Small retailers turn to coalitions for salvation
While SMEs are traditionally limited in their scope for operating customer loyalty programmes, their days are not necessarily numbered, according to UK-based loyalty consultant Chris Jacobs.
Many large organisations today have a customer loyalty or CRM (customer relationship management) programme, and many of those are either looking at a relaunch or are planning to take advantage of new technologies.
But we should perhaps spare a thought for the independent retailers that are not well served with cost effective solutions that suit their limited budgets. These companies certainly need more ways of competing with the major players.
We often hear 'gloom and doom' predictions explaining how local businesses, and branches of national companies, will disappear from our High Streets in the future - but the independent retailers are apparently beginning to fight back through initiatives in which groups of small businesses set up local coalition loyalty schemes.
These community-oriented programmes tend to be formed by villages, town centres, trade associations, buying groups, or the local Chamber of Commerce. Because the costs are shared by a number of companies, reasonably sophisticated programmes can be adopted.
The usual benefits of a coalition programme also come into play, including opportunities for cross selling between participating businesses, and enabling the participation of the low frequency retailers. An additional 'pull' factor is achieved by making redemption available only through participating merchants.
Individual shops are also increasingly starting their own loyalty programmes (although many of these are simple 'points mean prizes' incentive programmes to begin with).
There is an increasing prevalence of reward programmes in the independent pub and restaurant sector, following the success of loyalty programmes in large chains. This is a highly competitive sector, and consumers tend to eat out more these days, so the frequency is high enough for successful loyalty programmes.
Since, in the UK alone, there are 5 million SMEs across a wide range of industries with a total turnover of 3 billion, there must also be many opportunities for B2B loyalty schemes.
Small businesses don't always need the latest technology and sophisticated data mining tools to understand the behaviour of their customers (because the owner of the corner shop is often on first name terms with their regular customers), but there are some that need help. For example, take the busy convenience store that often has a queue of customers waiting to pay for their loaf of bread, pint of milk, bag of sweets and a newspaper. To run a points programme in this environment does need some technology at the point of sale, and technology that doesn't increase the transaction time.
Moreover, SMEs are not always single outlets; many have a small chain in which case the owner can't possibly serve or know all the customers personally. This is particularly the case for restaurants, hotels, petrol franchises, dry cleaners, hairdressers, off-licences, and so on. This suggests the need for some form of database that lets the business owner see the patterns and cross-overs of purchases across the whole chain of outlets.
Fortunately, technology has at least become more affordable for the smaller retailer with recent advances in internet communication, multi-functional payment terminals, and of course more flexible, cheaper ePOS systems.
Shareable customer loyalty databases could therefore support multiple, configurable loyalty schemes to help reduce costs, and email-based marketing completes the picture by providing a viable direct marketing channel for such programmes.
Chris Jacobs has been involved with the design and implementation of more than 60 loyalty programmes in the UK and Europe.