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Jan 4, 2016

The benefits of loyalty schemes for independent retailers

By Paul Clapham


For a number of years loyalty schemes were perceived as the preserve of the multiples - the benefits accrued to those who had scale and deep pockets to make a scheme work. But the world has moved on and loyalty cards are now part of the independent’s marketing ammunition.

Lifetime value
So is it worth it? Why bother? The answer to those two questions is ‘yes’ and ‘more profits’. Loyalty cards are most particularly beneficial to sports retailers because of the lifetime value of a customer in this sector.

Where in the past people hung up their boots in their thirties, they increasingly play for much longer and/or take up new sports more suited to older age groups. It’s also common for sports enthusiasm to be passed down the generations.

The key benefit of loyalty cards is, of course, to retain existing customers, the value of which is hard to overstate. There are plenty of statistics demonstrating that a focus on customer retention has a major impact on profits.

A loyalty card is a prompt to choose you ahead of the competition and a reason to spend more on each visit to your store. The card in a customer’s wallet featuring your address and phone number is an advert he or she carries around.

Building knowledge
Equally valid is the fact that each purchase a customer makes builds your knowledge of their enthusiasms. The person buying tennis balls three times a year is a much better prospect for a new racquet or clothing than the one who buys once in Wimbledon fortnight - and you know which is which.

Building that knowledge helps you engage with your customers better, which in turn helps with retention. You can make them specific offers at appropriate times. You can also go wider than that, because sportspeople tend to be interested in a range of sport. All your cardholders might like an invitation to a ‘try handball’ event and that formula can be campaigned if successful.

Does a loyalty card help you find new customers? The providers say yes, but personally I’m not convinced. You might get some referrals when a cardholder waves his card around in the bar after a game, but otherwise it doesn’t look like a new customer generator to my eye.

Upselling and multiple purchases
What certainly does work if you seek out the opportunities is upselling and multiple purchases. Your loyalty card can have different levels of reward for upselling. Hence purchases over, say, £100 get bonus points.

Multiple purchases are more of a communication benefit. Buy new socks with new boots and the socks get double points; cricket gloves with a bat works the same; so too does a box of balls with a racquet. Even the more sophisticated customer bites on this one, especially since the proposition is entirely logical and they won’t get it elsewhere.

When it comes to choosing who you buy from, there are several key issues. How easy is it to implement is probably number one for those who are not techno-whizzes and predictably there is a lot of variation. As with all technology, how good is the back-up? Also, can the supplier train you and your staff on site, if that’s necessary?

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