As large corporations and small businesses alike continue to fight for success in a sputtering economy, the focus on the bottom line has forced companies to radically re-evaluate the way money is spent and how new systems are implemented. Increased scrutiny on expenses as a result of the recent recession has placed a tremendous amount of pressure on owners and operators to show clear evidence that new initiatives are indeed valuable to the bottom line. That said, one proposed system seems to continue to receive approval: loyalty card programs. These little gems are sure-fire ways to maintain a consistent revenue stream among your most loyal customers.
Since the first loyalty installation within the c-store industry in 2002, loyalty programs have garnered “kudos” from industry players and consumers alike. “If we look where loyalty programs came from, it is relatively young in our industry,” said Anton Bakker, CEO at Norfolk, Va.-based Outsite Network. “We pioneered it with the first loyalty installation back in 2002. At that time there were no other companies specifically focused on offering loyalty for convenience stores, so we had to do quite a bit of discovery in order to properly pioneer this. Since that time, in the U.S. market now has several loyalty installations. We have one of the largest loyalty application programs with about 1,500 convenience stores.”
And while loyalty programs have evolved since their inception, one thing’s for sure: Loyalty programs have earned a stronghold within a recessionary economy, especially in niche markets such a petroleum and grocery.
“What we’ve seen is that consumers are looking for ways to save money and c-store operators are looking for ways to meet that need for the consumer,” Bakker said. “So the loyalty systems have become more popular and we’ve seen more sales of loyalty systems in these tough times.”
In fact, industry experts agree that loyalty programs are more important during a recessionary economy for both retailers and consumers. “For the retailer, creating loyal customers is vital in order for them to maximize the amount of discretionary income consumers spend in their store versus the gas station across the street,” said Tracie Wilbanks, marketing manager at The Pinnacle Corporation, Arlington, Texas. “For the consumer, a tight economy calls for a re-evaluation of how and where they spend their dollars. If they can get a discount on their coffee or cents off at the pump at one location but not the other, their choice is easy. Once the discount is earned by the consumer, the value they feel transfers on to their feeling about that retailer, causing them to come back and possibly spend even more of their discretionary income at that location.”
Pinnacle offers Loyalink, a complete loyalty solution designed to build customized marketing programs that drive customer loyalty and higher profits. Loyalink's easy user interface not only helps you understand customer shopping habits, it allows you to capture and use that information to bring your best customers back, time after time. Fully integrated with Pinnacle's Palm POS, Loyalink requires no additional store level hardware. That means no additional card readers, printers, or other hardware that is expensive, increases maintenance burdens and consumes valuable store level footprint.
According to Joe Randazza at National Payment Card, Coconut Creek, Fla., his company is benefitting from the effects of a credit tightening/recessionary economy with its loyalty debit card programs.
“Industry statistics indicate that on a monthly basis a typical consumer utilizes debit cards as a method of payment 13 to 16 times versus 5 times per month for credit cards,” Randazza said. “In today's environment only 15 percent of consumers applying for new credit cards are being accepted. A large number of consumers with existing credit cards are finding that their credit lines have been reduced. In many cases these consumers are making minimum payments therefore their available credit has been minimalized.”
What’s more, consumers who are straddled with large sums of credit card debt and large interest payments are turning to debit cards as a method to control their spending. According to ATM and Debit News, annual PIN based debit POS volume in the U.S. has increased in 1997 from 12,580,000 transactions to 27,230,000 transactions in 2008.
“As a consumer I have a credit card and a bank issued debit card in my wallet,” Randazza said. “What I don't have is a gas debit card that provides me rewards for every gallon of gas I purchase. In today's recessionary environment I need rewards on my spending. But more so I want rewards attributed to specific things that I'm buying such as gas. Consumers that are able to pay their credit card balance off each month could benefit from a 5 percent rebate. But the credit card companies offering such rebates know that there is a very small percentage of consumers that benefit from such an offer. Our product provides a reward to consumers for each gallon of gas purchased.”
And while loyalty programs can be found in wallets and on keychains throughout the U.S., today’s loyalty programs have evolved into two distinct programs. “One of them is your basic loyalty system where you issue a loyalty tag or ID to a consumer and then you start to collect transaction information on that consumer so you target that consumer in a relevant way and offer him incentives to fit his needs,” Bakken said. “We have noticed that in a c-store you can really influence the impulse purchases of consumers. When a consumer goes to a grocery store, they often have a list, but in the c-store, the purchases are typically based on fuel but you can easily upsell them if you know what their purchase history is. You can easily trigger an impulse purchase by sending that consumer a message reminding him about what that consumer already likes.”
The second form of loyal programs that have taken root during this recessionary economy is the total loyalty program. “This type of program integrates the loyalty system with the vendor that provides product to the c-store. We see people do that with a vendor-sponsored reward so that the reward cost is not solely up to the retailer,” Bakken said. “The c-store may build a loyalty base of 20 percent whereby 20 percent of the consumers are loyalty consumers, but the vendor really would like to market and target 100 percent of your customer base. We see the importance of bringing loyalty to the next level by creating the ability to do one-to-one marketing to do that to all consumers in a c-store. This is where totally loyalty programs come in.”
Private Labels Working for You
Loyalty programs in general are proving beneficial during a recessionary economy, yet the private label component of these programs creates a tremendous amount of “loyalty” among consumers for a particular store brand.
“It is true, as a private label debit card that changes consumer’s behavior by providing the reward that a consumer wants, saving money on gas—we provide a compelling loyalty component that has proven to be a traffic building program,” Randazza said. “Our typical merchant is experiencing above 5 percent consumer adoption with our ACH decoupled debit product.”
Bakken added that creating the culture of loyalty within your chain is critical. “Your basic un-loyal c-store customer stops at three different locations—namely on the way to work, on the way home from work, and the third store is visited on the weekend, close to their home.
“We have seen that with incentives, retailers can consolidate those three locations into a single location—theirs,” Bakken said. That is a really strong indication of the success that loyalty programs can bring to c-stores. We have examples of retailers who have had double digit sales increases over the last three years, since their loyalty program was put in place.”
While many c-stores may have established a loyalty program of sorts, many are interested in seeing what a loyalty debit card program can provide during this economy. Randazza said there are several fundamental reasons why merchants should incorporate an ACH decoupled debit card as a payment method.
• First and foremost to support the industry's efforts in showing VISA and MasterCard that there are competitive forces in the marketplace.
• National Payment Card’s interchange is a flat $.19 per transaction. As an example, the national average for midgrade gas is $2.71. The average consumers purchase is 10 gallons therefore the average purchase is $27.10. Industry wide the typical settlement cost that merchants are paying for a $27.10 transaction is $.6056 for credit cards, $.5920 for signature debit, and $.3597 for PIN debit versus our $.19 per transaction. On a per gallon basis the cost is $.0606 for credit cards, $.0592 signature debit, and $.036 for PIN debit versus our $.019 per gallon.
·• Merchants are able to use the savings to self-fund the consumer reward.
• National Payment Card provides merchants consumer spending data that is not available through any other payment mechanism. “Through our real-time online merchant report system, merchants have access to such information as the each consumer's name, e-mail address, telephone number, number shopping visits and dollars spent,” Randazza said. “This information can be downloaded into a traditional loyalty engine to upload sales inside the convenience store.”
Making Strides With Loyalty Cards
Wilbanks said that the key to keeping a loyalty program successful during a recessionary economy (and at all times) is quite simple: Don’t rest on your laurels. “You should have a plan that introduces new and different promotions periodically to keep your current members interested and to entice potential members to join,” she said. “In a difficult economy, a loyalty program should appeal to the shoppers desire to be economical. Offering cardholders additional discounts on already discounted items has been found to be a highly successful program that is supported not only by shoppers, but also by suppliers.”
And remember, the most important requirements in establishing and growing your loyalty program during a recession are front-line employee education, communication and on-site promotion. “If your employees are knowledgeable and can accurately communicate the benefits of joining your loyalty program, then they should be able to convey those benefits and promote the program to your customers,” Wilbanks said. “Combining print materials, such as aisle violators, ceiling danglers, pump toppers and banners, can further communicate your loyalty program’s benefits.”
Loyalty is not a light bulb where you flip the switch and there’s the result. “You have to focused on it and market it with loyalty in mind,” Bakken said. “There also are many different technical issues so you need to make sure you can support loyalty throughout all of your brands and across all of the point-of-purchase equipment you have.”
Jim Nevill at Midax, Virginia Beach, Va., said it’s important to keep your loyalty program efforts fresh, so the value proposition is kept front and center with existing customers. “Also keep the promos simple and make the redemption easy,” Nevill said. “Making the redemption hard means the consumer discounts the program. A point per dollar, for example, does little to encourage consumers to buy product that contribute to the retailer’s bottom line or use the vendor promo dollars effectively.”
Nevill added that c-store owners and operators need to consider using reciprocal marketing with other local retailers, community programs and anchoring at the grocery store. “Gas prices are still a highly emotional item, so the more you can reduce them, the more impact you get with your program.”
And as Wilbanks pointed out, many times retailers don’t sufficiently market and promote the loyalty program. “Retailers really need to be prepared to make the loyalty program their number one marketing focus,” she said. “Dedication of marketing resources to promote the program and communicate its benefits is absolutely necessary. Retailers must also make sure their store employees are armed with the drive, information and tools needed to adequately promote the program. Once retailers have successfully launched their program, they should also change up their promotions to keep the program fresh.”
KickBack Points, LLC. was formed in 2000, by a group of business owners, as a means to compete against larger aggressive competitors. It was determined that through loyalty marketing, they would be able to recognize and reward their best consumers and protect their market share from attrition. Today KickBack provides programs for nearly 100 companies and their flagship program, KickBack Points, is the largest coalition loyalty program in the US. KickBack stands as the leader in loyalty marketing in the convenience store and quick service restaurant channels. KickBack has also designed effective programs for other channels such as: grocery stores, gaming casinos, truck stops, furniture stores, rental companies, clothing stores and many others.
KickBack Rewards Systems
P.O. Box 554
Twin Falls, ID 83303-554
Phone: (866) 230-6357
Fax: (208) 735-2195
National Payment Card
National Payment Card Association is recognized as the leading provider of Merchant Branded ACH Decoupled Debit Cards. National Payment Card is the only Non-Bank (not associated with credit/debit card bank associations or financial processors) whose ACH Decoupled Debit platform has been designed exclusively for the gas station /convenience store industry. The company’s ACH Payment Card system turns existing cards, such as driver’s licenses, loyalty cards or membership cards, into private label debit cards.
National Payment Card's fuel payment solutions focus on changing the consumer's payment method through his/her instant gratification by the price roll-back at the pump. The price roll-back is funded by the station operator through the reduction in processing costs associated with traditional credit and debit card fees.
4171 W. Hillsboro Boulevard, Suite 4
Coconut Creek, FL 33073
Tel: (954) 449-9540
Fax: (954) 428-4584
Contact: Peter Guidi, VP Sales, email@example.com
Midax is a software developer that has been around for over 10 years, approaching 1,000 retail sites. Our focus is on a real-time integrated solution for front and back office in grocery and c-stores. We focus on branded and unbranded, manned and unmanned gas station solutions for loyalty, payment and back offer—either sold as a license and housed in the customer’s headquarters or as a rental service through the Midax Data Center.
Contact: Scott Abraham
Phone: (715) 891-2113.
Outsite Networks is the leader and pioneer of c-store loyalty marketing, supporting over 100 retailers, 4.4 million consumers, and 1 billion transactions nationwide. Outsite Networks is now the only ALL customer c-store loyalty solution TOTAL Loyalty.
Phone: (757) 853-3000
Web site: www.outsitenetworks.com
Since 1983, Professional Datasolutions, Inc. (PDI) has been dedicated to delivering innovative software and service solutions to the convenience/petroleum marketer. For the past two decades, PDI products have steadily been the most widely installed software solution in the multi-unit convenience retail business, as well as the implementation leader in NACS/PCATS initiatives, focused on developing and implementing technology standards.
3407 S. 31st St.
Temple, TX 76502
The Pinnacle Corporation is the leading automation technology and software supplier to the continually evolving convenience store and petroleum industries. We deliver tools that automate the broad spectrum of convenience store operations and supply chain management of fuel operations. Nationwide, Pinnacle’s products and services are used daily in thousands of convenience outlets to automate and improve store operations and by fuel marketers to increase efficiency in the complex management of fuel logistics.
Phone: (817) 795-5555; (800) 366-1173
201A East Abram Street
Arlington, TX 76010