Who this article is for:
This article is intended for Deal/Coupon Providers, Retailers who run deal/coupon promotions and Loyalty Program providers….and any other curious party.
Fact: Deal sites bring in traffic to local merchants. They have been one of the most effective marketing tools a merchant can use for driving traffic. Profitability of that traffic is a topic for another article. The point is, that marketing medium gets the attention of consumers.
Fact: Getting consumers to come back again after buying an initial deal or promotion has been a real challenge for almost every merchant.
The reality is that most merchants simply do not have a customer retention process in place in order to get their “deal” customer to come back and become profitable. Even if just a small percentage came back, the entire campaign would be highly profitable and repeatable for Merchants.
The Question is: what tools are available to make Deal/Coupon Marketing more effective?
There are several answers to this question. However, for the purpose of this article, let’s focus on the use of Loyalty Programs as a way to improve Deal/Coupon marketing effectiveness.
Loyalty Marketing is a hot area right now for the brick-and-mortar retail industry. Retailers are looking to leverage technologies to drive further consumer engagement and frankly to compete against ecommerce sales. Mobile Loyalty solutions are one such solution that can help with consumer engagement….replacing paper punch cards, old POS programs or other manual programs, mobile loyalty programs enable merchants to communicate with customers in various ways, have the ability to provide consumers with up to date information and provide consumer data rich in marketing opportunities.
However, loyalty marketing is even more crucial for the smaller retailers and merchants. Large retailers have already been leveraging loyalty programs in order to drive repeat business from consumers. Many have invested hundreds of thousands if not millions of dollars on perfecting their loyalty processes. Think Shoppers Drug Mart/Pharmaprix, Loblaws, Best Buy, Sephora, Canadian Tire, Old Navy and the list goes on.
Why can’t the smaller, local retailer have the same advantages at attracting that all important repeat customer? Until recently such loyalty programs were too expensive or cumbersome for smaller retailers to use. A slew of startups, however, have come to market over the past few years that have helped level the playing field for smaller retailers. These startups have made Loyalty programs affordable and usable for the very small merchants and retailers. These businesses can now leverage the power of loyalty marketing the same way their larger competitors have been doing for years.
Regardless of which loyalty solution a smaller retailer/merchant uses, the following is how these loyalty programs can be used in order to make a Deal/Coupon promotion far more effective.
- A typical deal/coupon marketing campaign follows this general process:
- A retailer launches a deal/coupon promotion.
- It is marketed to an audience. Money and time is invested.
- The promotion works and drives traffic to the retailer.
- In the case of Deal promotions like Groupon, Tuango, Wagjag, Social Shopper, Buytopia, Living Social, etc, the majority of consumers are one time deal hunters. The merchant/retailers needs to provide an added value in order to convince some of these first time buyers to come back and be repeat customers.
- In the case of a Coupon promotions run by the Retailer, the promo is probably being delivered to your existing audience or the retailer bought advertising to promote the coupon promotion.
In either case above, the majority of consumers come in for the offer only and do not buy additional goods/services.
Enter the Loyalty Program
- If the local retailer had a loyalty program already in place, a deal/coupon promotion becomes far more effective. Here is the process:
- Consumers comes in for the offer
- Retailer signs up consumer to the loyalty program at checkout, or signing up is part of the offer or consumer is provided an additional incentive for signing up
- Now the Retailer is armed with consumer contact information within the loyalty program that can be used to market to the consumer DIRECTLY instead of using a 3rd party or paying for marketing to communicate with consumers.
- Consumers receiving Retail messages within the Loyalty program can now share incentive and reward offers with friends on their social networks. The retailer gets more exposure for free. Good luck doing that with paper or plastic based programs.
- Retailers start sending incentives/offers to consumers in the loyalty program.
- Even if a small percentage redeem those offers or start accumulating loyalty rewards, it will generate far more profit for the retailer than simply running the original deal/coupon campaign without a loyalty process.
- Once consumers redeem offers or respond to messages from the loyalty program, Retailers can track all data, responses, conversions, etc and make better marketing decision going forward. Again, good luck doing that easily with paper or plastic based programs.
- Retailer is motivated to keep using Deal/Coupon campaigns to drive traffic. They continue to leverage their Loyalty Program to communicate incentives and rewards to customers, getting more of them to become repeat customers
KEY POINTS TO CONSIDER:
1. Merchants with a loyalty program are 88% more profitable than those without one
2. Repeat customers spend 67% more than new ones
3. Loyalty programs helps merchants market to their clients in ways that were too expensive before.
4. Merchants who use Deal sites to acquire customers, are seeing a lot of success in registering those one time customers into their loyalty program and then marketing to them to get them to come back. The more they come back the more profitable that customer becomes… in essence a Deal campaign is even more valuable to merchants when the merchant uses a loyalty program along with it. The more success merchants see in customers returning, the more they will continue to use Deal sites to drive traffic.
- It is worthwhile for the Deal/Coupon provider to ensure their merchant/retailer clients leverage Loyalty programs? The more they see success, the more often they will use the Deal/coupon provider to generate traffic.
- Should deal sites encourage merchants to use a loyalty program?
- Which loyalty programs should merchants/retailer use? (a dedicated program, a coalition program, a 3rd party program, etc)
- Should deal sites start providing a loyalty program solution to their local retail/merchant clients? Perhaps partner with an existing solution provider in Canada.
It does not really matter which loyalty program a retailer chooses to use. As long as they have a way of capturing customer data and then re-marketing directly to the consumers on the program. Some options may include:
- Retailers can use loyalty technology providers (too many to mention) to launch their dedicated loyalty program.
- Retailers can use loyalty features found within their existing POS system, although these are limited in their functionality
- Retailers can use the larger 3rd party programs such as airmiles or aeroplan, however they are pricey
- Retailer can also use what are called loyalty networks best geared towards the very small business. Such loyalty networks include Vicinity Rewards from Rogers or Kangaroo Loyalty & Rewards
The bottom line is that Loyalty Programs are making Deal/Coupon Campaigns far more effective because consumer data is being captured and retailers can now communicate directly with consumers and motivate to come back and purchase instead of counting on 3rd parties to provide marketing/advertising services. The more effective the whole cycle becomes, the more Deal providers will be used…
As always, contact us for further insight.