Where Do Loyalty Programs Go From Here?
The COVID-19 pandemic highlighted some areas where c-store loyalty initiatives may need to evolve to keep pace with competition from other channels. Few companies were as prepared for the COVID-19 pandemic as Dominos Pizza. Having built its digitally enabled, off-premise infrastructure for nearly a decade, the company was positioned to thrive in a climate where many customers were stuck at home. The Dominos app isnt just an add-on to the customer experience. For many, it is the customer experience. Beginning with the iPhone in 2011 and Android in 2012, Dominos transitioned from a business reliant on phone calls to a true e-commerce leader. Dominos digital sales were near 30% of total sales by the end of 2011, according to Bloomberg. Prior to the pandemic, they had risen to near 70%, per CNBC News. Convenience retailers pursued a much different mobile strategy in the years leading up to the pandemic. Rather than emphasizing digital ordering and off-premises sales, their apps were typically designed around discount marketing and loyalty programs  strategies to encourage in-store visits. That made it difficult to serve customers, who were suddenly fearful about visiting their favorite stores due to the pandemic. Lets examine a few perspectives. Moving Apps Forward  The pandemic reinforced the importance of understanding customers and their behaviors, explained Daniel Kahan, the loyalty lead at W. Capra Consulting Group. Were coming back to the same conversation we had before the pandemic about the currency of data, said Kahan. When the pandemic hit and consumers were no longer coming to the stores in droves, many retailers lacked an understanding of who those customers were  and their purchase patterns. Some retailers even lacked ways to reach out to them.  Kahan suggested that loyalty strategies must be based on actual consumer data rather than blindly pursuing mobile payment strategies or other drivers, such as consumer packaged goods (CPG) discounts. By understanding their needs and behaviors, retailers can identify specific tactics and techniques that can lead to a return on their investments. Maybe the answer isnt always a mobile app. The app or bust mentality can even be problematic in some circumstances, Kahan noted. A mobile app is expensive real estate on a consumers device, he said. If you dont get it right the first time, they will not go back to using it. Research confirms this. Consider alternatives like progressive web apps, where youre still offering a digital experience, but youre not necessarily putting the same demand on the consumer. You can collect data and ultimately use that to create a more immersive experience.  Loyalty as the Outcome  View loyalty as an outcome, not a strategy. Kevin Rice, the chief marketing officer at Hathaway, a digital growth agency, recalled the way Apples famous Mac versus PC commercials spoke to the emotional rather than rational side of loyalty. Many readers will likely remember those. Justin Long played the role of the Mac and presented a cool, chill and suave contrast to John Hodgmans stuffy, dated and terribly uncool PC character. Despite PCs being cheaper and often discounted, customers were willing to pay full price for Apples products, said Rice. They simply aligned better with their values and who they aspired to be. Theres less elasticity to that approach. If you have a strong emotional connection, customers are less likely to switch brands than when the relationship is based solely on discounts.  Rice sees an opportunity to strategically use discounts as a way to show that loyalty goes both ways. Personalized offers can help. Although he argues true personalization is rare at the present time  and may require a lot of manpower along with a lengthy organizational journey  retailers are getting closer as theyre becoming more sophisticated with segmentation. Ultimately, its about delineating between an explicit rewards program versus loyalty as an outcome, said Rice. The programs that everyone gets to be part of are great enrollment drivers. From there, its the below-the-line tactics that drive loyalty.  Creating Your Story  What Dominos did was contextually relevant for them, but it may not be the answer for everyone. Retailers like Caseys do appear to be on a similar journey. For the quarter ending Dec. 31, 2020, Caseys reported that 55% of prepared food orders came from their website and mobile app. But theyre also a unique company, and its doubtful that the average convenience store is as well-positioned to thrive on mobile ordering. One interesting opportunity may come from subscription programs. According to Saurabh Swarup, general manager of global marketing technology company Liquid Barcodes, it makes sense to both the customer and the retailer. Imagine a coffee customer in a hurry on his work commute. Rather than standing in line for his usual beverage, he might instead grab it and bypass the line. Its only a matter of time before you see subscription programs making their way into different aspects of the convenience store business, said Swarup. Anything and everything that can be on subscriptions will be.  Beyond the obvious customer benefits, subscriptions also provide retailers with clarity from an accounting and reporting perspective. Brands know how many customers are subscribed and at which price points. Rather than struggling to define incremental sales uplift, retailers have clear results. Perhaps even more interesting, subscription programs present clear opportunities for upselling  a tactic that has been traditionally difficult in convenience retail. The average American might visit a car wash six or seven times per year, explained Swarup, but a subscription customer might visit three or four times per month. Now imagine that a customer goes to his favorite car wash, and the system asks if he wants to upgrade from the bronze subscription to a one-time gold wash for only $2. It may not mean much to him, but it just helped drive $2 for that retailer right then and there.  Swarup recalled a successful upselling competition that took place during a previous role at fast-food corporation Yum! Brands. When a call center incentivized employees to upsell extra cheese on pizza orders, the team immediately rallied behind it since they received small kickbacks whenever they were successful. The cost of the payouts  along with the cost of the extra cheese  was minimal compared to the small upcharge that customers paid. We were still making around $1.60 on every extra cheese order, and all we had to do was ask, said Swarup. Thats the power of upselling.