Through a special arrangement, presented here for discussion is an excerpt of a current article from Convenience Store Decisions magazine.
Faced with rapidly escalating costs, cutthroat commodity pricing and broader competition, the time is right for convenience stores to adopt more aggressive loyalty marketing programs that will attract new customers and reward existing ones.
For nearly 80 years, loyalty and frequent shopper plans have proven to be highly effective promotional and brand-building tools for businesses ranging from airlines to supermarkets. This is underscored by industry estimates indicating that these plans have attracted more than 1.3 billion members in the U.S. alone, most of them concentrated in the financial services, travel and retail sectors.
Given lower transaction sizes and limited traffic in c-stores, the question is how they can best initiate, participate and profit from loyalty programs with a minimal upfront investment and a realistic return.
At present, relatively few c-stores stores nationwide offer more sophisticated programs, despite the fact that gasoline has become the "ultimate currency" for loyalty plans. However, many more are said to be on the fence and about to jump on to the loyalty bandwagon.
"It's one of the faster growing segments of the industry," said Rick Ferguson, editorial director of COLLOQUY, a magazine focusing on the global loyalty marketing industry. "The problem was that five years ago, the technology was a bit prohibitive and required a big upfront investment. Chances are you would have had to change POS systems or put in kiosks to build the IT infrastructure in the database. Today, a lot of Web-based platforms and software service companies are more affordable. That's made it easier for retailers to get in the game."
Anton Bakker, CEO of Outsite Networks, agreed. "I'd say there are sophisticated, integrated loyalty systems in place at about 5,000 stores right now. The horse is out of the gate and not going back," he said.
Some c-store programs enable retailers to engage in data mining for core customers. But as Mr. Ferguson noted, "You have to walk before you can run and even the best marketers in the travel industry are not as sophisticated in data analysis as they'd like to be."
One of the issues is that many tools now available are more focused on customer retention than sales lift. "Some people are already buying as much from you as they can. They can't buy more gas, soda or cigarettes," Ferguson said. "Those are the ones you want to keep from gassing up at Wal-Mart or Sam's Club by launching an awards program that lets them know you value their business."
Discussion Questions: Given the lower costs now involved, what do you think of the opportunity for customer rewards programs at convenience stores? How would the challenges in establishing such programs be different from supermarkets and other retailers?