Inventrak Blog

According to a recent report from the Chief Marketing Officer (CMO) Council, both customers and marketers agree that deeper engagement and personalized contact drives loyalty. Thus, in order to increase customer satisfaction and drive their loyalty, retailers need to ensure they can meet customer expectations at each discrete stage of the customer engagement cycle.   

There are five stages in the customer engagement cycle: 

1.Enlighten: Retailers enlighten and inspire customers through innovative and traditional ways. For example, today, many retailers are using email campaigns to directly engage their customers.   

2.Search and Shop: Customers expect to easily acquire useful information. Today, many customers use online stores as an information source: they search the product and related items and read the reviews of those who have previously purchased the item and then go to the brick and mortar store to make their purchase. Moreover, many online stores provide trend information such as best seller lists to their customers which have proved to be a very successful strategy. 

3.Purchase: Customers expect to be able to purchase products anywhere anytime they want. Most retailers have already provided online purchase option as well as traditional in-store purchase options. Both customers and retailers are looking for more options such as emerging mobile purchase options. 

4.Pick Up or Deliver: Other than physical-store purchase/pick up and online-store purchase/delivery, there are some emerging trends: according to RISNews, retailers report that 15% to 30% of their online transactions are picked up in stores; some large chain stores have begun to offer “order to store” options at their e-commerce platform.  

5.Service and Return: With the development of cross-channel retailing, customers expect to enjoy cross-channel customer service, too. For example, customers expect to return products to physical stores which were bought on e-commerce, and vice versa.

A loyalty program helps retailers by  
• Building trusting and positive customer relationships
• Increasing customers’ spending
• Strengthening the brand
• Decreasing price competition with their peers
• Decreasing marketing costs  

One key to a loyalty program is targeted marketing, which allows you to focus on your various customer types and customize rewards to best suit those customers. For example, some customers are of high value, i.e. they make a great contribution to your sales and gross margin; others only come to your store to get a product which is on sale. High value customers might come back because of your special service for them, e.g. a private sale. You want to deliver the right benefits to the right people so that you can get the most from a limited investment in your loyalty program. 

The first step to building a loyalty program is to identify your customers’ value and segment them into different categories. What categories should you have at your store? It depends. Best Buy create some categories based on the level of "tech oriented".  

After segmenting customers into categories, retailers should use targeted loyalty programs tailored for each customer category’s needs and desires. How this is accomplished will vary by types of items sold, the value of each customer, and customer categories serviced, among other things. For example, luxury store owners do extremely targeted marketing (the loyalty program strategy is generally called “client telling”) aimed at their best customers and based upon the loyalty program and sales associates’ personal knowledge of the customers’ shopping preferences. 

Most retailers cannot justify the high cost of the client telling approach, so more modest, but still targeted approaches can be used, such as targeted direct mail and e-mail. You can send personalized promotions/services/rewards to customers from different categories based upon their preferences, purchase history, manufacturer-funded discounts, inventory levels, and so on.