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[20 comments]

Can Loyalty Save Your Town?

December 5, 2012

Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.

Social tools like Facebook, Foursquare, Groupon, Living Social, Belly, Perka, Shopkick and otheres present the potential to level the playing field between local merchants and their national competitors. What Sports Authority and Dick's Sporting Goods are doing with The League and Scorecard respectively, can be done just as well by a local tennis, running or golf shop.

In fact, local merchants should be able to do much better, with their proximity to their communities providing an advantage in tailoring messages.

Probably the smartest way for local merchants to compete is to leverage digital loyalty systems in a coalition model. Local merchant discount networks have sprung up across several states to encourage residents to spend their money locally, rather than mindlessly running to the mall.

My little South Florida town is launching "Shop the Point," a "resident card that entitles you to discounts, incentives, and other rewards for patronizing businesses in our community." While I'm excited that the Chamber of Commerce drive such a program, I also see a potential shortfall if planners adopt the tempting DIY approach for merchants to loyalty.

The big win is creating cross-shopping activity among and between businesses, enabling customers accumulating value to cash in for something more interesting than "10% off." That often relies on the standard recipe for loyalty marketing of providing tailored offers to individuals based on where they shop and even their interests. The method of enrollment and data collection for this program will determine how powerful it can be for merchants in the long run.

I know what you're thinking: "Just keep it simple ... you can't build Membership Rewards for the local community." I get that. But I also know that a successful social shopping program, Zavee.com — based in the next community over — could be adopted as the backbone of this new local discount club using a registered card model. Alternatively, the folks at Belly or Perka would welcome the opportunity to offer merchants a paper-free way to shift rewards from just discounts to experiential rewards. Foursquare may be able even able to offer SMS support for those not rocking a Smartphone.

The power of the coalition model is to share offers, data and cost to drive better results for the whole. There are inexpensive digital tools that can support a local coalition. My little town has taken a first step in the loyalty race in hopes of keeping hard earned dollars within the community. Their journey represents a case study of programs that are hopefully also being explored across the U.S.

Discussion Questions:

What do you think of the potential of social media tools to drive loyalty across local retail communities? What needs to happen among local officials and merchants to make coalition programs successful?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How would you rate the potential of digital tools to support loyalty programs across local retail communities?

Comments:

I think it has a lot of potential. In my town in New Jersey we've already had a lot of people participating in a local blog to comment (and complain) about local government, etc. I think people want to be loyal to their local communities—it helps boost their own property values if their town is successful.

The local government and local merchants need to get together and come up with a cohesive plan to reach out to the community.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

Bill, I absolutely agree that SOLOMO tools can give local merchants a chance to grab more share of voice, communicate more personally with shoppers and alert local residents to special deals and offers. Evolutions in mobile and mobile payment are changing small merchants' cost structure and databasing capabilities.

The coalition approach is interesting: my initial reaction was that it adds to much cost and requires more administration than any local merchant is going to want to undertake, but as I pondered your post I wondered if that is perhaps a role for the chamber of commerce of the future. By putting an ongoing administrative body in place into which new merchants can "plug and play" it may alleviate some of the time and money otherwise required by small merchants to participate.

While Belly and other programs are interesting, I think a lot of local merchants learned with Groupon rather than just trying to get on the latest digital fad they're better off doing what they do best: providing unique merchandise, high customer service and convenience with a personal touch. If my experience last weekend of our local 'small business Sunday" was any measure, that plus a good communication strategy should do wonders to drive business in little business districts everywhere.

Lisa Bradner, Chief Strategy Officer, Geomentum/Shopper Sciences

Social media tools can provide a valuable weapon to compete with the national/regional chains. When it comes to retail there is an opportunity to develop an affiliation with local retailers similar to that enjoyed by the local farmer. Research has demonstrated that people seek out local farm products. Why? Because they identify with the plight of the local farmer and they respect the work ethic of the local farmer. However, the above are only relevant if the local farmer meets their needs for tasty and affordable fresh meats, eggs, vegetables and fruits.

My point is that a local affiliation has the possibility of making a difference only if it is designed with the primary needs of the shoppers in mind. Solve the problems of local shoppers better than the national players and that will solve the problems of local retail merchants.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

If "buy local' continues to devolve into "to get a deal" they will lose the competitive edge they have in their markets. Shopper loyalty that gets customers back and rewards them for purchases, like Perka, I'm all for. Rewarding people who don't know you to get a coupon, Groupon, or the rest in a hope to attract them to "buy local" and maybe later pay full price seems foolish.

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Bob Phibbs, President/CEO, The Retail Doctor

Using social media tools to drive loyalty is a desirable undertaking and I support "Shop The Point" and any similar type program.

There are two things that local retail communities cannot do without: sustained loyalty and competitive prices. When big "outsider" retailers counteract via social media and lower pricing risks can loom. Too frequently we've witnessed local customers having every attribute of a devoted dog except loyalty. Walmart has proved that.

Nonetheless, local retail communities need a better paradigm and let's hope the "Shop The Point" effort is the start of something beneficial.

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Gene Hoffman, President/CEO, Corporate Strategies International

There is some potential to increase local shopping, as many new social media sites are promising big results. I still believe that the train has left the station, as loyalty is now more to price, which gives Walmart and other big-box stores a huge advantage.
Many articles on this link are about the big retailers and how they are doing this and that, so if we as consultants are blogging about the success of these new programs, have we lost focus on small business?

There are some exceptional small businesses that I know very well, who are struggling to make it year to year. It is not because they are poor at marketing their products, but it is the perception created by many—especially the media who drive the business to these bigger stores—and who can blame them, as Black Friday shows on TV all the incredible values you must have.

There are solutions to help small business, and we must do the heavy lifting ourselves, by working together with the new media technology available to us. The challenge is huge to change perceptions of consumers, as to where the real deals are, but doing nothing assures us of our demise.

Anyone out there ever heard of BNI? I belong to a local chapter, and yes it is a very effective tool to help small business. Just asking, because keeping your face out there every day in the public can only help you if you run a quality small business, which will get you referrals through "word of mouth" which is still the best form of advertisement I know.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Bill's article is absolutely on target...but we need to pull the curtains back all the way to reveal the whole panoramic picture. I'm about a month away from launching an online initiative called City Possibilities that uses "social collaboration" to help a city (or south Florida town) reach it's highest possibilities. Our goal is to have 20% of the populations of 100 cities across North America involved in the first year or so.

This is not about loyalty to local retailers—it's about loyalty and engagement in the community itself. And in most places that is almost totally missing. The goal is to have the place work as one aligned whole living system focusing its energy on what is possible, not just fixing potholes literally or figuratively.

"Loyalty programs" are an attempt to cover up or compensate for something that simply isn't there. If you really cared would you have to be bribed? Cities are confusing disjointed collections of pieces with some pieces having a retail label. I forget who said "Cities are places where you go to be lonely together."

You'll have loyalty when you have real community and then the possibilities are infinite.

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Ian Percy, President, The Ian Percy Corporation

This could become the digital replacement of the coupon books that are sold by the local school booster club as a fund raiser for sports and other extracurricular activities. The idea of having this type of program to support local business communities is an extension of the digital realities that we live within. It will take a forward thinking and innovative chambers of commerce to effectively organize all the potential participants.

Maybe the program could be developed and implemented by a class at the local high school! The kids would be uniquely qualified to understand the workings of social media and they would learn something relevant to their immediate world. There must be a teacher out there that could step up and grasp the value not only for the students, but the community at large!?

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

Social media tools provide a valuable means to connect people in local communities to the retailers and businesses serving them. This idea sounds good in theory, but the real proof will be in the execution...can you gain the needed level of participation by both the retailers/businesses, as well as the community? Will it be a cost effective to administer and to participate? And will it be viewed as created to help consumers or in a way that is not as consumer friendly? I think the potential is there but it won't be easy!

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Brian Numainville, Principal, The Retail Feedback Group

In retail, there is an expression: Own your mile. Mile is a metaphor for whatever your geographical market is. Could be five miles or the entire city. The goal is to be top-of-mind in your local market.

Social media can allow you to make strong local connections compared to the national retailers. What value can you present via social media that national retailers can't. For example, national retailers may provide "how to" videos, but local retailers can provide "how to" videos featuring local customers—sometimes recognizable customers.

Using other local retailers with products that complement yours are another way way to spread the effort. What does my friend down the street have to offer that I don't, and vice versa? Cross promoting each other is a low/no cost effort that can bring more traffic into your store.

There are advantages to being a local company that markets locally, versus a large national chain that scales its marketing programs out. And beyond the formal programs we create, there is always the true local connection. The local retailer lives in the community, eats at the same restaurants as customers, has their kids in the same schools, votes in the same places, etc.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

The ability for the sponsoring coalition to share customer data with their respective merchants is key.

Sandra Gudat, CEO, Customer Communications Group

There is a lot of potential. There are a lot of pitfalls too.

I'm not sure whether officials have to be a part of the equation either as there is decent commercial opportunity here.

However, this will require leadership, and it will require a very customer or community centric approach. Many loyalty propositions focus mostly on acquisition or switching and sweating the asset for short-term gain. I don't see those approaches succeeding here.

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Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

To make this work locally the coalition has to be strong and determined to stay the course. Success will not happen overnight. Word of mouth has to flow. The rewards have to be satisfying.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Bill makes a good case for localizing loyalty, but I don't fully agree with the statement "...the potential to level the playing field between local merchants and their national competitors." National competitors that create effective loyalty programs have a bunch of resources to make it work. Where will that come from in a local consortium? An obvious answer might be a local or regional chamber of commerce, but I don't believe that they have the skills or manpower to make a loyalty program stick.

It seems like something that will peak quickly and fade as users expect more than the local aspect to drive interest and utilization.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Management of such a coalition through a chamber or local government body that is designed to promote commerce will fail. The vision and expertise to advise and counsel as well as manage the 1:1 marketing advantage that this type of insight provides must come from a service provider. What Ian Percy appears to be working towards is very intriguing.

A coalition type APP that provides entree to the network of local merchants in a given community seems to have merit. The social media, tools and applications that would "extend" the reach and engagement I am a bit skeptical of. It is not sustainable.

Commitment to leveraging the data/insight with personalized offers/communications. A clear plan with commitment by the merchant coalition to proactively promote (not just coupons), but exclusive events, merchandise access, additive services (home delivery, personal shopper) will generate sustain interest, participation and a perception by the user that the APP is worthwhile. Anything less it will die a slow death.

David Slavick, Director, Loyalty & Retention, FTD.com

I'm not a big fan of "social" media in the business setting, and nothing here is moving me away from that position. As Ken quite correctly points out, the second sentence of this piece contradicts the first: local stores may do what national chains are doing, but they will do it without all the resources the latter have...that's hardly leveling the playing field (and notice who is following whom here).

'notcom'

SM can definitely get the word out faster and more specifically to the local customers. It can also be a great tool to build customer loyalty. That said, it's worth remembering that the customer is primarily interested in the merchandise, the price, and the shopping environment. Without these fundamentals, SM is just a faster way to turn off the customer.

Bill Emerson, President, Emerson Advisors

Many people, especially those who live where there is at least a relatively engaging local shopping district, are tuned in to the plight of the local retailer. We all know what they are up against and at no time is that more apparent than during the holiday season. Most of us also recognize the value local retailers provide in our communities. We see them stepping up to support our schools, social services, sports teams, etc., and we know that buying from them also helps our communities. In turn, most of us want to reciprocate by supporting them—our local business owners.

Social media efforts that emphasize the full value equation and drive repeat business is essential. Social Media tactics that reward bargain hunting mentality, like Groupon, are not going to grow a loyal customer base.

The coalition model is ideal in that it drives and rewards adopting a behavior—shopping locally. This will benefit all in the coalition. They are, however, harder to establish and manage.

Kurt Seemar, President, Analytic Marketing Innovations

There is truly no limit to what these tools can accomplish...with a collaborative, cooperative process in place. If you have a "Program Champion," that person or people can educate, energize and provide ongoing incentives to the local participating merchants. This will not happen by itself. If you build it, that doesn't guarantee success.

Get some merchants to be vocal advocate and share their stories with other merchants. Many independent retailers and manufacturers are making this happen.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

The ecosystem of local retail needs to be led by the most dominant player to help the concept succeed. Shopping malls with retail outlets of multiple brands can initiate coalition programs. Even large co-operative housing societies can run such programs. As with any new concept, initially a few early adopters will come forward to try. The nature of customer profiles with respect to tech-savvyness and online shopping history can become key factors for success.

Chandan Agarwala, Manager - Strategy and Research, iGATE Corporation

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