Reward Good Customer Behavior, Don’t Entitle Them

Reward programs have been around for years. Airlines, hotels, and restaurants adopted these programs decades ago. Convenience stores, on the other hand, seem to prefer club programs and simple promotions like 3 cents off per gallon or short-term, low-value programs.

At a high level, mass promotions are a great business strategy, driving more visits and spend. Most of the time they are also paid for by the CPG vendors, so the cost of running these promotions is minimal to the convenience store. Mass promotions and eblasts get brands quick wins and compel customers to make purchases with the incentive of getting an item for free.

Most mass eblast promotions are the standards “Buy 1 coffee, Get 1 coffee Free.” Let’s think about this from the customers’ point of view, a very frequent customer who comes in every day for their morning coffee before they head off to work could get a free coffee just like the customer that has maybe come in once or twice would be able to get the free coffee with their purchase. The fact is, the customer that comes in every day would have been willing to purchase that cup of coffee at full price. You are essentially rewarding the frequent customer with a free coffee for not changing their behavior or driving an incremental visit or spend and eroding the revenue you did get from driving the customer who has not come in as much and did change their behavior.

In addition to simple mass promotions, many convenience stores run basic rewards programs that offer members 3 cents off per gallon of gas. While this is a great reward to give customers who sign up for reward programs these promotions are given to all customers without them needing to earn this reward by taking other actions such as purchasing items in the store or visiting multiple times. Is this truly a reward or is it more of an entitlement? Is this program driving any different behavior from the customer or is it just something they always know they will get when they stop into your store?

What if instead of giving away these rewards and asking very little of the customer in return, brands were able to change their behavior and drive incremental visits and spend? Rewards programs are a great way to target certain customers and compel them to take an action in order to receive a reward. By using a rewards program your brand is able to capture more relevant customer transaction data and leverage that data to connect with customers in a relevant and motivational manner.

Look back at the “buy 9 coffees, get 1 free” example. What if you knew which customers were coming in every morning and purchasing coffee? The customer who comes in every day for their morning coffee does not need this promotion because they are coming in anyway and paying full price. Essentially that one free coffee is taking revenue away from the brand and not changing that customer’s behavior.

By leveraging customer data, this promotion could be targeted to the customers who are purchasing coffee but not as frequently and maybe could use some motivation to come in. Using segmentation to target the customers who are not coming in as frequently and encouraging them to do so in order to receive that one free coffee is rewarding their good behavior. It is important to remember to always reward the customers who change their behavior and drive incremental visits and spend instead of entitling those customers who have not.

Leveraging customer data and segmentation is just the beginning of the conversation. In a recent webinar, Paytronix discussed what convenience stores need to do for a successful future. Click the link to watch the webinar “Dos and Don’ts of Successful Reward Programs” and learn more about leveraging customer purchase data to drive more revenue.