Adjusting the Sails

Maria Caines

April 14, 2020

Business owners have had to tack hard and adjust their sails as they manage through sharp drops in revenue, often resulting from government-mandated closures. Hard decisions around employee layoffs, expense reductions, complete service delivery overhauls, requesting or extending credit, subsidies, and much more.

The world as we knew it came to a skidding halt in the Spring of 2020. Families are being challenged to spend more time together as parents learned to work from home, home school the children, isolated from the rest of the world, and yet still maintained some semblance of normalcy. But this is not as big an adjustment for those who have embraced a home office before the world locked down to preserve human-kind.

Business owners have had to tack hard and adjust their sails as they manage through sharp drops in revenue, often resulting from government-mandated closures. Hard decisions around employee layoffs, expense reductions, complete service delivery overhauls, requesting or extending credit, subsidies, and much more.

All this while one big unknown looms: When will we be able to jumpstart our businesses and get this economy moving again?

There is however, a rare gem in all of this uncertainty and there could be a lot of carats to be chiseled from this diamond in the rough. Once you have done all you can to ride out the storm, you will be gifted with the time to look at your business from a new perspective.

Imagine if you could go back to the inception of your business to right the wrongs, straighten the path, improve your processes, reboot, so to speak. This is the gift that you have been blessed to receive. A rare gem it is, indeed.

There is one thing that has become abundantly clear. In many parts of the world, businesses have been mandated to close when they are serving large numbers of customers. Now more than ever, those businesses – restaurants, coffee shops, salons, spas, retail stores, hotels, grocery stores, garages, etc. – must absolutely find a way to communicate directly with their customers when those customers are not in the establishment.

The giants of retail figured this out years ago and developed customer loyalty programs as a low cost way of purchasing customer information to enable direct marketing to their customers. Those giants have reaped the benefits of growth approaching or exceeding 35%, as illustrated by the dividend reports issued by Loblaws, a large national grocery chain in Canada. They launched PC Points in 1998 and, within three years, doubled this class of dividends. Within five years, dividends had tripled.

The bright spot in this data for local business owners is that Loblaws, and other big box conglomerates, have taught consumers how and why they should embrace a loyalty program, making customers much more accepting when they are invited to join one. And customers love the gamified aspect of collecting points and rewards.

Show me a business owner who would not appreciate a revenue spike of 100% or 200%? For these purposes, let’s be conservative and say 35%, without additional fixed costs. Most business owners in the retail, hospitality and tourism sectors would probably relish those results.

Customer loyalty rewards are simply an embellishment of customer relationship management, or direct marketing. The gifts that you give your customers are a new form of currency; a thank you for information that allows you to learn more about them, their wants and needs, their special celebration dates, their ages, their shoe size, how far they come to shop with you, what day of the week they shop most or least, what motivates them to spend more with you than with your competitor. Knowledge is power and may provide insight into your other marketing channels and where your dollars will be most effective.

Let’s take a closer look at ways that customer relationship management can alter behaviour and achieve results:

 Increased number of visits or orders
 Increased quantity of items per purchase (BOGO)
 Increased retention, fewer defections, less churn
 Increased averaged spending per visit or order
 Increased uptake on new purchase categories
 Increased upsales to more expensive brands
 Increased referrals of customers due to great loyalty program
 Increased reactivations of previous customers

All of these and sometimes combinations of these strategies motivate your customers to spend more. You have likely been on the receiving end of promotional emails that motivated you in similar ways, so you will know the type of messaging that you want your customers to hear from you. Remember the 6 “P”s of marketing. Offer the right product at the right price in the right place with the right promotion topped off with points in a loyalty program.

Business owners like to believe that their customers are loyal to their brand, product, service, or style but the reality is that consumers are increasingly fickle and, unless you have a way to stay top-of-mind, you can be quickly replaced by the next new shop down the block. You have the power to position your business through relationship management.

One of my favourite scenarios for restaurants creates a unique guest experience around a seasonal menu flip. When you have whittled your offerings down to a manageable sampling, instead of asking your managers to decide which ones land on the menu, invite your top twenty customers and their plus ones for an exclusive evening where they will decide the items that land on your menu for the new season. First, you need to know – really know – who your top twenty customers are. Not the ones who buy a coffee every day, but the ones who spend the most money at your venue. They will be thrilled to be acknowledged in this way. You will deepen your relationship with them and create raving fans who will be sure to recommend you to their friends. Their friends will want to be invited to your next exclusive event, so they will begin spending more, and so on, and so on. All of this is made possible through a great loyalty platform to provide the right information when you need it.

Then, of course, there are the businesses that have been collecting emails through their website for years but haven’t recognized the gold mine that they have. That makes the database pyrite, fool’s gold, until they begin to actively mine for gold. A loyalty program will help to develop a database faster, reactivate previous customers and your direct marketing will drive the revenue growth.

Still, some owners will say that they still don’t understand how this style of marketing creates new revenue. Essentially, use your customers’ information to say “Thank you” and to nurture the trust in your relationship to keep you top of mind as the only merchant to obtain your sector’s products and/or services.
By applying the Pareto Principle of marketing that recognizes 80% of sales come from 20% of customers, then moving more customers to the same level of support as those 20% will increase your sales volume exponentially!
i.e. 20% are spending $1,000 per month for a total of $100K = 80% of $125K
If you move that increase from 20% who are spending $1,000 per month to 30%, that could mean up to a 40% increase in total sales.
Or if you increase your 10,000 customer base by 10%, instead of 20% of customers being 2,000, now there will be 2,200 spending in the higher brackets. Now, superimpose these figures over your own numbers to project your results. Impressed? Here are some key points to request during your research:

Features that make a solid customer loyalty solution:

 Easy to implement & use  Tech savvy & mobile
 Affordable  Brand with your logo
 Coalition  E-commerce API
 B2B adaptability  Global reach

A coalition platform may reduce your cost of new customer acquisition by marketing beyond your existing customer base, keep the accruing liability off your balance sheet, plus save time and money on design, administration and advertising. Merkle, Inc.’s 2020 Barometer on Loyalty Report shows that consumers who collect rewards increasingly want to be able to redeem them faster making a coalition platform more attractive to customers hoping to collect and redeem rewards in more than one place.

When you decide to embrace loyalty marketing, keep in mind that this will be a commitment over years but the returns for your succession/exit strategy will improve by adding value for the next generation.
In an emergent new economy, businesses on Main Street, Every Town, will be uniting under one loyalty platform enabling them to market together while offering customers rewards for supporting local businesses instead of the big box retailers. Learn to work together as a coalition to bring greater value to each others’ customers. Engage customers to keep them shopping in your town. And motivate them to choose local more often than they previously have by monetizing their reward for doing so. This combination of ingredients is the recipe that will move our economy forward faster than ever on a more stabilized foundation.