What your business gives away in loyalty rewards could be a small investment for what you get back in customer data
Story by Lee Marie Reinsch
NEXT TIME YOU NOTICE PEOPLE carrying odd items or wearing strange garb to your favorite hotspot – and you aren’t at an ugly-sweater party – look closer for their smug smiles. They probably just landed a free meal or a sweet deal just for being loyal customers.
In an era of smart phones and Twitter feeds, thanking patrons for doing repeat business has leapt to new levels. If the phenomenon needed a cute name, Rewards 2.0 might be apt.
“We reward a lot of people for following us on social media,” said Brian Schalk, brand ambassador for Hu-Hot Mongolian Grill restaurants in Wisconsin, which are owned and operated by Appleton-based Appetize. “We send out these odd offers on Twitter and Facebook just for those following us.”
Three days a week, Hu-Hot sends the sometimes-wacky deals out to its followers and friends. Some of those followers or friends might be identifiable as the smattering of patrons wearing raccoon-skin hats to Hu-Hot and therefore eating free on Daniel Boone Day. Or those whose plaid flannel shirt and jeans chop down their tab on Paul Bunyan Day.
Or, these friends and followers might be less visible from across the room: those dining with their iPads on Apple Appreciation Day. Or those named Ray who caught the May Ray Day tweet in time for dinner last month.
But unless you follow or friend Hu-Hot, you probably won’t be privy to such deals.
“It’s just a way of saying ‘Thank you’ to our followers,” Schalk said.
Rewarding fidelity not new
FOR DECADES, SAVVY COMPANIES have rewarded their customers for their repeat patronage. Banks did it with stuffed animals for those opening Christmas savers accounts. Small-town bakeries did it with the baker’s dozen, wherein a dozen of anything meant 13. Insurance companies do it with multi-policy discounts.
In today’s e-obsessed world, being a loyal customer can mean being a follower, fan, friend or rewards-program member just as much as it can mean being the guy who’s bought nails at the same hardware store for the last 27 years.
But 27 years ago, that same hardware store didn’t have to compete with megastores and a million other hardware stores from across the country, much less Web sites from around the world. Competition is huge, and customers can be fickle.
“Businesses are thinking ‘Golly, it costs a lot to get a new customer, so if we just keep our old customers and let them be our word-of-mouth marketing team, then we’re a step ahead,’” said Dawn Nowakowski, an Appleton-based dynamic marketing professional who consults with a variety of small, local businesses to institute customer-rewards programs.
In Hu-Hot’s case, the followers who get free meals are the word-of-mouth marketing team. They’re bound to brag to their friends and families, who then decide that Hu-Hot must be a pretty neat place.
OFFBEAT TWEET OFFERS ARE CUTE, but like many companies, Hu-Hot has taken the thank-you thing a step farther – by getting personal. So not only do its funky deals arrive thrice weekly in your pocket electronic device, Hu-Hot gets to know you as a person rather than as a mere vessel for its marketing message.
In addition to the deals it offers to the Twitter crowd, Hu-Hot offers a loyalty card program. It works pretty much like most such programs do: accrue points for dollars spent and get free stuff.
Of course, Hu-Hot gets something in return for the discounts it doles out: information on who’s dining at their restaurants, how often, what they’re ordering and when they come.
“When you register your card online, you give your age, sex and location,” Schalk said. “When you eat at a Hu-Hot, it records that you came into this location at this time, ate with this many people, and spent this much money.”
Hu-Hot can keep tabs on your tab, so to speak, and it’s all done electronically.
A LOYALTY CARD WITH ITS UNIQUE CUSTOMER ID encoded in a mag (magnetic) strip or bar code provides the vital link between products sold and customer demographics, Nowakowski said.
“It allows a retailer to determine who their regular customers are and what the value of their purchases are,” she said. She helps businesses institute such programs.
Hu-Hot has found its typical customers are women between the ages of 25 and 34 who are dining with at least one friend. Most female guests come in pairs, but the occasional ‘girls night out’ group tilts the mean average to a group-size of three, Schalk said.
So what does that tidbit of trivia mean for a business such as a restaurant?
Well, if it wanted to attract more large groups of women, it might tailor its deals to girls-night outings. Or offer something free to the birthday chick.
Another example: If loyalty-card demographic data show that a specific customer regularly orders crab rangoons as an appetizer, Hu-Hot can send that person a coupon or notice about a special on crab rangoons.
“We can be sure of a population, and we can run a special to drive more people in,” Schalk said.
Merchants participating in such programs say they’re finding them to be business boosters.
Hu-Hot launched its Loyalty Card program earlier this year.
“What we’re seeing is an increase in traffic and profit directly related to this program,” said Schalk.
Hu-Hot’s card program is free – just sign up for the card, and it keeps track of how much you spend at Hu-Hot. For every dollar spent, the guest gets a point. A point is equal to about 10 cents. For every $10 spent, the guest gets $1 back in the form of credit on their loyalty card.
A computer program keeps track of the points, along with information about the customer’s spending and dining habits.
“What we essentially look at is per-person average of the amount of dollars any given guest would come in and spend,” Schalk said. “What we are seeing is that when people come in with the loyalty card, they are spending more.”
Before the loyalty card program, Hu-Hot used a manual punch-card system to reward its customers for continuing patronage. It worked, but it was hard to keep track of, Schalk said.
“You needed a special puncher, otherwise people could punch their own card,” Schalk said.
Not only that, but since information wasn’t centrally stored, the restaurant had no way of predicting when customers were going to redeem their accrued free meals.
“The plastic card keeps track of it online,” Schalk said.
THE GATHERING OF SUCH information is pointless unless you have a plan on how to use it, Nowakowski said.
“You will need a solid marketing campaign for this valuable customer data,” she said. “You can identify what is the most effective way of marketing to your customer based on their demographics and buying behavior.”
When customers sign up for loyalty programs, they usually provide their contact details and possibly even details of the members of their family – such as birth dates or ages – which enables the retailer to market to them, Nowakowski said. Coupons, birthday specials or a newsletter – or all three – might start arriving in your mail or inbox.
But it’s critical to have a well thought-out reward program, Nowakowski said. Don’t just gather info willy-nilly.
“A poorly implemented program is merely price discounting,” she said. “If you do not generate more sales and you issue a rebate when a customer’s sales reach a certain level, then all you have succeeded in doing is giving away (profit) margin.”
Correctly implemented, a loyalty program can grow your base of highly profitable customers, she said.
“You don’t have to be a big huge franchise to have a system,” Nowakowski said. “For any marketing program to work, however, a business must have all the components of success in place – a great experience, quality products, good service culture, dedicated and empowered employees, the ability to track return on investment and, of course, a strategic marketing plan,” she said.
The trick is to make sure that what you give the customer is something they perceive as having value, Nowakowski said.
Expressiveness is key
EXPRESS CONVENIENCE CENTERS recently revamped its rewards program to make it easier for customers to accumulate points, according to Kelly Dewey Chartre, spokesperson for parent company US Venture, formerly US Oil based in Kimberly.
Points don’t expire, either.
While it might be counterintuitive to think that making points easier for customers to accrue might actually increase profits, so far that’s what appears to be happening, Dewey Chartre said.
“We’ve had tremendous feedback from guests,” she said.
In doing the makeover, US Venture worked with a company that had solid industry data on convenience store trends.
“We found that most people have three (different) C-stores that they patronize,” based on proximity to work, home and regular leisure pursuits, Dewey Chartre said.
Of course, Dewey Chartre wants Express to be the one and only for all three purposes, so she and her team had to figure out how to make that happen.
“We want guests to think more consciously,” she said.
By letting points accrue rather than forcing them to expire every month, guests have more incentive to go where they know their reward points are working overtime for them. The momentum factor works in their favor.
“We found that (with the previous system of points that expired) the large majority of people couldn’t accrue points,” she said.
Some categories of people – such as drivers of SUVs who put on lots of miles shuttling kids around – were acquiring lots of points, while other categories – singles with fuel-efficient cars – weren’t acquiring enough points to make doing business at Express a priority.
With the new system, other purchases besides gas, such as in-store items and beverages, garner points so that a larger share of customers can acquire a large enough stash of points that they’re inspired to seek out an Express for their ultimate reward of free stuff.
“We are incenting guests to come inside our store and have personal interaction with our associates,” she said.
That interaction boosts awareness of new products and specials, as well, and that makes vendors happy, too.
We all like a deal, no matter how small
NOWAKOWSKI IS THE MOTHER OF TEENS, which makes her the perfect guinea pig (er, test market) for American Eagle store’s loyalty card program. The popular chain offers certain percentages off the price for reaching certain spending tiers.
“My goal is to get 40 percent off,” Nowakowski said. “They don’t even give you anything but a discount – but you still want it.”
Another case in point for the small reward: Nowakowski faithfully gets her joe at Copper Rock Coffee Shop in downtown Appleton because of its loyalty program: every tenth cup of coffee is gratis.
“I am excited to get my coffee free,” she said. “It doesn’t take a lot to make a person happy – that is the whole point of rewards-marketing: to make the customer loyal. You want to lure them to your store so they can tell everyone about you. They become your champion.”
Nowakowski said that loyalty cards also serve as visual reminders to shop at the stores they represent.
“There it is, smiling at you in your wallet every time you open it, and it reminds you that if you shop there, you’ve got a reward coming,” she said.
An alumna of Ripon College, Lee Marie Reinsch is a freelance writer based in Green Bay.