it at a curbside store pickup on their way home or have it delivered to their doorstep. Reach them via email. Entice them with a daily special. Build your customer base. Gain their trust. In time they may start to purchase all of their groceries online.

The opportunities are out there. Look beyond the hype. Connect the dots. Develop a niche. Be more than a category manager — be a category leader.

Millennials: Separating Fact from Fiction

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Category managers need to understand Millennials— who they are, what they buy, how they shop and much more. Why? Millennials are now the largest generation and the largest segment of the workforce. They spend hundreds of billions of dollars a year as most have now graduated from college and have begun their careers.

Much has been written about Millennials, aka Gen Y, the boom echo and the selfie generation. Some of it conflicting. We’ll try to sort it out for you.

Who are Millennials?

There’s no official age range, but the one that seems to be the most acknowledged is from Pew Research who define Millennials as born between 1981 and 1996 — which puts them in the age range of 22 to 37. There are approximately 74 million Millennials. By contrast, baby boom births totaled 77 million, but the number of boomers still living is less than 65 million.

Millennials are now entering their prime spending years as they begin and advance in their careers, get married and start families. They’re buying TVs, cars, homes and like to travel. They currently spend $200 to $600 billion a year depending which study you read. Even at the low end, it’s significant and growing rapidly.

What are their buying preferences?

Everyone knows they’re tech savvy and like to shop online. But there is some debate about whether they prefer brick and mortar or online shopping. Most agree Millennials like to first research products online. Then they either order for delivery or pick up at the store known as BOPUS (Buy Online Pick Up at Store). They like deals. Think coupons, promo codes and free shipping.

Influencers

Peer and general customer reviews strongly influence Millennial buying choices. Generate conversations among your Millennial customers and encourage public reviews of your products and services. Make it easy for Millennials to share with their friends when they choose your brand. Encourage reviews on other sites. They more skeptical of conventional advertising

Millennials are also socially conscious and like to support local companies. They’ve been brought up learning about preserving natural resources and like businesses that actively support and promote a greener economy.

Healthy Appetite

At the grocery store, Millennials with children are showing a strong appetite for fresh fruits, organic and natural items—particularly locally grown. The impact? Produce sales increases have outpaced all other grocery categories nationally over the past few years. Conversely, other categories such as pre-packaged foods have experienced lower demand.

Faster Food

Business Insider’s Akin Oyedele reported that Millennials spend the least amount of time on meal preparation compared with older generations. They’re more likely to eat at restaurants, pick up prepared meals (meal kits), or order delivery. Bankrate data shows that 54% of Millennials eat out at least three times or more each week. As a percentage of expenditure, Millennials spend more than Generation X and baby boomers on food away from home.

Retail

A recent report by Cassandra found that 70 percent of Millennials surveyed dislike loud and busy stores. They prefer brick-and-mortar stores that are relaxed and unfrenzied. Millennial shoppers like to do research online, but also appreciate the opportunity to ask questions with a retail employee.

Millennials like new experiences. With the increasing number of empty store fronts, retailers are have more short term options. This means more pop-ups, more temporary leases, and a wider, more convenient selection for discerning Millennial shoppers. Pop-ups, work in part, because of their spontaneity. The brief, get-it-while-you-can nature of temporary locations excites Millennial shoppers.

To DM or not to DM

There are many reports that show Millennials read and respond positively to direct mail. However, most of the studies we found were prepared by direct marketing companies or the U.S. Post Office so they should be taken with a grain of salt. It may seem counterintuitive, but there is some logic to consider direct mail to reach Millennials as it may help break through the copious amounts of digital ad clutter they encounter on a daily basis.

Spend Time to Save Money

Finally, it’s important to remember that Millennials grew up during a major recession. Many have accumulated large amounts of student loan debt. They are quite willing to thoroughly research products to be confident they’re getting the best quality at the lowest price from a brand that aligns with their values.

The Most Common (but easily preventable) Mistake in Email Marketing Campaigns

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The most common mistake? Ignoring the 40-40-20 Rule.

Over many years, marketers have studied direct response results and have discovered a breakdown of what generally makes an e-campaign or any direct response campaign successful. The results are as follows:

40% is the quality of the LIST

40% is the quality of the OFFER

20% is the quality of the CREATIVE

Of course, every campaign is unique and there are variations of the rule, but 40-40-20 is easy to remember and serves the purpose.

Most marketers like to focus on the creative because that’s the fun part. But now we know creative is only 20% of what’s needed to be successful. The fact is too much time is often spent over-analyzing and revising the creative concept, images and copy.

If you’ve ever created a direct response campaign, you’ve seen this movie. Everyone wants to see the concepts. Then everyone wants to put their mark on it and then it gets reviewed again. The creative goes through endless rounds of revisions until it becomes sanitized and diluted by too many cooks spoiling the creative broth. In the end, everyone is equally unhappy.

To be clear, the creative is important – it needs to grab attention and trigger a response. But instead of so many revisions, make sure the creatives understand the audience/message. Then make sure they create very specific and targeted concepts. Finally, have one creative director who approves the creative.

Back to list. Before you even look for a list or start the creative, spend time creating your audience profile. Try to refine it down as far as possible. Remember your campaign can only get a response from prospects already interested in buying. Don’t try to sell to anyone else. THEY WILL NOT RESPOND. You can’t create demand – only satisfy it.

So, the list must be comprised of people who are most likely to buy your product. Seems obvious, but finding the optimal list requires a clear understanding of your best prospects. That may require some additional research and strategic thinking.

Even with the perfect list, it’s important to understand that only a small number of people will respond:those already interested in buying and can be motivated to buy NOW. Keep in mind, a successful campaign might generate just a 2% response.

With the time and budget limitations every marketing campaign faces, you need to focus on only the best prospects. Develop your own and/or buy one from a list company. If your list includes current customers, then you have an excellent list. But if you’re trying to grow beyond those audiences, you need to ensure that you’re talking to good prospects. Do some research and connect the dots. You’ll likely discover smaller customer segments that have even more reason to buy.

What about the offer?

In this context, the offer refers to more than just a promotional discount. It includes both the unique appeal of the product combined with any special discount to buy now. You need both and they must be quickly and clearly communicated. You could offer pet rocks at 70% off and not get any response (unless maybe you had the right list, of course!).

So remember the 40-40-20 Rule. It has decades of results to back it up. There are no guarantees in direct response marketing, but a successful email marketing campaign will require:

  1. Quality list (ONLY those prospects most interested in buying your widget)
  2. Must-have offer (e.g. this unique widget is half off, if you order today!)
  3. Powerful creative and Call To Action (on target message, not diluted!)

Good luck!

C-stores Feasting on Millennial Meal Opportunities

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Unlike other types of brick and mortar retail, the convenience store (C-store) industry has actually doubled in size over the past 30 years — and it’s still growing. Why? One reason: you can’t fill up your gas tank online and 80% of all auto fuel is purchased at C-stores.

But while gasoline drives about 60 percent of sales at a typical C-store, what customers buy inside the store accounts for most of the profits. However, some categories like cigarettes, once a key profit generator, are falling.

More Margin from Munchies

For C-store operators, foodservice success is essential as it represents 22% of sales and 34% of profits. To fatten their bottom line, C-stores have been adding higher margin, prepared foods.

Here’s a taste of what some C-store operators are doing:

  • LaCrosse, Wis.-based Kwik Trip’s Cheese Mountain pizza accounts for about 20% of the chain’s hot food sales which is available by the slice, whole baked in the store or refrigerated to take home and bake. Take-and-bake is the fastest growing segment for Kwik Trip, followed by whole pies baked to order.
  • Wawa Inc.’s build-to-order hoagies drew crowds to its new location in Washington last month. Many of Wawa’s quick-service items are built to order, so the food is made fresh by staff onsite. Wawa also offers a touchscreen ordering system so customers can easily create personalized meals.
  • Sheetz, headquartered in Altoona, Pa., offers made-to-order cappuccinos, lattes, espressos and mochas all made on the spot from Italian espresso machines. Customers can also order custom food options through touchscreens. On National Coffee Day Sheetz offered free cold brew to customers who ordered through their app.
  • Casey’s in-house bakeries serve cookies and donuts made fresh from scratch. Casey’s has also found success in its initial trial of a pizza delivery service and offers a discount on gas to customers who buy pizza.
  • Dash In’s new 5,600-square-foot store in Chesterfield County, Va., offers customers an open kitchen and bar with craft beer and free wi-fi.

Increase size of basket with impulse sales of snacks and candy

Obviously, impulse sales are highest at checkout. Alan Tobin, senior manager, c-store category strategy and insights for The Hershey Co., noted; “Retailers have a huge opportunity to increase basket sizes through maximizing merchandising in this space … About 75 percent of candy sales from a counter unit are incremental. With 47 percent of purchases being unplanned, and more than 80 percent of purchases consumed within an hour, a candy and snacks consumer is in the market for these products on pretty much every trip.”

To take advantage, Twice Daily, located in Kentucky and Tennessee, also displays candy and snacks on the way to and from destination zones, such as the beverage cooler and fresh food area.

What’s driving new foodservice concepts?

Millennials. C-stores appeal to Millennials (ages 22 -36).  And that’s good news because this group is now the largest segment of the workforce and their buying power is growing rapidly. These younger customers love the convenience of a one-stop shop. Bankrate data shows that 54% of Millennials eat out at least three times or more each week. As a percentage of expenditure, Millennials spend more than Generation X and Baby Boomers on food away from home.

What do Millennials want?

  • Have it their way – made to order meals as noted in the examples above.
  • Buy local – natural and locally grown including fresh prepared foods, like meal kits, sandwiches, pizza and chicken.
  • Spice is nice – they want to taste more extreme flavors. Some C-stores are offering spicy new dishes with Sriracha, as well as habaneros, ghost peppers, harissa and sambal.
  • Single serving size – Millennials prefer single-serving options, such as a mini pie or slice of cake slice rather than a whole, full-size dessert.
  • Quality is key and will bring them back – e.g. beverages can be enhanced by filtering the water used to make coffee, iced tea fountain drinks, and in the ice machine.
  • Early bird – focus on breakfast and coffee. Remember, most Millennials are now in the work force so get ‘em early!

“C-stores are in a great position to really capture that breakfast crowd by looking beyond just doughnuts … to having a robust coffee program and really robust breakfast sandwich program made to order.” – Eric Richard, education coordinator, for the International Dairy Deli Bakery Association (IDDBA).