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Loyalty Programmes
Published: 12 Jun, 2009
The recent slow- down in retail sales has prompted many garden centre owners to look for ways to increase, or even maintain, sales levels and see loyalty programmes as the answer.
John Russell writes - Like all programmes and schemes, their effectiveness depends on how well structured they are, how well they are implemented and maintained, and how well the results are monitored. They should not be seen as the panacea to our retail woes, but part of the total mix we can look at to drive our businesses.
Basically loyalty programmes focus on encouraging existing customers to shop more often, spend more, and remain loyal shoppers. A well constructed programme will provide benefits to both the customer and the garden centre.
There are two main ways to offer benefit to the customer:
- various discounts or price benefits, as a reward for continued loyal support.
- added value benefits, such as newsletters; exclusives, short supply, new products; invitations to special events; preferential advance ordering; out of hours shopping; free subscriptions to magazines; etc.
The garden centre should also benefit in two ways:
- by encouraging customer loyalty and getting repeat business.
- more sales from focused marketing.
But do these benefits always accrue to both parties? Research would tend to suggest not. If not, why not? A lot of it depends on what I mentioned above – the structure of the programme and how it is implemented.
Most of all it depends on how good the garden centre is. A garden centre loyalty programme, no matter how good, is not going to influence customers to shop there if the garden centre is only average , or below, compared to its competitors.
Quite often there will be several garden centres in town, all of similar quality and substance, all offering similar loyalty programmes. Customers therefore end up belonging to more than one of the loyalty programmes, so no benefit accrues to any particular store.
How do we overcome this? You either have to be the best garden centre in town, or offer the best loyalty programme. Preferably, you should be the best garden centre AND offer the best loyalty programme. Being the best garden centre in town, of course, involves many aspects, too many to talk about here. But there are three things you should make sure always happen in your store.
One is to maintain consistency in your level of service – ensure staff understand systems and policies and that every customer is treated the same on every visit, every day of the year.
Second, never run out of your core product range – those products that your regular, local customers look for day to day. If you don’t have these, they will go somewhere else.
Thirdly, communicate with your customer database regularly, in an informative and friendly manner that keeps your name right under their noses – at least once every thirty days. I know of one garden centre that does this every week!
How can you get the best from your loyalty programme?
First, structure the programme in a way that gives significant perceived benefit to customers:-
- Record purchases in bands of say $20, and give discounts in the form of “Free Goods” vouchers. This significantly reduces the
cost to the garden centre while still giving the perception of good value to the customer. - Display and highlight with signs a limited selection of product as “Loyalty Card Members Only”, at a reduced price. Although this may be quite a large discount it will only apply to a limited number of products. Thus the cost to the garden centre is much less than an across the board discount. The Loyalty Card member will see the immediate benefit to them, plus it will encourage other customers to sign up to the scheme.
Second, Structure the programme so that it is affordable, sustainable, and manageable:-
- Do not give flat, across the board discounts. These may appear simple and easy to operate, but the cost is a cash cost and is unlikely to be sustainable. Benchmarking shows that the average garden centre is achieving a net profit of only 5% of sales! Discounting will further erode this.
- Always give price benefits as a voucher for free goods to be redeemed on later visits.
- A large discount on a few items for loyalty programme customers costs less than across the board discounts.
- Work with suppliers to share the costs of free goods or benefits.
- Communicate with your loyalty customers by email – this greatly reduces costs by eliminating postage, paper, envelopes, and printing out of the equation.
Thirdly, provide other meaningful benefits with added value:-
- Invitations to exclusive events.
- Out of hours shopping – e.g. pre-Christmas
- Have a weekly draw of loyalty members who have shopped during the week, with a meaningful prize such as a glazed pot, shrub of your choice, free consultation etc, for the winner.
- A quality newsletter, sent regularly via email, to your loyalty member database.
Last, but by no means least, you must monitor and measure the programme in terms of benefits versus costs to the business. Many 
garden centres have embarked on a loyalty programme with generous discounts only to find that their bottom line net profit disappeared.
One garden centre with sales of less than $1 million gave away $73,000 in loyalty programme discounts and benefits! On top of this were the costs of set up and administration. Clearly this was unsustainable.
In other cases, the costs of printing and mailing newsletters to their large database became prohibitive. Even large companies, in other retail fields, are finding poorly thought out loyalty programmes are not working, and are exiting them.
Cancelling your loyalty programme, for whatever reason, is not going to win you points with your customers. It may even upset them so much that they become disloyal and go elsewhere.
In summary, to ensure your loyalty programme works for you, structure the programme so that the total cost is sustainable.
Drive the programme with links to your internal marketing, and by extending its value through such things as events, newsletters, and weekly prize draws.
Have the best loyalty programme in town.
But perhaps the best loyalty programme of all is to be the best garden centre in town. If you offer the best range, the best quality, the best service, the best value, the most convenience, the most inspiration, in the most pleasant surroundings, why would customers go anywhere else?
