Targeting occasional customers may be the key to building retail loyalty.
According to a data insights report from Paytronix Systems, a provider of reward program solutions, the majority of new loyalty program members are low-frequency customers. This segment presents marketers with the largest opportunity for increasing the times this consumer visits a retailer.
The Paytronix Data Insights report found that medium- to high-frequency guests are the first to join a brand’s loyalty program. However, about four months in, the proportion of new members who have medium- to high-visit frequency drops to one-sixth, with the majority of new members dropping to the low segment.
Therefore, if a retailer wants to reach 15% of its customers in a loyalty program, it cannot rely just on its best guests.
“The biggest driver of getting a loyalty program to succeed is getting customers to join it. But this needs to be an ongoing exercise—you don’t just have a big membership drive when you launch the program and then sit back and reap the benefits forever—you need to be continually enrolling new members,” Lee Barnes, head of Paytronix Data Insights, told FierceRetail.
Why 15%? Although it is not a magical number, Barnes said that programs that can get to around 15% penetration tend to be the ones that do well in the long term. Two things start to happen around this percentage mark. First, in the way of operations, he notes that the turnover in restaurant staff is frequent, so low loyalty penetration means the managers are less likely to train staff for loyal customers. But if loyalty is around 50%, staff will regularly encounter loyal members and will learn exactly how to handle these customers early on.
“We find that the tipping point is around 15%, so once you get to this level you start to see some self-perpetuating behavior and the program begins to have a life of its own,” Barnes said.
Second, loyalty tends to drive customers to visit 10% to 20% more often and slightly increase sale averages. At 15%, total sales start to have a 2% to 3% lift, “which is starting to get interesting,” he added.
In order to bring in these low-frequency guests, brands need to first target their messaging to this specific group of shoppers, compelling them to join.
“Mostly, I think you have to talk to them directly, and give them compelling, relevant reasons to visit. These people like your brand—if they registered with your loyalty program, then they liked you enough to visit and took the time to go online and fill out a form, but they probably have other brands that they like too,” Barnes said. “Getting an extra visit from a lower frequency customer isn’t as sexy as relaunching your menu or investing a million dollars or more in an awareness-driving Super Bowl commercial, but it works, and if you’re not doing it then you are leaving money on the table.”
Second, retailers need to make it easy to join their loyalty program by offering mobile-friendly registration, kiosks, iPads in the store and even paper registration forms.
Third, staff and sales associates must serve as brand ambassadors. If associates tout the program as easy and beneficial, it will be more inviting to the consumer.