You are a retail marketer and are not hitting your sales numbers for the week, month, and quarter. What is the first tool you pull out of your toolkit? You should run a promotion! You gather with your merchandising team, and they are out of compliance days. Is this the end of the road for your promotion? Think again!
It is time to turn to one of the best-kept secrets to drive sales: loyalty promotions! Loyalty promotions are a woefully underutilized way to drive short-term promotional sales.
Let’s unpack this a little.
Let’s say you have a points-based loyalty program. Your customers earn base points (i.e., they spend $1 and get X points). A healthy loyalty program also needs a good bonus point budget: we recommend approximately 25-30% of the total loyalty spend, in addition to vendor funding (more on that later).
Customers sign up for loyalty programs for the base earn; however, this base earn does not drive incrementally positive behaviour and most customers return to their usual spend pattern. However, your bonus points budget is how you motivate and change behaviour over and above their normal pattern. That is done on a promotional basis, either through mass, segmented, or targeted promotions.
Loyalty promotions can work equally well or sometimes even better than discount or sales promotions to change behavior:
- Drive incremental visits,
- Increase average baskets,
- Cross-sell to other, previously overlooked, categories in the store,
- Motivate trial of new products,
- Change customers over to private label products or other higher margin products.
And we haven’t told you the best parts:
- Depending on the customer penetration of your loyalty program (i.e., the percentage of your customer base that are loyalty members), most often loyalty promotions do not count toward compliance days, especially if the promotions are segmented or targeted,
- You can work with your vendors to fund, or at least partially fund, your loyalty promotions, which would significantly reduce the costs of the promotion,
- These promotions are highly measurable,
- They drive traffic back into your store for future redemption, as they build balances and engagement with your brand.
What are you waiting for? Imagine if you could shift just a small percentage of your promotional discount budget into loyalty promotions! Test your way into it. Learn what works for your business. Which customer segments respond best to points? What is the easiest behaviour to nudge through loyalty (visits, baskets, trial)? For which product categories does loyalty work best?