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Profitable Times Newsletter

Customer Rewards Program

The first step towards deciding how, or even if, to start a customer rewards program is to determine what you hope to achieve and who will be the target demographic of the effort. Most large commercial retail store reward programs are designed to gather, constantly update and aggressively use personal information for marketing purposes. The lure is discounts in a wide variety of forms including lower prices, free gifts and points that can be redeemed for products. The programs can be described as a form of a bait and switch where consumers are enticed with incentives and then refocused on products with hefty margins. All this takes sophisticated software that tracks customers and their purchases so the next offer is more attractive than the last.

When evaluating the potential of museum store rewards programs the upside is less dramatic. The methods used are typically less sophisticated and the goals are more aligned with providing a congenial 'thank you' for being a repeat customer than aggressively manipulating the customer to buy more. Although software to help track retail purchases and coordinate that data with membership is improving steadily, the vast majority of museums do not have the financial resources and staffing to gather the data and plan sophisticated and coordinated marketing programs including linking to social media like foursquare™.

So, for whom and how can a museum store reward program work? The best bricks and mortar target customers include:

  • Members
  • Staff
  • Volunteers
  • Other museum stakeholders
  • Local destination store customers

Building loyalty is not a major issue with the first four above or similar museum affiliated groups. These groups are generally already loyal but the effort by the museum store may generate additional purchases in the future or keep a figurative warm blanket around this important group of customers who, even without a rewards program, account for a disproportionate percentage of sales. It isn't clear, however, what percentage of these reward-encouraged purchases are sales that would have been made anyway without providing discounts. For these customers the reward is frequently viewed more as an appreciated incremental thank you not so much as an incentive.

In my view, the real increased sales potential is with local destination shoppers. Even though they are less loyal to the museum and may have other at least similar stores to choose from, a rewards program can spread and reinforce the museum's brand and these customers can be influenced to consider the museum store for future purchases.

The recommendation is to initially build a low-cost, low-maintenance rewards program that can become more sophisticated, and more effective, as financial, software and staffing resources are available. The program can initially be focused on destination shoppers but the same strategy will also affect museum-oriented groups.

What can be included in a core rewards program? First, regardless of resources, it should be remembered that your institution is a museum first and that the store only has a supporting, albeit important, role. Second, when designing a rewards program generally keep it simple and straightforward. The purpose is to keep loyal customers happy and coming back and doing so requires relative ease of execution. Not having the software to automatically keep track of purchases and progress towards earning a reward should not stop you from starting a program. At its most basic, the program can use cards that you stamp or punch with distinctive graphics to record progress but are kept by the customer in their possession. Don't take responsibility for accounting for the program or safekeeping the cards unless you are ready to address claims that purchases have not been recorded properly or cards have been lost. As you plan the program, decide in advance how you will handle others besides the cardholder using the reward card.

The cards can be offered to whomever you want using broad or restricted criterion that you establish. Unless you plan to track sales by person and do something with that information, you don't have to have customers register to participate. My wife and I have a favorite Thai restaurant that has a simple program of stamps on an unregistered card. If we have forgotten a card that recorded meals from previous visits- we may have two or three cards going at one time, they allow us to combine cards to meet the ten-meal reward trigger.

Often a lot of time is spent on the mechanics of the customer interface but too little on the reward's financial impact. Generally, most museum stores do not have deep margins so the reward needs to strike the balance between being enticing and financially responsible. A free selection of some kind after triggering the reward may, in many instances, be too generous. A reasonably deep discount on a product or next purchase is probably good enough to get attention while not depleting the profits generated by the purchases that triggered the reward. Customer surveys reveal that savings are valued more than a free gift.

To maximize the impact of any type of rewards program the associated marketing must be proactive by offering and then reminding customers about the program and promoting reasons to come in. Otherwise, without promotion, the rewards may build too slowly leading to ho-hum feelings and even forgetting about the program. To take the marketing to the next level, additional discounts and special offers can be made to customers who provide their email address.

 
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