Discount Cards: Past, Present and Future
Nobody denies the onset of the crisis, but so far its discussion in the country is under an unspoken ban. Increasingly, you hear a cautious and not so negatively colored: "new economic conditions." However, conventions in terminology do not change the essence of what is happening: amid a decline in purchasing power, companies are forced to more clearly build their loyalty systems. What will help keep the customer? Shoes Report asked this question to business analysts and leading retailers.
Sergey Gnedkov, director of the marketing agency FDF Group
He has been working in marketing research since 1998. In 2002, he founded the marketing agency FDFgroup. He personally conducted more than 500 studies. Developer of a number of research methodologies for product testing, advertising and pricing. He currently manages the company and oversees its main projects.
Member of ESOMAR since 2009
Field of activity - marketing research of consumer and industrial goods markets, service markets; sociological research. The agency specializes in quantitative marketing consumer research.
A discount card is a mutually beneficial practice that allows trade or service companies to increase their turnover at the expense of regular customers, and customers can save money by purchasing useful things or paying for necessary services. At least, such a meaning was put into this program when it was created and implemented everywhere. But the reality is that the benefits of standard discount cards are now beginning to lose both.
Clients literally littered with “unique discount offers” actually turned out to be at the starting point - discount cards were equal to all sellers, and it was again not easy for the buyer to make a choice.
“Once upon a time, the retail market was in a certain“ state 1 ”, no one helped the buyer choose, no one called him to him, did not say:“ Come to us, we have discounts ”. Then, “state 2” came quickly enough on the market: everyone offered a discount. But for the buyer, nothing has changed, he has remained with the same difficult choice: he has cards of most stores, 3% here, 5% there, there is a cumulative discount in the third store. At that moment, when all sellers gave a discount, it stopped working for the buyer, ”explains Sergey Gnedkov.
In the middle of last year, the famous Ukrainian shoe retailer Intertop announced the closure of its discount program. And this happened at a time when the involvement of the population in various bonus programs was actively growing: according to the IFAK research company, the increase in the country amounted to more than 7% per year. But the announced reasons that prompted such a harsh decision were objective: discount cards ate 3% of the retailer’s revenue. The large Russian retailer “Obuv Rossii” also refused the discount system. “A few years ago, we realized that installment works better than a discount, and at the same time we do not need to reduce the cost of goods. This resulted in a significant increase in sales: more than 60% of purchases were made by installments, and more than half of the customers reused our service, ”comments Anton Titov, director of the company.
And yet, most retailers are in no hurry to change familiar programs, especially since for many they work as a plus. Another thing is that without exception, market players understand that in the new economic conditions it is necessary to look for new systems to increase consumer demand.
Does price influence customer loyalty
Loyalty is a multidimensional concept. It consists of emotional, evaluative and behavioral components. Building full retail loyalty is possible only when all three of them are involved.
“Bonus card - a tool designed to influence behavioral loyalty (“ Come and buy ”). At the same time, retailers, issuing bonus cards, often forget that the bonus system de facto affects not only behavior, but also the emotions and assessments of consumers, says Sergey Gnedkov. “In our practice, we were faced with situations where bonus cards did more harm to the retailer than good,” when the terms of the bonus program changed, the retailer received a sharply negative emotional reaction from consumers. Before launching the bonus program, as well as when planning any changes in its conditions, we recommend that our clients conduct research for a comprehensive assessment of changes in customer loyalty. ”
On the other hand, for a Russian buyer, especially a regional one, the question of price always comes first: according to a RBC survey, 71,5% of the respondents identified the price as a guide for making a purchase. Talking about quality as an incentive to buy is a half-truth, or rather, reluctance to be caught in commercialism. Discount is an ordered form of discounts, which explains the attractiveness of various programs. Everyone considers money, and with the obvious opportunity to save, hardly anyone wants to fork out for the "extra" amount. That is why Russian shoe makers are not in a hurry to refuse discount programs. Today, perhaps, almost all retail companies implement their own loyalty programs, but do they help to increase sales and increase customer loyalty in the current realities?
Gingerbread house: around and around a discount
Today in the United States there are about 8000 loyalty programs of national coverage, in Russia this figure is much less. But the number of consumers involved in such programs is growing every day. According to the calculations made by the PriceFree payment system, today there are 12-5 cards for one average resident of industrial and economically active cities of Russia. And the total number of circulating discount cards has exceeded 500 million, this ensures an annual growth of the market - 25-30%.
At these growth rates, most market players try to offer the client a unique service, which is expressed not only in direct discounts.
- Accumulative, bonus systems. Such loyalty systems are designed to tie a customer to a brand or store. The discount on goods increases in proportion to the number of purchases. But experts are sure that such an approach works for the seller only in the case of a clearly debugged accounting system.
“Often such“ complex ”systems not only do not help, but even begin to do harm. If your system works in semi-manual mode, or is configured so poorly that it is impossible to make all changes quickly, then an angry customer appears who, instead of remaining loyal to the brand, starts shouting: “They cheat, cheat! Where are my points for past purchases? ”The consequences of this then cannot be blotted out by any advertising campaign,” comments Sergey Gnedkov.
- Community and community around the brand. For a special circle of customers who are loyal to the brand or the store, the company holds private events, parties and even festivals, with all kinds of "gingerbread" in the form of gifts and additional discounts. However, according to experts, such a loyalty system will work only if you clearly understand who needs to be invited to such an event and who is not. “Again, everything depends on the analysis system. If you debug it to full automatism, it will be great. In the meantime, it’s the same beating across the squares, it can only be narrower, ”said Sergey Gnedkov.
From general to specific
According to most market analysts, the need has ripened to get away from standard discount programs. Where to? First of all, in a personalized service.
“The seller must analyze consumer purchases on discount cards (and subsequently their electronic counterparts), identify his priorities, predetermine desires. And instead of banal newsletter about the new collection, send a personal offer. For example, if I bought classic black shoes of the 43rd size in the store, I expect that they will call or send an e-mail in which there will be information that there are similar models in the new collection, and the size I need is in the store from my home (or office) at such an address, ”says Sergey Gnedkov.
Thus, the interests of the buyer are taken into account as much as possible even before he arrives at the store.
The main problem of today's communications with the buyer is that they are not debugged. And virtually no one listens to the buyer. The bulk of the information comes from the company - the client receives a ton of news about discounts, new collections, sales, etc. All this unnecessary information falls out on the person’s head, while no one thinks about what he really needs. But the power of communication lies precisely in the two-way communication!
Yes, such a personalized service will require serious technical support and complex computational algorithms. Yes, companies will have to make serious investments - invest in software and technology development. But it is precisely in this “personalization” that a powerful growth driver lies, and it is in this direction that we need to move. “Personalization” will help your company retain customers and maximize sales.
Read about the “shopping of the future” models in issue # 117. You can purchase the magazine in the editorial office of the publication.
No Discount Sales Strategies
What else can you give the buyer, in addition to direct discounts, equivalent to the money that he will save? It can be a bet on super-qualified polite sellers, free delivery, gift wrapping, etc., that is, a banal discount card can be replaced with some unique service.
“An important and positive factor for such a development of loyalty systems is the willingness to make such changes for the client himself, who is technically open to new innovative ideas, armed with modern smartphones, has Internet skills, is fully literate in their use,” comments Suren Hayriyan, President of Payment Discount PriceFree systems. These company studies show that 60% of cardholders do not remember and cannot name half of their issuers, and more than 80% do not use half of the cards because they cannot find them at the right time or even lose them. This allows us to conclude that 65% of discount card holders are in the field, the degree of loyalty of which could be significantly increased. This means that there is a large space for volume growth.
Founder and CEO of LoyaltyLab, Mark Goldsteen, with whose participation more than 100 national coverage loyalty programs were launched in the United States, in his article Top Ten Coolest Trends in Loyalty Programs names the main strategic ways of developing loyalty systems.
Tip number 1. “Moor” - the expected norm
Opportunities to engage a client in the program with a good history, adjust the rules of the loyalty program (levels, thresholds, types of rewards) and in general functionality “out of the box” are becoming more and more, for less money and with increasing understanding on the side of business owners that to do this.
Tip number 2. Look for your own highlight
What in your offer to the consumer market actually sets you apart from the general background? Who is your client? Is it a man or woman, with a bald head or a square, a fan of Spartak or Lokomotiv, a trifle in his pocket or a golden VISA? Whoever he is, your task is to make the loyalty program pleasant and memorable for him. Forget awards like Mini Cooper or a trip for two to Italy - they merge with the gray background of all the other programs, and no one will remember them tomorrow.
Tip number 3. Gamification should be interesting
The use of gaming mechanisms has become an analogue of rocket fuel for loyalty programs. If you want customers to come more often and stay with you for a long time, think about how to get them involved in the “game”. For example, customizing is the very chip that can increase consumer commitment to a particular network. This is the system of "replanting" the client, involvement in the game. Suffice it to recall Crocs experience: customers have the opportunity to create their own unique design of a pair of rubber slippers with the help of small rivets. It’s worth a penny, but what a result!
Tip number 4. Encourage immediately, immediately, immediately
Remember the old concept that “you need to first collect the base of program participants, and then we will begin to reward and monetize”? If you remember, forget it. There are no longer acceptable options with a long buildup. They simply cannot work in a world where a popular person can get a million followers on Twitter in just one day. Involve everyone, get involved immediately and immediately fill them with gingerbread. Interact with the client in real time - get real results.
Tip # 5. Traffic is everywhere - just use it wisely
And it also means that not only and not so much on Facebook and Twitter you can find the customers you need. The challenge is to find an environment of active users that is as close as possible to your business. It can be both other social networks - Odnoklassniki, VKontakte, Google+, and individual communities of interest (Mozzarella Club, etc.).
Point of view: Experts on discount and ways of its development
Sergey Gnedkov, director of the marketing agency FDF Group:
“Calculating the benefits of discount programs is quite difficult. I believe that in many respects everything depends on the marginality of the business. If the calculations were initially correct, the discount will work and there should be no financial costs. If your margin is at the level of 10-15%, then you simply will not be able to give a discount to customers in the amount of 10%, and giving a 1-2% discount is pointless, as the buyer will not feel it. So for a high-margin business, the discount system works perfectly. ”
Dmitry Kondrakhin, Marketing Director Carlo Pazollini:
“I cannot agree that all discount systems do not work. For example, our system has proven itself well, and we are satisfied with the results of its work. We have a large number of loyal customers who buy from us and only from us and come back to us again. Perhaps it is precisely because our discount system has been debugged. After the first purchase, our buyer receives a club card (the limit on the purchase amount is 5000 rubles), and with each next purchase his discount progressively increases to 15% and is valid until the end of the season. Since it is not personalized, cardholders have the opportunity to pass it on to friends, relatives, and colleagues. This increases interest in the brand and stimulates sales growth. We started the card as a standard loyalty system. But now we are looking for ways to modernize it. The buyer is indeed somewhat overloaded with all kinds of discount systems. First of all, we want to come to a more civilized form of discount - to an application for mobile phones. This will allow customers to make purchases without presenting their card at the checkout. Alas, IT technologies are lagging behind marketing today ... You are right that loyalty systems directly affect profits: you can create a kind of community around the brand and use certain levers to control their behavior. But it must be borne in mind that the reaction to this or that type of discount is individual - someone likes belonging to a certain chosen circle, someone very carefully calculates the benefits of this or that discount. We have a very wide target audience - both in terms of profitability and age. Therefore, it is difficult for us to average the client and develop a unified loyalty system that will be accepted by all customers without exception. We have at least 500 loyal customers. In our opinion, the monetary component works better in this case: 000% in the high season is a significant discount for most consumers. "
Natalya Evseeva, Head of Loyalty Programs at ECCO:
“The beginning of the development of loyalty programs and the maintenance of regular customers in the network of ECCO branded stores can be considered 1995, when unnamed discount cards of a fixed denomination were introduced into circulation (5%, 10% and 15%). You can use discount cards with a fixed face value until the launch of the cumulative discount program in 2006. This program allowed us to provide a discount depending on the total amount of customer purchases (up to 27 rubles - 000%, up to 5 - 54%, over 000 - 10%). A cumulative discount card is a personalized one and is issued when making a purchase in any ECCO company store for an amount of 54 rubles or more. In May 000, in parallel with the accumulative discount program, in three stores of the city of Kazan, the bonus program Loyalty ECCO Bonus Club was launched in test mode. The bonus card is issued on conditions similar to the cumulative discount card. When making purchases, the cardholder receives bonus points depending on his rating: with a total purchase amount of 15 to 2000 rubles - 2012% of the amount paid for the goods, from 2000 to 2999,99 rubles - 10%, from 30 rubles - 000%. The amount of the discount when paying with points can reach 79% of the value of the goods. Clients may be awarded additional points for certain events or as part of the company's marketing campaigns.
The test launch of the bonus program in the Kazan region was successful. And soon this loyalty program will replace the accumulative discount in all retail stores of the chain. ”
Anna Demurova, Deputy Marketing Director, TMHF Group:
“Now we are developing a new CRM system for Soho and Clarks store chains, but so far we are not ready to reveal all the secrets, we want to first properly test the system in test mode. The difference between the new and the old program will be in the creation of a global system of regular discounts and personal data of customers with automated targeted selection of participants for certain activities. We want to know everything about our customers and work as accurately as possible, with benefit for both the company and the buyer. But in any case, we will work with club cards as accumulative, after the launch of the system, cross-marketing projects with other large networkers will also be loaded. ”
Valeria Rudneva, ECONIKA company:
“All regular customers of the ECONIKA shoe network have the opportunity to join the accumulative discount program, within which, as accumulations on the card (depending on the amount of purchases), the discount grows to 20%. In addition, card holders have the opportunity to participate in special campaigns of the company! The company provides special conditions for mothers with many children and students, and by the day the client always receives an additional 5% discount, which is valid for a month. A discount card is issued when filling out the questionnaire, it can also be issued when making a purchase in an online store for an amount of more than 5000 rubles. Discount cards of the ECONICA network also operate in the online store. ”
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