The 80’s were fun, but your loyalty program called and said it’s dying for an update.

The evolution of loyalty programs over the course of several decades has impacted how the airline, hospitality, and restaurant industries create relationships with their respective customers. To date, we have seen these industries move along a trajectory from paper to electronic stamp cards; basic point systems to tiered loyalty programs; to leveraging compiled customer data to emotional engagement and integration. The airline industry led the pack in the late 1970s, followed by the hotel industry in the 1980s, and then the restaurant industry in the 2000s. These loyalty programs across all sectors have built relationships by rewarding customers for their purchase behavior.

While other industries have moved programs toward more sophisticated use of the data gained from operating loyalty programs, convenience store programs in general seem to be stuck in the 80’s in terms of how data is leveraged to connect with customers in a relevant, motivational manner.  The majority are offering programs that are centered on CPG promotions funded by partners and offering fuel rewards in the form of cents off the gallon.

It’s time to shift the central focus from “Category” to “Customer.”  To create a bond between the brand and its customers and maximize the impact marketers have on revenue creation, market segmentation is essential. Within any customer base, there are segments of people with shared interests and motivational factors. When marketers develop insights into their customer base that reveal common motivators, the result is a powerful, profitable marketing strategy.  Simple segmentation methods begin with demographics, preferences, and behavioral traits. Who are they, how older are they, what is triggering their trips, how frequently do they purchase, and what exactly are they purchasing?

Beyond simple segmentation, creating segments of like-minded lifestyle segments helps the brand further deliver relevance and convenience to its customers. For example, here are three examples of customer groups you might see in a given week.

1. The Truck Driver. The blue-collared, pickup-driving guy earning a low to medium income. He averages 300 miles per week, so he tends to be a frequent customer. He’s in early in the morning for coffee and Slim Jims and is back again early in the afternoon to tank up before heading home for the day.
2. The Soccer Mom. Her mini-van is filled with kids, carpooling to and from practice. There’s a single breadwinner in her home. She’s cost conscious yet relies on convenience. She’s a non-smoking mother who will likely be interested in prepared meals as she attempts to feed her kids on the way to or from practice.
3. The Professional. Professionals typically earn medium-to-high incomes and work consistent, set schedules. Always on the go, they may drop in for their morning coffee and breath mints on the way to work or for a quick on-the-go lunch.

By identifying your market segments, like the ones above, marketing messages, offers, and message cadence can be tailored to each segment based on their common needs and behavior patterns. The result is greater audience reach, more revenue, and higher profitability.

When the message and offer is not targeted, the brand erodes profits by sending offers to those who would have purchased the item anyway. In addition, relationships also take a hit when messages are irrelevant to the recipient – unsubscribe rates soar. As an example, a male colleague of mine, in the past two weeks received a message directed at busy moms and another one directed at nurses. He’s neither and subsequently unsubscribed from the brand. When customers subscribe, they become a valuable asset to the brand. With each unsubscribe, the brand loses a tremendous potential for future revenue.

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 “The Evolution of C-Store Loyalty: The Past, Present, and Future” and learn more about what the future of loyalty looks like for convenience stores.