Not long ago I made a trip over to the local Radio Shack to purchase an electronic plug for my cassette recorder.  As I paid for my item the retail clerk asked me for my name, address, cellphone number, birth date, and even my email address (something every retailer should be asking for today!).

Although I felt a twinge of discomfort giving out my personal information, I went ahead and gave it to him and went on my way.

Driving home I reflected on Radio Shack’s checkout process and was reminded of the power of information gathering at the point of sale. I had just given Radio Shack three ways to contact me, not to mention, information on what I had purchased. In the hands of a skilled marketer, this information is powerful.

Small businesses should be looking for low cost, high impact marketing

The recent economic slowdown has brought increased competition to small businesses. And with that, retailers across North America have described their sales as “flat.” Small businesses should be looking for low cost, high impact marketing activities to drive prospects to their business.

One of the most effective and cost-efficient ways to add profits to the bottom line is the use of database marketing, which uses information collected at the point-of-sale.

Using personal data, purchasing data, and contact information from a customer database, a spa and pool retailer can make offers to customers for complimentary products and services and engage in loyalty marketing activities.

Database marketing has four key elements,

(1) gathering customer data,

(2) building a customer database,

(3) creating targeted offers for specific customer groups, and

(4) tracking results to improve responses.

• Step 1: Gather customer data. The easiest way to begin this process is to develop a simple form for customers and salespeople to fill out every time a customer purchases a product or service. Include personal information such as names of spouses, children, profession, and birthdays, as well as, product information such as manufacturer, make, and model.
• Step 2: Build a database to store your customer information. Start simple using off-the-shelf software such as Microsoft Access. Later on you can begin to modify the database to either include different types of information or to print special reports.
• Step 3: Start sending offers and personal messages to your customers. Don’t wait until you have a large mailing list. Begin sending notes to customers right away thanking them for their purchase, to celebrate birthdays, share holiday messages, and inviting them to come in and take advantage of special offers.

There is an old saying that goes, “Business goes where business is invited, and stays where it is appreciated.” A personalized invitation to drop by the store to take advantage of a specific incentive is sometimes all that is needed to keep your customers coming back into the store.

Instituting a program of personal, hand-signed notes that coincide with birthdays or special events addressed to the customer’s significant other that offer gift ideas, can have surprising results.

• Step 4: Track the results of your database marketing efforts. By knowing who you sent offers to and who responded will help you identify your best customers, allow you to more effectively allocate your marketing dollars, and help you tweak your marketing pieces to get higher response rates.

What Information Do I Collect?

It’s important to determine in advance the type of information to collect. To do this, make a list of common special offers you might be presenting to your customer.

For instance, if you sold a product in the health industry and many of your customers have lower back problems you could joint venture with other businesses to develop special promotions on products that help to relieve lower back pain.

To capture the fact that your customer experiences lower back pain, simply place a check box on your form that says, “Do you experience lower back pain?”

If your customer has small children, consider presenting follow-up offers for products targeted for small children. Imagine being a consumer and receiving a letter from your business with an enclosed birthday card for little Joey who just turned eight years old and a discount offer for a basketball hoop or other relevant products.

You think to yourself, “What a great gift. Joey would love that!” This is the power of database marketing.

Collecting Accurate and Consistent Information

Database marketing all starts at the point of sale. Without accurate, complete, and consistent data this type of pinpoint target marketing can’t be done. To ensure that your information is accurate and consistent, help your customers fill out the data collection form and review each information form for completeness.

You might experience a hesitancy from your customer to give out all their personal information, similar to how I felt at Radio Shack.

However, after explaining that the information will only be used to send out special offers during important events, is completely confidential, and will not be shared with anybody else, you’ll find that most of your customers won’t have any problem giving out their personal information.

Cost Effective Loyal Customers

Marketing to your current customers is one of the most effective and cost-efficient strategies you can do to reduce your marketing costs, enhance your customer / retailer relationships, and produce long-term loyal customers who, over a period of months or years, become your biggest source of referrals.

Thanks for the tips David. Today even the CRM technology to hold and manage these customer details is affordable and easy to set up. In fact small retail businesses with nothing in place have an easier time than Corporates with their complex, legacy databases. To get started, email zn.oc.gnitekramlatigidnull@nivek.

However, creatively using data about customers can contribute to the customer’s experience in so many ways.

That doesn’t mean a birthday card should be sent to every customer because data shows that below-average customers know the sentiment is hollow

For example, there’s nothing easier than sending a birthday card to your best customers. That doesn’t mean a birthday card should be sent to every customer because data shows that below-average customers know the sentiment is hollow; they know they don’t shop enough to warrant a birthday card. In addition, below-average customers spend too little anyway and the result is a negative ROI.

But when you send a creative, relevant, personalized birthday card with a gift that has no catch to a good customer, it pays dividends in relationship building that goes beyond that day’s transaction.

Data from a major retailer in the US showed that their best customers (i.e. top 30%), when they redeemed their birthday gifts, spent even more. They purchased things they normally wouldn’t as a treat for themselves and they bought more than usual in gratitude. They walked the store, discovered new merchandise and ‘connected’ more.

Real-world Case Studies

UK supermarket giant Sainsburys talked to each of its 4.5 million ‘Nector Card’ customers with an image personalized postcard mailer right on their birthday. Printed digitally with a volume of about 400,000 pieces each month.

I. The Task: Customer Care

• Gift vouchers are a good means to attract customers and are frequently redeemed.
• Sainsburys sends a mailer to each known customer, right on his or her birthday – the information about birth dates comes from the customer database.
• The mailer includes a voucher with one of the customer´s favorite products as birthday gift. These customer preferences are taken also from the customer database.

II. The Features: Outstanding Personalization

• Image personalization
  The Sainsbury´s birthday mailers impressed clients at first sight using image personalization on the front cover. Each customer´s name was integrated in a photo design in a highly realistic way. Using the latest variable print technology a highly emotional and personal look could be created, that showed customers at first sight that Sainsburys cares about them.

• Full document customization
  Additionally, each mailer was adapted to each client, not just by the customers name in the image but also by using different fonts for different age groups and by printing in an individual product as a present, including both product image and text. Also an individual e-voucher number allows fast and simple redeeming at the cash desk. The redeeming is tracked and the data are automatically sent back to the loyalty program database.

III. The Results: 40% Conversion Rate!

• The redemption rate of the coupons has risen to a stunning 40%!
• Based on the experience of previous campaigns, the return-on-investment increased by 25.5%, revenues leapt by 110% and gift redemption by 39%.

It’s already started Downunder

Myer, a major retail chain in Australia has reportedly been monitoring the Sainsbury experience. Just recently they announced their decision to slash their traditional mass advertising budget, instead sending targeted direct mailers to their 2.7 million Myer One card holders. (Myer gold customers should expect birthday promotions to start soon).

It’s a smart move which should save them millions in traditional TV and Newsprint ads, whilst paying huge dividends at the cash register. Read more about Myer’s plans here

Rafi Case Studies

For yet another highly response birthday-related case study we liked was out of Israel and outlined by Rafi Albo in his workshops here late last year. Check out our 5 min Rafi WOW Factor Video

Untapped Small Business Opportunities too

All this isn’t just for big budget retailers. Small business owners have immense opportunities by building up a database and better tracking their clients purchase patterns. Restaurants in particular have the biggest opportunities. Click here for some ideas.

Don’t forget that the aim here is to build up a history of your customer behavior and preferences. Finding out how they want to be communicated with is important too. If they prefer to be contacted by email or SMS text message, that’s fine. Often using more than one channel provides the best results. Ensure your marketing strategy and infrastructure allows for this.

The real purpose of a loyalty program is not points or rewards or plastic cards or discounts – These are just means to an end…

Loyalty programs are there to help discover who the best customers are and track their behavior, find out their preferences, cater to those preferences and keep two-way communication going. The result should be an ever-stronger relationship with customers that increases frequency, per-cheque revenue, marketing efficiency and competitive advantage.

Most businesses lose between 15 and 20 percent of their customers every year.

Most businesses lose between 15 and 20 percent of their customers each year. Retailers lose even higher percentages. From those loyal customers who remain, however, the profits can be significant. The acquisition costs of new customers, particularly for a small retail store, can be very high. Who pays these high costs? It is not the casual transaction buyers – here today, and gone tomorrow. They rarely pay for even the cost of their own acquisition.

The real payoff comes from the loyal customers who, over a period of months or years, move up from being customers to becoming clients and even advocates. The goal, therefore, is to reduce acquisition costs – largely mass advertising – and spend the savings on retention – loyalty building communications.

What Makes People Loyal?

What is it that makes people loyal to a particular retailer? Is it the prices, the quality of the products, or the way that they are treated by the store?

For discount stores, the attraction is price. There are always transaction buyers – people who think only of price. They read the ads and visit stores only when what they want is on sale. They have absolutely no loyalty. If you are not a mass-market discounter, you cannot make money from such customers. Rather than kow-towing to these ingrates, it would be better to provide them with the telephone numbers of your competitors and invite them to take a hike. For a regular retailer to compete with a mass discounter on his own turf – price — is almost committing suicide.

Product quality is important in customer retention, but only up to a point. When I was growing up, in the thirties and forties, we lived in New Canaan, CT. If we wanted quality products, we would take a day’s journey to New York where we could visit Bloomingdale’s, or Altman’s. Those days are over. I doubt that anyone in New Canaan is traveling to New York City today to shop.

American retailing has become so advanced that most customers are within easy driving distance of a large mall or shopping center with a wide variety of stores having anything that they could conceivably want to buy. For every store featuring Hickey Freeman suits, there are a couple of others not too far away who have Charles Jordan or Joseph Abboud. It’s not the products – it’s the relationship with the institution and the sales people that keeps people coming back to a fine store.

Does Database Marketing Work?

It is clear that in many companies, database marketing is working and producing customer satisfaction and profits. It is also obvious that in many cases, it is not working, and that companies are wasting their money. Some marketers have been willing to share their data, so that the state of the art in our industry can be enriched.

One of these is Max Grassfield, owner of Grassfield’s an upscale men’s clothing store in Denver. Max founded the store 35 years ago, and is still at it. In this period of time, he has not only become a great retailer, he has developed into a skilled database marketer.

He calls his system "Invitational Marketing™". It is based on the proposition that "business goes where business is invited". Max issues personal invitations to his store to a carefully selected group of individuals in the Denver area. His method works. In this article, we will cover the techniques that Max uses, the theory behind his methods, and proof that it is working.

Why is Grassfield’s Unique?

So, several years ago, Max Grassfield asked himself, "What can we do to make Grassfield’s unique?" The answer, which he evolved after much study, research, and effort was to develop methods to know his customers " better than the other stores know their customers".

For the last ten years, Grassfield’s has been collecting a database of information on its customers, who voluntarily provide it. Originally, the data included name, address, telephone numbers, sizes, birthdays, and the wife’s name.

He discovered that wives are often heavily involved in their husband’s clothing purchases. He is right. In my case, my wife Helena buys all of my clothes, so I understand Max’s thinking. Max collected information on all his customers – cash, check, and charge card – not just those that have opened a Grassfield charge account.

He evolved a group of regular written communications with the customers on a one-to-one basis which use the customer’s first name or nickname (as the customer prefers), their sizes, wife’s name, product preferences, and references to what they bought in the previous season.

Most communications are programmed to include messages designed only for the particular customer addressed: "I’ve been keeping my eyes on the 44 long suits…" Every letter is personally signed by the customer’s salesman who he met while visiting the store. For personal notes, he created a special half sheet (5 ½" X 8 ½") letterhead bearing the Grassfield’s two-color logo in an A-2 envelope. To display the Grassfield’s merchandise, he developed an oversized (6" X 9") glossy photo postcard in full color. The text for the letters and post cards is printed on the store’s laser printer.

Last fall he sent a wave of three different oversized postcards in one month intervals, to 4,100 regular customers. Each card greeted the customer by name, and was signed by his salesman. In November, he sent a special mailing exclusively to the wives on the database, which included eight color photographs on gate-folded heavy stock.

The Results

The September letters offered $35 off on any purchase of $100 or more. There were 117 respondents (a 2.85% response rate) with an average sale of $451. It was an outstanding success. The final cost per piece mailed was just 48 cents including postage. For a $1,968 investment, he brought in $52,767 in sales. Compare that with the cost of full page ads which others are using to attract that type of business!

In October, the messages featured the fall suit collection, referring to the customer’s size as well as his salesman’s personal day off: "Dear Arthur: With you in mind, I’ve kept my eye on 42 Longs…I’d like to show them to you. I’m here every day but Tuesday." The P. S. offered "$50 off your purchase of a shirt and tie when you buy any fall suit." The results: a disappointment. Thirteen transactions (0.32% response rate) with an average sale of $805 and a total volume of $10,470 – again for an investment of about $2,000 in communication costs. Not everything works.

The November mailing to the wives was very carefully prepared. "Dear Connie (or Mrs. Rogers if she prefers that):..I have all of Fred’s sizes on file. ..All you have to do is select your purchase and we’ll handle the rest." Grassfield’s offered to open a special charge account in her name, gift-wrap her selection at no change, and included a $20 gift certificate. The letter was mailed to three thousand wives. Ninety eight responded (3.27%) with an average sale of $324, generating a total volume of $31,728. The total November sales gain was 4% over 1994 which in turn was 20% over 1993. A great success.

The October disappointment, however, resulted in an overstock of men’s suits which had to be dealt with. In December, Max selected eight suit sizes that were overstocked. Using the database, he drafted a special note to each customer whose size fit one of these eight groups. The incentive was $100 off any suit in that inventory, and $200 off the high-end Hickey Freeman suits. He mailed 1,164 invitations and sold 56 suits in 39 transactions.

The average sale was $1,110 with a total volume of $43,307. The average mark-down per transaction was only 15%, far less than if he had waited for the annual January sale. In a December which was reported nationally to be a disappointing one for retailers, Grassfield’s reported a sales increase of 28% and closed the year with an annual sales gain of 7.2%.

How to Acquire New Customers

Maintaining loyalty is important, but you still have to acquire new customers if you are going to stay in business. From local sources, Max gets a regular list of new homeowners in the Denver area. Based on study of his customer base, he selects only those moving into homes valued at $200,000 or more. Twice a month he mails a welcome letter with a $25 gift certificate. The letter goes this way:

Dear Mr. McKinley:

I’m told our kind of store is an endangered species, soon to be driven out by the big stores. I don’t believe it. I think there’s still a place for a store that knows you by name, keeps track of your sizes and style preferences, and keeps you informed of special events that will save you money.

What do we carry? Suits and business attire by Joseph Abboud and Hickey Freeman, sportswear by Axis and Barry Bricken, shoes by Cole Haan and neckwear by Robert Talbott. And there’s more…lots more for you to discover on your first visit.

The incentive? The enclosed $25 gift certificate. Come spend it in our store as if it were cash. No strings attached. We’re confident that when you do, you’ll sense the qualities that have kept Grassfield’s customers loyal for thirty-five years.

Cordially, Max Grassfield

P. S. In case you’re unfamiliar with the area, there’s a map on the back of the certificate.

This letter was mailed twenty times over ten months. Over the ten months, he sent a total of 6,161 letters. One hundred and eighteen homeowners (1.92%) showed up to redeem their certificates, spending a total of $16,505, for an average sale of $139.88. But, more important, many of these people came back for a second visit. The database records all purchases. In subsequent sales from some of these 118 customers, Max realized $9,340 additional purchases – and, of course, that is not the end of the story. There will be many more purchases from some of these newly acquired customers in the future.

Every one of the 118 newly acquired customers received a welcome letter, a brochure with the business card of their salesman. The customer services featured include "emergency tailoring (in our trauma center) while you wait, and without charge".

There is no Grassfield’s plastic card. Customers who have opened an account just have to say, "Charge it" and walk out with the merchandise. They don’t even have to sign a charge slip.

If we sum up the ten month’s experience, Max has spent $2,957 to acquire 118 new customers who have spent a total of $25,845 thus far. If we can assume that Max has a 40% profit margin on his sales revenue, he has made a profit of $10,338 on his investment of $2,957 – a return on investment of 350% on his acquisition expenditures. Compare that with most retailers who are lucky to break even on new customer acquisition.

Surveys: A Disappointing Test

In addition to the regular acquisition mailings over the ten months, Max tried two test mailings of a special new customer survey which accompanied the invitation. He sent out about a thousand surveys. The survey was not a success. It did not improve sales as well as the simple $25 offer. He did get a 17.8% response rate to his survey, however, and learned some valuable information. Sixty nine percent of the respondents shop for men’s clothing several times a year. Almost half of them buy two outfits per shopping trip. Sixty four percent take their wife or a friend along to help them with their selections. Sixty five percent have never established a relationship with a specific salesperson at the store. Most of Max’s respondents are between 35 and 44 years of age and have an income between $100,000 and $150,000.

Finally, Max regularly mails reactivation mailings to lapsed customers who have not shopped after a period of time. The database dictates who gets these messages.

What it all Means

Max is able to measure the return on investment for each project. He is in a position to determine the lifetime value of his 4,100 customers. He has the data needed to append Recency Frequency Monetary (RFM) codes to his customer base. He can determine who are his best customers so that he can give them extra special services and recognition. His database has become a powerhouse of information that he uses to generate customer satisfaction, loyalty, and repeat sales.

Max Grassfield’s experience shows us this: database marketing is not just something for American Express and American Airlines. It can be made to work well for a small retail store. It is possible to make extremely profitable use of a personal computer to keep track of the preferences and buying habits of four thousand customers, and to communicate with them on a one-to-one personal basis which customers appreciate, and which produces highly profitable results.

That being the case, why aren’t more retailers — both large and small — doing what Max has been doing for the last couple of years? It’s not because they haven’t read about it. This article you are reading now is certainly similar to others that you have read elsewhere. What is the problem?

This Type of Work is Difficult

I think it is because setting up a database, and dreaming up communications like those that Max has devised, writing the software necessary to create the personal references in the letters – all of this is a lot of work. It is complex. Max told me that the program to write just one of the one-on-one letters shown here takes 300 lines of computer code. That is 300 lines to write, and debug when something goes wrong – as it always does. Max had to design the database, and see that data is constantly being collected and stored in it. The database has to be constantly updated as people move in and move out, get married, get divorced, have children, stop coming to the store. This kind of work calls for dedication, drive and a lot of imagination. It is a lot easier (but much less profitable), to sign a contract with an ad agency for full page ads in the local newspapers. To do database marketing, the owner of the store has to get religion – as Max has – and do a lot of the work himself – or find a creative person on his staff who can do it. The sales force has to play a role in these communications – signing the letters, and making suggestions for new ways to please the customers.

What You Must Do

So, you have the proof. You can see that database marketing can be used profitably to acquire customers and maintain their loyalty. Of course, we have special circumstances here. Max is the owner of the store. He has an entrepreneurial interest in the outcome of his loyalty building efforts. He has become adept at using his personal computer and laser printer, and he is very creative. He likes to collect statistics to measure his success. How can you do what Max does? I think that there are several rules you must follow if you are to be successful.

1. Build a database and develop methods for capturing customer data. Involve everyone who has any customer contacts in the care and feeding of the database.
2. Find someone very creative and put him or her in charge of developing customer communications. Provide her with a long term budget so she doesn’t have to seek approval every time she wants to try out a new communication. Shift a major part of your advertising budget into one-to-one loyalty building activities
3. Find a way to give your Director of Database Marketing the entrepreneurial drive that Max has. Make part of her compensation based on an objective measurement of her success in building long term customer relationships.
4. Educate your top management, and all customer contact personnel concerning the objectives of building up customer loyalty. Make the retention rate as well known in the company as the sales rate.

The above is an extract of an article by Database Marketing Consultant Arthur Hughes

For example, mobile phones

Having access to MMS picture messaging was not an obvious answer to many marketing problems. An unimaginative marketer may have decided to simple broadcast txt or small graphical advertisements.

But an imaginative marketer realises that each customer can be sent a unique QR/2D barcode to act as an on-screen loyalty card or coupon identifier. Telstra in Australia as well as vendors in Japan, Europe, UK and the US encourage these barcodes in many ways for vouchers, payment or rewards. read more.

[Unlike the emerging NFC options outlined below, most camera-equipped phones are already compatible to handle QR barcodes].

Coming Soon – Mobile NFC technology…

In terms of indirect uses for customer loyalty, the mobile phone presents marketers with a quick, cheap, and ever-present channel of communication that more often than not leads directly to the targeted consumer within seconds of broadcasting a message. It’s an excellent communication channel that allows consumers to send requests, receive information and transaction confirmations, receive coupons and vouchers, and even to make micro-payments (through premium rate numbers and text messages). In terms of direct uses for customer loyalty,

the mobile phone can take the place of the loyalty card, whether by means of on-screen identity numbers and bar codes or the simple use of a mobile phone number.

A number of the latest mobile phones now have both Barcode Readers as well as NFC (near field communications) chips built into them. HFC enables very close range (usually up to 4cm) wireless communication with other NFC devices (such as POS terminals or in-store kiosks). This effectively allows each consumer’s mobile phone handset to become a unique identifier, not only for payments and identity checks but also to replace loyalty cards and key fobs.

The applications for NFC technology embedded in mobile phones are growing rapidly as consumer awareness and acceptance of the technology grows. Apart from obvious applications such as contactless payments and transport or event ticketing, other uses already include:

1. Smart posters
This technology means that consumers can pick up promotional offers and mobile content (e.g. coupons, voice messages, sounds, video clips, wallpapers, ring tones, special offers, and so on) by simply holding their phone up against a promotional wall poster or billboard;

2. Loyalty card surrogacy
This means that consumers can opt to use their 2D Barcode, Tag or NFC-enabled mobile phone as their loyalty programme identifier instead of carrying a separate plastic card or keyfob – and if this is done with enough loyalty programmes, the problem of ‘plastic fatigue’ could become a thing of the past;

3. Contactless couponing
This means that consumers can automatically pick up personalised coupons or offers from kiosks and offer boards on the way into a retail store, just by holding their phone up as they walk in;

4. Peer-to-peer sharing
This enables the quick and easy sharing of promotional coupons and media content with other consumers, in cases where sharing of the coupon among friends and family in an almost viral way is desirable (for example, an open-to-all offer such as a ‘buy one, get one free’).

The Time Has Come…

A report by Impaq Group put forward some convincing arguments to suggest that the time has come for the mobile phone to replace the loyalty card. Over 30% of consumers never remember to carry their loyalty cards or have lost them. But the customer-facing elements of a good loyalty programme (i.e. clear rules, an acceptable currency, simple redemption, relevant rewards, achievable results, and flexibility) are not bound to any particular medium, so the mobile phone can stand in for loyalty cards without affecting the operation of the programme.

In practical terms it would be a relatively simple matter for almost any modern mobile phone handset to display a customer’s identifying bar code (or other machine readable image) on-screen, either as wallpaper or as a saved image or MMS message. The consumer then only needs to show their phone at the check-out to identify themselves. And it certainly would encourage interactivity, leading to additional engagement in the programme. Members could be reminded before Happy Hour promotions or other member events. They could have their points balance available at all times, encouraging them to redeem them more regularly.

In addition, catching the consumer when their interest is at its peak (e.g. being able to hold a mobile phone next to an advertisement poster to book event tickets) means that the transaction is decided upon and completed while the consumer’s desire is high. The ticket seller could then use a simple text message to remind the consumer when the event is near, and either give instructions on how to print tickets at a kiosk or deliver a uniquely coded ticket to the mobile phone for presentation upon arrival at the event.

Using customer feedback to increase loyalty…

At the same time, improved communications and CRM systems that provide cross-enterprise customer information will make it possible to enter into much more meaningful dialogue with customers while, at the same time, making it much easier for customers to respond. In order to make the transition from mass marketing to individual communication with customers, and to begin accurately anticipating customer response rates, a truly integrated customer segmentation and dialogue application (e.g. on the internet) could allow marketers to increase the accuracy of segmentation, and to develop more cost-effective campaigns for cross-selling, up-selling, customer profitability, and customer loyalty.

This kind of customer feedback should be a key part of any customer satisfaction and loyalty initiative. After all, a loyalty programme’s purpose is to collect data that helps a company respond better than its competitors to the consumer’s needs and desires, and to provide the kind of service and product offering that just can’t be matched.

This article is an edited extract from the 36 chapters of detailed coverage in ‘The Loyalty Guide III’, which is The Wise Marketer’s latest 920 page global guide to customer loyalty programmes, techniques, practices and theory. The report is available now, worldwide, for £1150 (approx. US$1995 or Euro 1495).

See TheLoyaltyGuide.com for the free executive summary, downloadable chapter samples, table of contents, online searching, and online ordering.

What’s changed over the last few years to be able to do this in colour and in a highly graphical, stunning manner. The rationale is to create a good first impression and entice the recipient to respond. This is especially vital in loyalty programs, be they sent by post or electronically. It seems to work too, since targeted, highly personalised communications obtains an average 4-5% response rate instead of the industry standard 1-2%. (Experts like Rafi Albo typically achieve over 15%)

Below are some examples of what’s possible today, giving that real WOW factor. Note these ‘named images’ are not generated individually by a human using Photoshop, but generated dynamically, automatically, often at a rate of hundreds per minute, based upon names in a simple database file.

What’s more, it’s not just restricted to direct mail and printed media, but possible to incorporate low resolution versions within graphically personalised emails, website landing pages and mobile phone messages!

Look for a lot more of this in your mailbox (paper and electronic) over the coming years.

First, start a Birthday Program

Background story from the US – Collecting birth dates is the first simple step to a building a full loyalty program. It’s all about getting to know your customers better.

Of the top 130 restaurant chains in the United States only 7 have loyalty programs to capture customer details, birthdays and generally encourage more frequent patronage.

Why? Restaurants DO fit the bill – high-frequency patronage, pre-bookings and stiff competition, characteristics shared with hotels and airlines, sectors that already have advanced online booking, retention and loyalty programs.

For the Fifth Group Restaurants of Atlanta, for example, members spend 17% more than before they joined the program. Spectrum Foods’ Table One program in San Francisco increased average sales among their 15 restaurants by 10%. And The Palm’s 837 Club is garnering a terrific return on investment.

Fix the leak!

The average restaurant loses 10-20 leads per week as the result of poor client loyalty, together with poor marketing, enquiry and online booking processes. At an estimated $100 per customer sale ($200 for birthdays), the potential loss easily exceeds a $1,000 a week for small operators and much more for larger restaurants.

Customers want to be remembered – In a quantitative study by the National Restaurant Association, 50% of table-service customers said they’d be more likely to patronize a restaurant that had a loyalty or birthday program.

So, why are restaurants missing out?

An illustrative story is told by Brian Lambert, loyalty programs manager at Rock Bottom Restaurants in Louisville. Fishbowls it seems are a big thing. You go in and drop your business card in the fishbowl. Usually the restaurant manager goes in there, gives away the free lunch, and then throws the rest of the cards away. For restaurants, names are perishable. Reservations are recorded on paper, then thrown away. Customers are forgotten.

Yet hotels and airlines have had to capture names, because the reservations were dynamic; travel plans would change. And millions of people were calling weeks or months in advance. The information had to be saved. To track this meant it was essential to have a place to store all these names and contact information electronically. Hence, databases. And to feed the databases, computerized reservation systems.

Yikes – Databases?

Yes. Fortunately setting up a modern, computerised reservation system is now far easier and very affordable. They do what the old point-of-sale (POS) systems do not. They focus more on sales and the customer.

New generation web based reservation systems are finally emerging. Now recording, managing and tracking customer reservations is really simple. And because it’s done online, it can be accessed and updated anywhere, anytime. No special software needed. Just a PC with web access.

Best of all, we can use all that collected customer data to launch slick loyalty programs as well as personalised postcards and email marketing campaigns too. It can even be linked into your website to capture online bookings automatically.

Unlike clunky desktop solutions, such systems also encourage mass bookings for private events, large groups etc. It could even allow regular business clients to securely login and plan their own dates, see menus, costs and then book online.

Much more professional. More Profitable…

Today they seem to have lost their way and risk turning into just a another commodity food and drink outlet.   In Europe Mac Cafes are becoming more popular than Starbucks. Who’d have thought that would even happen?  They’ve responded with new drinks like smoothies and more food on offer. But sometimes more means less. It hinders, doesn’t add to sales or generate happier customers – It confuses. (read more). Financial analysts and investors like more. They see more products as more profit.

Today Starbucks runs the risk of alienating much of their customer base since the Starbucks ‘experience’ is being watered down, a problem clearly identified by their new CEO.

The big lesson here for small businesses in the hospitality industry is that dining is as much about the experience as it is about the coffee or food. Below is a good summary from a small business coach Jay Erret in an interview with ……

So, what should restaurants and coffee shops learn from this? Start with three ideas:

• Firstly, look at ways to engage with customers both in-shop, online and via mobile phone. Build a simple loyalty program – We do note that Starbucks are now introducing an improved program based around your mobile phone, not plastic.
• Second, simplify your menu and choices. Take special note of the environment, making it comfortable and encouraging talk. Food and drink naturally has to be of a high standard and having a unique ‘product’ or offering helps a lot. But it’s the experience and service that they’ll remember and come back for.
• Place your restaurant and menu online in a mobile-optimised website. This ties in with the mobile phone loyalty program and helps busy customer see in an instant what’s on offer. Many may like to subscribe to TXT alerts.

These reward programmes have to be done right. In an excellent article by Geoffrey De Weaver "… consumers do not mind sharing information with retailers as long as they receive worthwhile, personalised benefits…  54% of Australian consumers have at least one reward or loyalty card, and 69% tried to use a loyalty card as often as possible. Importantly, both figures are trending north…  Never lose sight of the top 20% of your customers who generate the majority of your sales and profits…"

But for the retailer or restaurateur,, the hidden beauty of loyalty programs is their ability to expertly track things at purchase time. Those linked in with EFPOS systems are the best. Without this or similar mechanism in place, few companies can track individual purchases back to customers.

The Key Driver for targeted marketing campaigns

It’s not just about getting people back to the store and buying. It’s about getting these best customers to buy more products, more often. This data is used to alert the right customers, at the right time, about the right offer. This makes it more relevant and therefore obtain a far higher response, often 10x higher. This strategy also reduces the need to bribe customers with extra large reward points or discounts, which adversely affects the retailers bottom line.

Imagine having an attractive offer arrive in your letterbox (normal or email), based precisely upon your current buying preferences, desires or on your birthday? Loyalty programs collect just this type of data, yet to date, are too seldom used by retailers or brands here in NZ. Yet it’s been common practice in Europe, UK and the US for several years…

Imagine too if this detailed consumer buying data was available in a smart company CRM system like Salesforce? And what if it’s then used to drive a personalised [semi-automated] cross-channel marketing programme? i.e. Many more sales, for much less effort and overhead cost. Predicting buyer needs through data mining isn’t new (click here). But loyalty programme data, linked into one-to-one marketing system takes things to the next level. We can now talk directly to the individual, not just the broader demographic, ensuring much higher response rates and ROI. 

It’s already started Downunder

Myer, a major retail chain in Australia has decided to slash it’s traditional mass advertising budget, instead sending targeted direct mailers to their 2.7 million Myer One card holders.

- It’s a smart move which should pay huge dividends. Once the Myer One database was analysed, it was likely a simple financially-driven decision – One that should save them millions in old fashioned TV and Newsprint advertising, as well as boost their sales volumes and margins.

As Rafi Albo proved many times, a good loyalty program is the hidden key to effective, highly relevant one-to-one communication – When done well it hits that emotional mark, driving sales results way beyond expectations.

Want to know how to set up a one to one marketing-linked loyalty programme? Talk to us.