DDscountLoyalty programs, although appearing to be the latest trend, have been around for many years. An early pioneer, S & H Green Stamps, was based on rewarding consumers with stamps redeemable for appliances and other merchandise. An innovative, modern-day loyalty program was launched in 1981 by American Airlines and was quickly duplicated by its competition and other service industries, including hotels, automobile rental companies and credit card services.

The leading benefit for music stores that start a loyalty program is the value of the customer information you will gather. The goal is to use the data effectively to improve the overall customer experience and to create a customer-focused sales and marketing strategy. It should be used to identify customer likes and dislikes. Having a better understanding of what motivates your customers will provide you with the tools to communicate your targeted offers effectively, enhance communication and offer rewards based on customers’ interests and buying history.

As loyalty programs evolved, one key ingredient was identified as essential to their long-term success: retailers must have the ability to track and identify individual customers and reward them for their desired behavior.

There are many reasons why loyalty programs are often abandoned. It’s important for music retailers to realize that loyalty is not just about points or rewards; rather, it is about nurturing existing relationships, creating new ones and converting first-time buyers to long-term customers. If done right, you will reap the rewards of your new loyalty program.

Developing Your Program

There are several aspects to consider when building a loyalty program. By putting thought and preparation into your program, you will experience much better results.

Program Positioning
This is what will differentiate you from the competition. What makes your program special? Your program’s positioning affects everything you do: when you’ll send communications, what you’ll offer, how you’ll strive to be perceived, etc.

Program Strategies 

  • Who are the target customers?
  • What customer needs will the program satisfy?
  • Are the benefits truly valuable to your customers?
  • How will customers be rewarded?
  • How will the data be captured?
  • How will the data be analyzed?
  • Who will drive the customer interaction?
  • How will the program affect your bottom line?
  • How will the results be measured?

Keep It Simple
Offer rewards that are obtainable. People are smarter than they appear, and they’ll know if your program is too good to be true. If your rewards are viewed as unattainable, then your enrollment will suffer. The rewards you offer must have a perceived value where customers truly feel as though they are winning.

Track the Numbers
It is important to keep your customer information and preferences current. This information always changes over time. Continually ask for new e-mail addresses and phone numbers. To do this, you can send out surveys or just ask customers at the checkout counter. Ask what features of the program matter the most or what appeals to them. You can target your promotions, rewards and benefits based on the feedback you receive.

Both businesses and consumers have recognized the value of loyalty programs. Only 12 to 15 percent of customers are loyal to a single retailer, according to the Center for Retail Management at Northwestern University. Although that might seem small, those customers, in fact, generate between 55 and 70 percent of company sales. Some food retailers find that as much as 65 to 95 percent of their sales go to members of loyalty programs. (More than 50 percent of food retailers offer loyalty programs, with ¾ of program customers using their loyalty cards at least weekly and 88 percent at least once a month.)

Variations To Consider

1.  Offer cumulative discounts on selected lines. Offer discounts to customers when they reach specified spending targets.

2.  Offer a loyalty card. If you sell high-volume, low-priced items (guitar strings, music books, etc.), give customers a card to be stamped with every purchase. Once they reach the target number, they qualify for something free.

3.  Give away free items with multiple purchases. “Buy One, Get One Free” is a tried-and-tested method of encouraging short-term repeat sales. However, you don’t want to overuse this tactic or people might start to question the quality of the goods you’re offering.

4.  Team up with an associated business to offer reciprocal discounts. A classic example is a music store that offers discounts for lessons at a nearby music school with qualifying purchases. In return, the school offers members discounts for products purchased at the store and access to special promotions.

5.  Hold a sneak-peek event. If you’re launching a new product, invite your best customers to a preview evening where they can try it first. Make sure the event has an “exclusive” feel, you provide good refreshments and your customers have networking time.

6.  Have closed-door sales events. Once or twice a year, run a members-only sales event complete with entertainment and refreshments. Your vendors will be happy to offer special deals for this preferred group of customers.

7.  Offer additional products and services at low or no cost. This works particularly well if the products or services are associated; for example, cables go with speakers.

8.  Offer referral rewards. Give customers a reason to recommend your store to friends by offering them discounts and free gifts in return for every new customer they introduce.

Planning For Success
The program that you create has to be simple and easy to understand. Customers should know immediately what is expected of them and how they can benefit from the program. Additionally, every employee should be thoroughly trained on the program and should be able to explain the process and benefits.

Find ways, other than discounts, to increase the perceived value of membership. Maybe it’s an annual cookout, organized outing, concert event or a member-appreciation event. Customers want to feel appreciated and, many times, simply recognizing them and keeping them engaged will help them to feel valued and emotionally invested in the program…and with your company.

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