Cultivating Customers Through Loyalty

Customer Commitment

The biggest hurdle some retailers face when implementing a loyalty program is getting customers to notice the many benefits. When Mid-State Petroleum launched its loyalty offering last November company Vice President Tony Perez launched a promotion to give away $10,000 in rewards at each of his locations. New customers received a $5 reward card and existing loyalty customers received an added $5 to their existing cards. Despite the free money with no obligation to register the card, some new customers were hesitant accept the gift.

“Once they actually get the card they love it. We process about 5,500 to 6,000 transactions a month where people use a loyalty card,” Perez said.

Most retailers would admit they faced a similar challenge and have used a variety of strategies to get the cards in customers’ hands. Flash Foods, for example, uses its Web site to promote its loyalty program and also makes sure employees at the store level are highly informed and involved, so they tell customers about the rewards.

The loyalty team at Express Convenience Centers backed their rollout with media support, including radio announcements and also had a few false starts, which worked to their advantage.

“We didn’t realize at first how integrated the program would be, so we had to move back our launch, which actually ended up being an advantage because we had more time to inform customers,” said Kelly Dewey, sales and marketing manager for Express Convenience. “By the time it started customers couldn’t wait to get one.”

Loyalty programs are a great way to entice customers to keep returning to your stores as they seek to gain rewards on routine purchases. Finding the right fit when it comes to a loyalty program will help convenience store operators differentiate their offering and could generate a steady stream of repeat customers.

The biggest mistake retailers make when developing a loyalty program is to assume they all offer the same cookie cutter approach to generating new business. That couldn’t be further from the truth. There are many options and many companies that specialize in distinct areas. Convenience Store Decisions spoke with four chains, each of which is offering a different type of loyalty program that they find effective.

Instant Rewards
Flash Foods, which operates 161 locations in Georgia and 16 in northern Florida, began offering its Rewards in a Flash program, powered by Loyalink from Pinnacle Corp., in 2005. With a simple scan of a customer’s license, they are entered into the rewards program—no paperwork needed—and issued a card. Customers can then use that card to gain discounts, such as two cents per gallon savings on fuel, or cash back on certain items on promotion. The card also keeps track of coffee and fountain club points—after 10 drink purchases they get one free—and the card alerts them when its time for their free drink.

Plus, when customers use the Rewards in a Flash card to buy certain products, they are automatically entered for a chance to win other prizes.

“The sweepstakes are popular with customers,” said Jenny Bullard, chief information officer for Flash Foods. “We’ve given away a Harley motorcycle, a truck, concert tickets, and we have vendors that participate with us when we offer those. But on a day-to-day basis, the coffee and fountain club is our most popular promotion.”

Flash Foods decided to go with Pinnacle’s Loyalink program primarily because it already had Pinnacle’s point-of-sale (POS) system in its stores. This allowed for a quick integration and streamlines the entire process so it runs extra fast.

“All the customer has to do is swipe their card at the register and we get all the information in the database about their rewards, so when they get a discount or are eligible for a free beverage it is listed right on the receipt,” Bullard said. “Some other programs we looked at did not interface with the POS, so we would have needed to add a unit in the store where customers could scan the card.”

Flash Foods also found that it has been able to enhance its loyalty offering over the years. For example, as gas prices soared, the chain began requiring customers to prepay for gas inside the store. But beginning in 2008, the chain rolled out a new program where customers could use their Rewards in a Flash card to activate the pump, allowing them to fill up the tank before going inside to pay and get their loyalty gas discount.

“I’ve been in stores and had customers say ‘this is the best thing you’ve done to let me turn on the pump with my loyalty card.’ It made the card more valuable to them,” Bullard said.

What’s more, the company has been able to turn its loyalty card into an ACH debit payment card, which allows customers to pay for gas at the pump. “The reason we started offering the ACH payment card through the loyalty card was to convert some of our credit card customers, so that we could avoid the high interchange rates that go along with those credit card transactions,” Bullard added. 

Currently, Flash Foods has more than one million loyalty card customers in its database. “If we look at how many of those customers were in our stores during the past 90 days, it’s at about 48-50%. We have stores where 60% of their sales dollars excluding gas is from customers using their loyalty card, so our loyalty cards work very well, especially in rural communities where the percentages are very high,” Bullard said. “The biggest thing you have to do with a loyalty program is keep changing the promotions to keep the customers interested.”  
 
Community Involvement
Express Convenience Centers, which operates 19 convenience centers in Wisconsin, also makes sure its loyalty program contains new and interesting promotions.

“One of the advantages of having just the 19 stores is we can change our daily and monthly rewards through our program every two weeks, so we’re always offering something new as opposed to the same free soda or popcorn,” said Erin Hietpas, who along with Diane Kempen manages the loyalty program at Express Convenience Centers. “Customers are getting a variety of rewards from our store.”

The chain launched its Go For Rewards program powered by Norfolk, Va.-based Outsite Networks, in 2007. “When we looked at loyalty programs, what it came down to was that Outsite Networks was the most progressive. We didn’t want to have a program that looked like everyone else’s, and Outsite offered us something unique,” said Kelly Dewey, sales and marketing manager for Express Convenience Centers. “Outsite also stood out because it was willing to work with us, so if there was something they didn’t have, they built it for us and helped create the program as we wanted it to be.”

Integrated into Outsite, the chain offers a key tag program. Every time a customer buys a product, they swipe their tag to earn six different types of rewards. And, the company just added fuel rewards to the program. Customers can earn 10 points per gallon and 20 points per dollar spent inside the store, and as they reach different levels of points each month they can earn various levels of rewards. The key tag also keeps track of various club programs.

“We have four different reward levels and at each level we try to add two beverages, a salty snack and a sweet snack. The unique thing about our program is we also try to have community sponsors involved, so guests can earn free admittance to go-carts or batting cages,” Hietpas said. This October the company also is offering free admission to a corn maze and tickets to a haunted house.

Currently, 69,000 customers have activated key tags and the program is growing stronger thanks to the community sponsors. Dewey admits it’s been a challenge to convince the community businesses to sponsor programs. “Luckily, we have a great relationship with all our partners, so they were willing to go out on a limb for us and sponsor different reward levels, and at the end of the first year everyone wanted to be involved and we had companies calling to say ‘how do we get into your program,’” he said. 

Customer response has been growing steadily. “They know the program inside and out. When they swipe their key tag at the printer in the store, it prints off a list that says their point status, reminds them of the clubs they’re in and how many points they earned for their last three transactions so they can keep track,” Hietpas said.

Furthermore, the loyalty offering at Express Convenience is a total team effort. Employee bonuses are tied into the program, which gives them added incentive to help it succeed. “It was rough last year with fuel and credit card fees, but the loyalty program helped,” Hietpas said. “Using Outsite we are able to look at the data and see how much more our loyalty customers are purchasing and develop programs to bundle items to sell them even more.”

Other Brands Onboard
As a major fuel brand along the East Coast, Gulf Oil was looking to leverage its brand recognition with that of other strong
regional and national brands. The company also sought a loyalty program that its growing dealer network that could seamlessly integrate into multiple POS systems in order to service its entire network. They found that ability in Override and officially launched its program last June in about 200 stores.
 
“From a marketing standpoint, we love that Override allows us to have multiple earn partners,” said Ron Sabia, Gulf Oil’s president and chief operating officer. Gulf supplies fuel to 2,200 stores in the Northeast and operates 11 stores on the Massachusetts Turnpike.

The company’s earn partners include Dunkin’ Donuts and Shaw’s supermarkets. If customers buy $50 worth of groceries at Shaw’s with their rewards card, they earn 10 cents a gallon off gas. On the Dunkin’ side, customers that spend $20 get five cents off per gallon. And, customers can combine those rewards, to gain 15 cents per gallon off at the pump. “We’ve actually had a lot of folks come in with enough rewards to get their gas for free,” Sabia said.

Another innovative feature of Gulf Oil’s loyalty program is that customers can watch the price of fuel roll back right before their eyes. “If you have a 15-cent per gallon discount and gas is $2.50, after you swipe your card the price will roll back to $2.35,” Sabia said.

Gulf Oil plans to integrate that feature at all of its retail sites, which will be part of the Override program by 2010,  and is working on a more cost-effective delivery system to help all their dealers and jobbers integrate the program. Gulf Oil also plans to add more national as well as regional earn partners to their loyalty program. 

Since adding the program, Sabia said he has seen a measurable spike in store volume. “You get repeat customers at all of the brands, and we’ve seen consistent growth in gallons,” he added.

When selecting a loyalty program, Sabia advises retailers to find a platform that is easy to manage, but even easier for customers to use and redeem rewards.

Program Adaptability
Finding a company that will meet unique needs is important for many retailers. Just ask Tony Perez, vice president of Mid-State Petroleum, who saw his company’s loyalty program boost in-store business and fuel volumes. Mid-State, which operates 26 company-owned and franchised Pop Shoppes in North Carolina, added its MetroSplash loyalty program about 15 months ago.

The cash-for-gas program usually requires a uniform software program across all stores that allows for cents-off savings per gallon, but all of Mid-State’s stores were not set up this way, so MetroSplash worked with them to create a flat rebate program with a unique tier system that worked for their company.

“If you buy $10 worth of inside merchandise, you get 25 cents on our card, $10-$15 equals 50 cents, $15-$20 earns 75 cents and on up in 25-cent increments up to $1.50 for $35-$50. That money goes directly on the card like a gift card and they can use it toward a gas purchase,” Perez said.  

Perez had tried another loyalty program about five years ago that offered food-based rewards, but the program became costly and the chain never gained the vendor participation to support it, so he discontinued it. So far, customer reaction to the MetroSplash program has been much stronger.

There also are opportunities for customers to get redeemable rewards at Pop Shoppe locations when they buy products at certain online stores, which Perez believes could further entice customers to join the program.

One of the advantages of the Metrosplash program is that it is easy to install across company-owned and dealer sites. “We’re in the process of becoming a 100% dealer-based company and we’re leasing out our locations, but our dealers as they lease the locations are keeping the loyalty program in place because they can do it as easily as we can and can even keep our unique pricing tier.” CSD

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