My Sales are Down... Do I Need a Loyalty Program?

Even though the marketing landscape has significantly evolved over the past 15 years, there is still one thing that continues to shock me: retailers who only think about launching a loyalty rewards program when business is not going well. I’ve always been amazed by retailers who solely see loyalty programs as a life preserver. If sales are sinking, many marketers still believe the solution solely resides in launching a loyalty program.

Although I truly believe in the benefits that come with implementing a loyalty program, some key business elements should be evaluated before moving onto a permanent loyalty solution. First, it’s imperative to review the basics such as customer service, pricing, assortment, merchandising and store cleanliness. The days of store owners and managers using past experience and intuition to know exactly what customers want is over. Don’t get me wrong, it’s important to have a strong sense of business intuition. But in 2014, it would be foolish not to leverage fact-based data in order to better respond to customer needs.

So, your sales are down. Now what?

By conducting regular “health checks” on the key elements of your business, retailers have the capacity to determine whether their pricing is fair, promotions are exciting, service is outstanding and they offer the most optimized product assortment. For example, customer feedback surveys, focus groups and secret shoppers are all reliable methods to better understand the customer’s point of view, engage more effectively and maintain insights into store level operations. By doing so, retailers are likely to identify problems easier, address them quickly and see ongoing performance improvements.

Now, assuming that all daily operational needs have been addressed, the implementation of a Loyalty Program can certainly be the next big strategic move. Retailers who invest time and energy into collecting customer data from loyalty program members will end up ahead of the curve.  Incorporating loyalty program data with the marketing research data collected from surveys, focus groups and secret shoppers will further provide retailers with a wealth of information to leverage.

As an example, if a retailer is feeling the pressure from an aggressive, price competitive marketplace, loyalty program data can be segmented to identify price-sensitive customers. Those customers can then be surveyed to better gauge their loyalty strictly based on pricing. The retailer will obtain a better understanding of its price-sensitive customers and can respond to their needs as reflected in the survey. By implementing customer retention efforts, sales will improve.

In conclusion, implementing a loyalty program is never a bad idea as long as proper expectations are in place. The benefits of such a program will not address mediocre customer service, poor pricing strategies or an unpleasant shopping atmosphere. The true advantages will come from the data that is gathered and how the data is utilized to make better business decisions and improve engagement with customers. In turn, that’s how a loyalty program can help increase your sales.