STORES Magazine - March 2008 - (Page 86)

CONSIDER THIS/ POINT OF VIEW Driving Loyalty Through Personalized Reward Programs BY BETH HOROWITZ Look in any wallet today and chances are that most – if not all — the credit cards you’ll find carry some sort of reward component, such as redeemable points, frequent flyer miles or a program offering merchandise discounts in return for hitting certain spending targets. We’re all accustomed to such loyalty programs, but chances are that we are not, in fact, terribly loyal. As consumers, we’re very much in the driver’s seat when it comes to choosing from the abundance of competing offers in the rewards card category. Yet once those rewards have been secured, or as tastes and lifestyles change, there may be little incentive for the customer to remain loyal. For example, a pet owner who loved the rewards points he accumulated for shopping at his favorite pet supplies store with his bank-issued payment card also has a love for golf and has switched to a card that rewards him for his love of sports. The solution to meeting the changing preferences of consumers lies in creating far greater personalization and relevancy for the individual consumer: it’s where a much deeper, richer relationship can be established between merchant and consumer, right at the point of sale. Because decisions and redemptions can take place at the counter, rather than at home or at the office, a migration to personalized rewards can give retailers of all sizes and capabilities an opportunity to create or participate in a reward experience that is valuable to the customer and creates loyalty. Card issuers and financial networks are now focused firmly on making such personalized experiences a reality through investment in complex technology that analyzes purchasing patterns and behaviors. They can use this technology to understand far more than customers’ basic spending habits, and then generate real-time rewards at POS. Retailers that partner with financial institutions and payment networks to integrate their own databases and inventory management systems into the equation are leading the way in becoming “loyalty hubs” with discernible benefits in customer loyalty, offer redemptions and transactions. Beth Horowitz is vice president of product management at Discover Network, a business unit of Discover Financial Services. data allows the network to identify customers most likely to be interested in the offer and generate an e-mail blast or a promotional box on their monthly statements. In addition, a 10th visit prompts a reward coupon or audio message at POS telling him he has earned a 25 percent discount on dog treats or toys. And, using the same card, he continues to receive golf-related rewards for his sportsrelated purchases. Targeted benefits like this are designed to surprise and delight consumers with a highly personalized but unexpected offering. Over time, as more and more information about a customer’s shopping habits is incorporated into the analysis, card issuers will even be able to detect changing customer needs and tastes and adapt their reward offerings accordingly – such as anticipating the birth of a child through a spike in purchases of baby wear and nursery equipment. Targeted benefits Let’s look once more at our golf-loving pet owner. His local pet store is offering a $2 discount on his dog’s favorite food to customers who use the chain’s co-branded Discover Network payment card. Instant analysis of customer 86 STORES / MARCH 2008 Focus on personalized rewards Many savvy smaller retailers are already updating their loyalty programs to put the focus firmly on personalized rewards. In this way, the programs become more about creating valuable relationships with the customer, rather than simply offering rewards. To rise to that level, information about the customer has assumed greater importance as retailers seek to increase the frequency of store visits and average spend from the fabled 20 percent of customers who account for 80 percent of sales. Beyond the technical challenges and costs associated with implementing this new approach to loyalty programs, there is another variable – mindset. Consumers, retailers, card issuers and financial networks must all perceive a net value from this emerging system for it to succeed. The stakes, as well as the cost of meeting consumer expectations, will rise rapidly as these audiences jostle for competitive advantages. The benefits will accrue to the retailers prepared to challenge their assumptions and build new models to put increasingly discriminating customers and their loyalty at the center of the equation. WWW.STORES.ORG http://WWW.STORES.ORG

Table of Contents for the Digital Edition of STORES Magazine - March 2008

STORES Magazine - March 2008
Executive Editor's Page
President's Page
Sam’s Club Gets Tough on RFID Stragglers
Athletes for Hire
What Shoppers Think
Goodwill Hunting
10 Things You May Have Missed
Numbers Worth Counting
Full Price/Markdown
Retail People
Luxury’s Shrinking Purse
Workplace Law
First Look
Green Retailing
Cosmetic Sales
Inventory Tracking
Loeb Retail Letter
ARTS Update
Point of View
NRF News
Retail Industry Calendar
Last Laugh

STORES Magazine - March 2008