Promotions are used to directly, quickly, and profitably change behavior. Most commonly, that behavior change falls into one of these categories: driving more visits, encouraging people to purchase at a time they normally would not, or inspiring more profitable bulk purchases.
The most common types of promotions are challenges, bonuses, and occasion based rewards.
Challenges. These promotions challenge reward members to perform actions to earn a prize. For example, a challenge could be “buy gas five times this month and get a free large coffee” or “spend $50 on snack items this week and get a free liter of soda.” These challenges are intended to increase visits and spend during a specified period of time.
Bonuses. These promotions often offer an instant benefit for the rewards member. “Purchase a sandwich and a large soda and get a bag of chips for free” is one example. Bonuses are primarily designed to increase spending during a visit, but secondly, they may also increase the number of visits since customers could seek to take advantage of a bonus multiple times.
Occasion-based rewards. These promotions are dependent on a time of year, such as the holiday season, or a well-known event. An example of an occasion-based reward could be “purchase two bags of chips and get a liter of soda for free during the week leading up to the Big Game.” […]
The greatest revenue-generating potential a loyalty program can tap into is a brand’s segment of customers who visit sometimes but not always. We have seen this proven time and again across more than 300 reward programs.
Each segment of customers visits at a particular frequency. Customers with medium-to-high frequency are giving the brand nearly all of their possible visits. Since they are already your biggest fans, getting them to visit you more is going to be tricky. On the other hand, low-frequency customers are visiting your brand occasionally, but other brands are being visited by them more frequently. The potential for your team to move low-frequency customers into a higher-frequency segment is where the value of any successful loyalty program comes into play, as the goal is to steal visits from the competition.
So, if the value of your loyalty program depends on your ability to attract lower-frequency members, how do you do it? There are three key factors. […]
Reward programs have been around for years. Airlines, hotels, and restaurants adopted these programs decades ago. Convenience stores on the other hand, seem to prefer club programs and simple promotions like 3 cents off per gallon or short term, low value programs.
At a high level, mass promotions are a great business strategy, driving more visits and spend. Most of the time they are also paid for by the CPG vendors, so the cost of running these promotions is minimal to the convenience store. Mass promotions and eblasts get brands quick wins and compel customers to make purchases with the incentive of getting an item for free.
Most mass eblast promotions are the standards “Buy 1 coffee, Get 1 coffee Free.” Let’s think about this from the customers’ point of view, […]
Do you need to reinvigorate your brand, increase revenue, and improve profitability? Upgrading your rewards program may help. However, proceed with caution. Upgrade only when you know the new program will better align the program with corporate strategic goals and likely produce large financial benefits.
There is never a perfect time to change your program. When clear signs arise, give a program upgrade serious consideration. Look for any of these four signs:
1. Declining loyalty penetration and new member enrollment. If the share of checks associated with your loyalty program is declining, it could signify that tenured members are lapsing and that the program is no longer motivating them to come in. If new member enrollment is down, it could be because new guests are not interested in the program or that team members in the store have stopped promoting it.
Your program should achieve a minimum of 15 percent loyalty penetration. This means at least 15 percent of your checks should be associated with the loyalty program, and according to many top brands, their loyalty penetration numbers far exceed the 15 percent benchmark. For example, in an July 2016 earnings call, Panera president Drew Madsen said that 50 percent of company transactions were associated with the My Panera program. If you notice your loyalty penetration rate dropping, and particularly if it dips below 15 percent, it may be time for a change.
2. Evidence that customers are “gaming” the program to their advantage. Have customers figured out a loophole in your program that they use to their advantage? Is your visit-based program increasing the number of split checks, and slowing down operations? Are customers buying low-priced items to earn points, and then redeeming them for expensive items? […]