CSNC Exclusive: How c-stores can use loyalty programs to drive sales
CSNC:Convenience retail already has built-in advantages like high traffic and frequent visits. From your perspective, why isn’t the channel fully capitalizing on that advantage today?
JP: Historically, C-stores just haven't needed it as much. And I think it's becoming more of a priority now because the classic trip driver in the business is under some pressure, and so they're rethinking, and expanding how they try to engage with customers.
There's lots of reasons to visit these days, and I think loyalty becomes a very useful way for convenience stores to stitch together that customer experience and try to get people to try some new things or expand into categories or trip reasons that maybe weren't there in the past.
CSNC: What are some top performing retailers doing differently to grow their basket size?
JP: I think the most effective is creating these challenges or offers that last over time. Not just something customers are working towards over the course of a month or six weeks, but actually drives additional trip frequency.
There are lots of things in the store that can become a natural part of a daily rhythm. If you change where somebody gets their morning coffee, for example, that's like a massive shift in behaviour. And then you'll get other other purchases on top of that. Like anything that spans beyond just the single visit and the single transaction, where customers can see themselves progress and be reminded that they are working towards something, has been very effective, especially in c-stores, where the frequency is so high, getting them back into the store is sort of a job.
CSNC: What are some of the most popular types of loyalty programs or incentives that you've seen in convenience stores today?
JP: I think the classic “shop here, and I'll give you points for every dollar you spend” has kind of become table stakes, and so it's not likely driving decisions anymore.
I think where you see loyalty being really successful is where you're creating a little bit of incentive over time, where there's a target; where multiple trips are going to get something, and where that reward is something that feels fun, meaningful, useful, or a treat.
The interesting thing about convenience store loyalty is you're not usually dealing with essentials. It's different from a family grocery shop, trying to stretch their budget. And so you’ll see people doing well with rewards that are an indulgence, a treat.
CSNC: 72% of shoppers are currently enrolled in loyalty programs. Why do you feel we're not seeing stronger changes in customer behaviour?
JP: I think enrollment is a good start, but there's definitely a leap that needs to happen between enrollment and engagement. A lot of people will sign up for a loyalty program if they're asked. And then we know from the data and from our own experience that some of those things end up sort of languishing or not top of mind for people. You may have a long list of contactable customers, but the group of people who are truly paying attention is smaller than that, and it's really the job of the marketing team. Not as a one time deal, but persistently over time, to keep that interesting and keep people engaged and making sure they're seeing the value.
CSNC: How can you really engage customers and create a long term conversation? What have you noticed work best?
JP: Simplicity is king, but it’s not enough on its own. The reality is that you've got a couple seconds of the customer's time for them to absorb, what are you asking them to do, and what do they get if they do it?
I think beyond that, I think you want something that is not going to fade into the background. Just earning a balance of points is so easy to forget about, compared to a little tracker that says I'm going to get a free slushie, and I'm three quarters of the way there, showing the gap needed to achieve that goal. If that reward then comes with a little celebration (not just that the treat) but also confetti animation on the app, that creates this little fun moment that cements the value and creates an emotional connection.
The advice is, you want to keep things fresh, but also keep it easy to understand for the customer whose attention is pulled in 50 different directions every day.
CSNC: What do you feel retailers are missing by keeping loyalty tied to the pump or only at gasoline related-loyalty points?
JP: I think they're the first thing to say is that I wouldn't want people to move away entirely from fuel loyalty. Fuel has for a long time, particularly in Canada been the poster child for irrational valuing of discounts, like saving $1 at the pump is valued psychologically by Canadians more than saving $1 in almost any other area.
But I think the market is fairly mature there, and has become saturated. I think it's a question of differentiation. We talked about treats and fun: It's hard to do that with fuel, but you've got lots of ways to do that inside the store, and I think it's also about expanding that customer behavior and taking advantage of the fact that customers are on the property to get fuel and converting more of those customers, either into the store when they weren't going in, or maybe to throw an extra item on the order if they were.
CSNC: How should retailers rebalance their engagement strategy?
JP: You want to put the emphasis in your engagement strategy in terms of time and attention, and especially money on the behaviour that you're trying to change: What gets rewarded gets done.
If the strategy of the business is, “we're in a decent, steady state on fuel and we're trying to sell more of our prepared meal business,” you’ll want outsized rewards there.
It takes more effort, and therefore a bigger reward for someone to change a behaviour, than it does to follow the same old habits.
I think you’ll also want to over-invest on the value, especially in the early days. And what we find is that it gets you through the inertia at the beginning, and then it's easier for something to become a habit, and then a little nudge is enough. You don't need outsized rewards at that point.
CSNC: What are some ways that you know a C store operator can reduce friction in setting up loyalty programs?
JP: You're ultimately getting into the question of, like, do I want to give this app space on my phone? Do I want to give this card space in my wallet? Is it worth it for me? Gas and grocery typically have been at the top of the list where the answer is yes, because I spend a lot of my monthly household budget on those and so therefore the rewards I can earn matter to me.
I think on top of that, we find that the biggest driver of getting that initial enrollment, is the perception of value. Can I access that value now, rather than something abstract?
It could be a discount, it could be sign up bonus points. It could be a free item today, whatever that is, you're basically then offering the customer something tangible in the moment in exchange for the sign up. Then once you have clients sign up, of course, you can communicate with them to give them incentives to do other things over time.
CSNC: C-stores are adding about 36 new members a month, compared to 110 a month for leading quick service restaurants. Now, what do you feel QSRs are doing right that convenience retailers are not?
JP: QSRs have an inherent advantage in that the main reason people will sign up for something is when you're giving them some kind of utility, you're making it useful. You're making the experience better.
With QSR, there's mobile ordering. I would like my food to be ready when I show up. It's easier for me to do the family's order on the app where we're not rushed, rather than standing in the line in front of a person trying to wrangle the kids. All those reasons are starting to push people more towards digital ordering, where, even if there was no loyalty program, this would just make my life easier. And I think that's the real advantage that QSR has in getting enrolment. I think it is the challenge for c-stores to figure out: What's the C Store version of utility? And it's not quite as obvious as it might be for QSR, so I think that's a problem for someone still to crack.
The basic thing with personalization and convenience is just to show me something I'm interested in buying.
If you give somebody a generic offer to earn points or get a discount it’s easy for that to become part of the background noise of modern life. Whereas if I happen to like crunchy Cheetos and someone combines an image with a personalized offer for a free bag of crunchy Cheetos then maybe you've got someone's attention in a more unique way. It's probably as simple as “show me something that catches my attention because I recognize and know it and like it,” you're more likely to get clients into the store than with just a generic message.
CSNC: Why is first-party data such a challenge for c-store operators?
JP: The challenge, I think, comes from what we call at Eagle Eye, “reasons to be recognized.”
What is the reason, when I walk into the store to use my app, swipe my loyalty card, give you my phone number to identify to tell you who I am. If there isn't a reason for me to do that, then I won't, and you won't have the first party data.
So all of the sort of stuff we've talked about so far sort of all builds up into those reasons to be recognized, like I'm earning points for my purchases, or I'm working towards a reward, or I'm in this challenge where I'm trying to hit a target: All those kinds of things become then a reason that I want to make sure that I get credit for this transaction and therefore give you my card.
CSNC: what does the next generation of convenience loyalty programs look like, and how quickly do you think retailers would need to adapt to meet them?
JP: I think for a C store today, a really big consideration is, asking yourself which ecosystem you would fit into. For example, Shopper's PC Optimum has done that, Canadian Tire's Triangle has done that, Scene has done that. There are a lot of ways clients can earn and spend across some of those big coalition and partner programs.
A c-store business that is committed to remaining as a standalone loyalty program that doesn't interact with any other types of retailers or online businesses or ways to earn, is going to possibly be left behind by these sort of coalitions that have much bigger mass and therefore can attract customers from one brand to another. I think that feels like the big trend right now that's shaping the landscape in a pretty major way.
CSNC: How are you seeing AI make a measurable impact in convenience retail?
JP: Where we see the impact the most is personalization, decisioning and recommendations. AI can just be much more scalable, much more precise. You can literally just have AI look at every single customer's purchases over the last 12 years, and build a unique offer just for them, and then move on to the next person, which wasn't possible just a few years ago.
But you still have the same sort of bottleneck at the platform level, if you've got 10 great marketing ideas today and your technology is limited, so that you can only do three, AI isn't going to help unstick the bottleneck. It's just going to mean you now have 100 ideas that you can't execute, instead of 10 ideas that you can't execute around the personalization.
So I think this is where we see the AI can absolutely take the lid off the sort of efficiency and effectiveness of promotions and personalization, but only once you've got that foundation of a way to talk to customers that's flexible and scalable and real time and all that kind of stuff, which you can't yet build with AI. Maybe that's coming.
CSNC: What do you think would be the first step for a retailer who'd be looking to modernize their loyalty program or their loyalty technology without overhauling everything in their store?
JP: My best advice is to just try something simple with what you've got. like, You don't want to overhaul your entire system if you don't yet know what the business value of that program will be.
I think most retailers have something, however antiquated they may feel their systems are. You can do some basic test where you make it work in the background to give people some personalized offering or a new loyalty offer and support it with simple stuff, like signs in the store.
You can do a low-tech test and get some sales lift. When you hit on something that works, that's when you then say, “okay, now we can make a business case to invest in doing this.”
You could pick a small set of stores, pull the data for those customers, pick 20 products that are high selling, and give each customer an offer on the one they buy the most. You could do all that in Excel and with an email program, and then see what happens in terms of driving a trip or getting a purchase from customers when you give them a personalized item compared to a generic loyalty offer. That's a bit of background work, but most people can stitch that together. Then you'll have a real number that shows how much people spend with a generic loyalty offer, compared to when you give them the personalized item.
Of course, you can't do that across all stores, all customers, all products. That’s when it's time to look at a system to automate it. I think the best fuel for getting investment internally, is don't spend 12 months in the boardroom trying to design something on paper. Just get a test out in the real world and see what your customers tell you, and go from there.
Joel Percy, is the vice president of Eagle Eye, bringing expertise in customer relationship management and personalized digital marketing.