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Specialty retailers are always looking for ways to make customers more loyal and stop them from looking elsewhere for swimming pool and spa/hot tub products. One way of doing this is to establish a loyalty program that builds longterm customer relationships — a key part of any business plan.
But how do you make a program enticing enough to motivate customers to return and make in-store or online purchases? Many pool and spa retailers do not know where to start or are afraid of creating too much work, or worse, creating unnecessary expenses that cut into overall profits. There are really just three key items to determine when building a customer loyalty program: (1) Define the business goals, (2) determine the structure of the program from what items (i.e. products, services) will be included to how the points will be redeemed and lastly, (3) figure out how the program will be integrated into existing accounting and point-of-sale (POS) systems.
Business goalsThe structure of the program should reflect the business goals. For instance, many pool and hot tub retailers state the first reason for setting up a loyalty program is to keep customers from buying commodity pool/spa supplies from big box stores. That was the primary goal for A&M Corsons, a six-store pool supply operation in Phoenix, Ariz. The retailer set up a customer loyalty program when it discovered customers were picking up chlorine tablets at their local grocery store. The goal was to get customers to think twice before doing that, because A&M Corsons would now offer them a benefit to purchase these items at the specialty pool retailer.
Other retailers might have different primary goals. For instance, another retailer might be interested in establishing a loyalty program to expand their customer base by reaching out to a different geographic region or because the company has added a service department and is looking to grow that business.
Structuring the programRetailers can make the loyalty program as simple or complex as they want. Most will agree, however, the simpler it is the better it will work. For instance, most consumers are already familiar with the loyalty programs offered by their local grocery store and/or gas station; therefore, modeling the program after one of these simple platforms can help prevent consumers from becoming frustrated or confused.
Determining which items are to be included in the loyalty program is key. For example, many retailers will allot points to ‘recurring’ sales items (e.g. chemicals), but exclude one-time, large-ticket items such as hot tubs. A&M Corsons opted for a simple, three percent discount that is rewarded to customers once they reach a $350 threshold (this is equal to $7.50). Retailers should be sure to pick a discount level they are comfortable with when starting out. For example, a retail store with average margins between 30 and 40, or even 40 and 50 per cent, may not want to offer more than 10 per cent to keep their customers coming back regularly. A loyalty program should increase the company’s sales, not make it less profitable.
It is important to refer to the company’s goals when determining what items/services to include in the program. Some businesses do not award points for service work or other larger shop-related jobs, while those retailers looking to expand their service departments will. Now that many big box stores are carrying chemicals, hot tubs, gazebos, and other industry-related products, smaller specialty retailers need to capitalize on the value-added benefits they offer such as a knowledgeable staff and differentiated warranties. These value-added benefits should be touted when promoting the loyalty program.
System integrationOnce the business goals and structure (i.e. how points can be earned and redeemed) of the loyalty program has been determined, it is then time to figure out how it will be integrated and implemented within the company’s existing accounting and POS system.
One way for retailers to maximize their loyalty program is to figure out ways of reminding customers of where they stand and what they can obtain with the points they have earned. The receipts printed from your POS system should indicate both the total number of points earned and possibly what awards can be obtained from accrued points.
If you don’t have a business management software program that can automate a loyalty program, it is best to keep the program very simple by using punch cards such as ‘buy 10 get 1 free’ on a specific product, as consumers are used to these.
Retailers that do not have business software that can easily track customer loyalty accounts will find it very time consuming to do so manually. Some POS software programs will do this automatically, so all the retailer has to do is select the program type and pick the items that will be included in the loyalty program. A&M Corsons has had a customer rewards/loyalty program in place for almost five years and they have used both manual and automated approaches.
They originally started their program within QuickBooks and found it worked well as it was built-in. The best part was it printed the customers’ points on their receipt, making it transparent to the customer. However, at one point they operated the program manually as well by tracking everything in Excel. In their manual system, they pulled reports into Excel and combined the data with sales information and then entered the credits back into the system.
Redeeming loyalty pointsMost consumers like to accumulate points on every purchase; some may even get upset when certain items are excluded. Keep in mind, the ultimate goal is to encourage regular in-store and online visits; therefore, successful programs tend to have larger point figures that equal a cash value (recurring) or discount amount.
How the loyalty benefit is provided is an important consideration. For example, a recurring loyalty program can be set up to provide the customer with a $25 credit in the system once 250 points have been accumulated. Or, by using a discount-based system, where the balance is accrued in a quarter or calendar year, the consumer can use the discount in the following period. For instance, if a customer obtains 250 to 300 points in the first quarter, they will get a 10 per cent discount in the second quarter, or if they earn 300 to 400 points, the discount increases to 15 per cent, and so on.
It is important the loyalty program includes some ‘lag time’ between when the consumer reaches the point threshold and when they are permitted to redeem the points. This is vital as retailers do not want to have someone purchase a product, use the reward, and then bring it back within the 30-day return period. To account for this, many retailers set their program’s provisions to not apply any points from recent purchases to customer accounts until after 30 days.
Rather than allowing customers to continually accumulate credits in their account, retailers should put an expiry date on them (e.g. six months to a year) as this eliminates accounting system problems, especially when a one-time customer purchases a high-ticket item but never returns. Having an expiry date also gives retailers a reason to reach out to these customers and invite them to the store to redeem their points before they expire.
Finally, loyalty points can also be used as a great customer service tool. For example, should a retailer want to compensate an angry customer, they can offer them an extra 100 loyalty points. This offer can fix a difficult situation without costing the retailer any money. This can be a great customer service tool for employees to keep in their back pocket.
Signing them upRetailers often hold ‘special events,’ ‘open houses,’ and/or ‘sales events’ where they heavily promote their loyalty program to add new customers into the database. Some even offer incentives for signing up by giving customers a 10 percent discount or an additional 100 points, should they commit that day. Retail staff should be well-trained on the loyalty program so they do not oversell any of its benefits or misrepresent how it works. In addition, customers should not be automatically enrolled without a verbal and written explanation as well.
The loyalty program should be promoted using a counter card (placard) set up at the POS. The checkout screen should also prompt all employees to ask the customer if they want to become a member of the program. Some POS systems will even allow retailers to use their customer’s existing loyalty cards (e.g. a grocery store keychain barcode) so they do not have to provide a new card to the customer, as customers crave simplicity and most do not want to carry another card on their keychain.
Tracking the resultsTo ensure the program is meeting the company’s business goals it is important to monitor and check the results frequently to ensure it is working. Compare results before and after the loyalty program was implemented.
Retailers should also take a quick, periodic look at their top 100 customers to see if they are visiting more often and purchasing more since the loyalty program was implemented, in addition to buying the products the retailer is trying to move.
Cerah Gray is a software support specialist at Evosus Business Management Software, a program designed specifically for the pool and spa industry. She previously worked with A&M Corson’s in Arizona can be reached via e-mail at email@example.com or by visiting www.evosus.com.
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