“INDIES: STOP MIMICKING LOYALTY SCHEMES”
Listed under: News
Published: Thursday, February 11, 2010
Persuading retailers that loyalty schemes don't work, is the focus of a 'scarcity vs abundance' debate due to be broadcast later this month
Rob Ward, founder of honestfoodlabelling.com and the Food Marketing Network, is hosting a teleseminar for retailers on 25th and 26th February.
Following the success of the US 'webinar' concept, the session is expected to appeal to time-strapped deli owners, farm shops and c-stores.
“I've been concerned about independents losing profit through loyalty scheme related discounting for some time, so this is an opportunity to address it,” said Mr Ward.
Research into the number of 'loyal' customers shopping in an average UK independent and observations on their buying behaviour makes a strong case for the seminar.
“All retail businesses will have a core 20% of customers. These generate 80% of their revenue and are likely to be the first in line to join a loyalty scheme. This makes discounting crazy. Not because retailers shouldn't show they appreciate regular custom, but because these loyal customers are totally in love with the shop already. I guarantee that 25% of them would be prepared to increase their spend by as much as 500% if they were offered the 'right' products,” explained Mr Ward.
“Think about the profit if 20% of your customers are generating 80% of your revenue but a quarter of these could be spending up to five times more?” he urged, highlighting the merits of avoiding rather than implementing loyalty schemes.
“It is important to have an affordable offer of basics in food retail business, but is there another way to adjust prices based on higher levels of service and different products? My objective is to show shop owners what alternatives they have – ideas that will help them make customers clearly understand what they are buying and why these products cost more,” said Mr Ward.
To put these ideas into context, retailers listening to the teleseminar will be encouraged to consider how other industries increase their offer to up their profits. “Look at airlines. They often segment their service into three clear categories so customers know that by choosing a certain level they're also accepting the cost that goes with it. The parcel business is the same. Customers buy time (and security), paying more for overnight delivery with online tracking than they would for a straightforward seven-day service, for example.”
The session is currently being promoted with a direct mailout to 1,000 selected food retailers; 4,000 business professionals; and 6,000+ Twitter followers. Final places will be limited to 300.
Mr Ward is also looking to run a second teleseminar on 'how to make social media work for food businesses' next month.
For further information visit: http://www.FoodMarketingNetwork.com
Following the success of the US 'webinar' concept, the session is expected to appeal to time-strapped deli owners, farm shops and c-stores.
“I've been concerned about independents losing profit through loyalty scheme related discounting for some time, so this is an opportunity to address it,” said Mr Ward.
Research into the number of 'loyal' customers shopping in an average UK independent and observations on their buying behaviour makes a strong case for the seminar.
“All retail businesses will have a core 20% of customers. These generate 80% of their revenue and are likely to be the first in line to join a loyalty scheme. This makes discounting crazy. Not because retailers shouldn't show they appreciate regular custom, but because these loyal customers are totally in love with the shop already. I guarantee that 25% of them would be prepared to increase their spend by as much as 500% if they were offered the 'right' products,” explained Mr Ward.
“Think about the profit if 20% of your customers are generating 80% of your revenue but a quarter of these could be spending up to five times more?” he urged, highlighting the merits of avoiding rather than implementing loyalty schemes.
“It is important to have an affordable offer of basics in food retail business, but is there another way to adjust prices based on higher levels of service and different products? My objective is to show shop owners what alternatives they have – ideas that will help them make customers clearly understand what they are buying and why these products cost more,” said Mr Ward.
To put these ideas into context, retailers listening to the teleseminar will be encouraged to consider how other industries increase their offer to up their profits. “Look at airlines. They often segment their service into three clear categories so customers know that by choosing a certain level they're also accepting the cost that goes with it. The parcel business is the same. Customers buy time (and security), paying more for overnight delivery with online tracking than they would for a straightforward seven-day service, for example.”
The session is currently being promoted with a direct mailout to 1,000 selected food retailers; 4,000 business professionals; and 6,000+ Twitter followers. Final places will be limited to 300.
Mr Ward is also looking to run a second teleseminar on 'how to make social media work for food businesses' next month.
For further information visit: http://www.FoodMarketingNetwork.com
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There are currently 3 comments - Have Your Say Today
Makes sense, I agree with Rob, loyalty should be rewarded with exclusivity and experiences that are valued more, not a discount!
Of course - retailers that have loyalty schemes do so because they have no loyal customers. They would be better described as ‘incentive discount schemes’ or ‘ids’ - especially as they appeal to our baser instincts as shoppers in search of the best deal.
Real loyalty isn’t bought, its earned. The challenge is to grow the 20% which Rob mentions. Access to a new experience or some other form of engagement will be the way to do it. Tutored tastings, invitations to try new products before they’re stocked (let the supplier foot the bill) and votes for new lines - three easy wins.
Quite right Dom,
The bottom line is that all niche businesses win customers because they are the best at either solving a problem or a pleasurable experience, sometimes a niche can be both, but that’s it.
No niche business wins by being cheap, for long. Price advantage is only a temporary attraction.
By focusing on the 20%, that generate the 80% of your revenue, you can build and grow the business with committed customers. Trying to persuade the 80% to spend more is far more expensive and less rewarding.
Rock on with a Privilege (premium) Club over a Loyalty (discount) club any day!