Visible Results News - Article

FAITHFUL - 17 April 2003 - CS News Online, USA

APRIL 14, 2003 -- Thirteen thousand consumers in South Carolina carry the Corner Pantry Rewards card. Since the card's debut last September, those shoppers spent $1.23 million at the 28 Corner Pantry locations. Same-store sales jumped 4.5 percent inside and 4 percent at the pump in January and February compared to same period a year ago, according to Mike Cox, vice president of Tucker Oil Co., the Columbia, S.C.-based parent company of the Corner Pantry chain. "The Rewards program is having a direct impact on our sales, both inside and at the gas island," Cox said. The three North Star BP locations in Calumet, Mich., are also experiencing sales gains as a result of the Advantage Club program the company launched last October. "The card brings people in and makes frequent customers more frequent," said Jon Marson, president. Corner Pantry and North Star BP are among a smattering of regional convenience store players implementing loyalty programs to drive allegiance and sales amid a stifling national economy that has prompted store closings across the retail landscape. Thanks to technological advances, loyalty programs are no longer the sole property of supermarkets, and now go well beyond offering discounts. Both Corner Pantry and North Star BP utilize a re-writable card from Overland Park, Kan.-based Visible Results USA Inc. Each time the consumer uses the card, it is imprinted with information about instant rewards such as a fountain drink or snacks, as well as updated information on points accumulated toward earned rewards. Loyalty 101 As operators see loyalty programs improving bottom lines, they are also learning valuable lessons about implementing and administering successful initiatives. Ensuring that the entire organization - from senior management to sales clerks - understands and buys into the program is crucial. Incentives for employees charged with enrolling customers go a long way, said Marson. "We give cash incentives based on the number of enrollees they generate each month, and occasionally we do a hat drawing for a cash award," he said. "You've got to offer incentives to get them to consistently promote the program." To date, North Star BP, which operates in a rural slice of the upper Michigan peninsula, has enrolled 1,200 customers. Corner Pantry recently added a pull strategy to the traditional push method of cashiers matriculating customers. Each day, Corner Pantry drops its gasoline price to $1.04 per gallon for a three-hour period at one of the 28 locations. The price special is promoted for five days prior to the discount period on WNOK, a Columbia radio station. Corner Pantry employees walk up and down the lines of cars queued up for the discounted gas, offering to enroll customers in the Rewards program. As many as 175 customers typically sign up during the gas promotion. "Educating the customer is very difficult," said Cox. "They're used to the grocery-store cards, which are just discount cards. We have to educate them that this is different and unique - they get something every time they come into our stores. Gas is such a strong draw to the location that we have a captive audience we can talk to about the program while they wait in line for fuel." Up to 6,000 gallons of gas is typically sold during the three-hour promotion. Prize Customers Once customers enroll, it's important to keep the program fresh, which requires daily coordination. Corner Pantry has six vendor partners, and Cox spends half his time organizing the rotation of instant rewards, developing promotional and marketing materials, educating staff and overseeing distribution of prize items to the stores. When customers visit a Corner Pantry, their Rewards card is swiped at a separate countertop device, into which the cashier also keys the purchase total. Identifying data and the purchase amount is sent to a central server, which returns information about points awarded for that purchase and total point accumulation. That information is printed immediately on the surface of the card, and the instant win item is listed on a receipt. These items range from coffee and fountain drinks at Corner Pantry to coupons for local sandwich shops, miniature golf attractions and NASCAR or sporting events at the nearby Carolina Center. As for earned rewards, Corner Pantry keeps it simple: One point per $1 spent. Fifty points equates to a free 2-liter soft drink. At 100 points, patrons receive $2 off their next c-store purchase and, at 150 points, a $2 savings with their next gasoline fillup. Corner Pantry's Reward program is played up in weekly wrapper ads in the statewide newspaper. "We use half the ad to communicate our low prices, and the other half to educate the consumer on the card and highlight the prizes available," Cox said. "The educational effort and constant communication is really important." Cox reports that securing vendor and local merchant partners was easier than expected. "They understand the value of getting their name in front of the consumer and giving them something of value," he said. Several vendors utilize the Rewards program to introduce new products. PepsiCo, for example, distributed 17,000 bottles of Sierra Mist as instant-win prizes in January and February. The cost of vendor and merchant participation is the product or discount they wish to offer. "They have the flexibility to work within their own budgets and goals," Cox observed, adding, "I thought it would be difficult to get participation on the vendor side and easy on the consumer side, but it was the absolute reverse." Local Hero In Calumet, Mich., area businesses now approach North Star BP concerning cooperative efforts as part of the c-store chain's Advantage Club program. Advantage Club members invest rewards points in a catalog compiled by Marson, who purchases the items at a discount from local merchants. "They know we can drive people into their stores," he said proudly. The catalog is available at North Star BP locations, and prizes include DVD/VCR units, sporting equipment, watches and other items, as well as services such as car washes. To claim their prize, patrons bring a redemption slip to the local merchant. "Our customers are now in their stores for a prize they've earned from us, which is good for everyone," Marson noted. Instant-reward prizes are donated by participating vendors and merchants and are rotated regularly. While Marson implemented the loyalty program to gain a competitive edge over other convenience retailers and to drive loyalty in anticipation of the arrival of big-box merchants, he also had another compelling reason. As a new BP operator, Marson wanted to drive usage of the BP gas credit card, for which he is not charged processing fees. Advantage Club participants who make purchases with their BP credit card receive double earned rewards points, enabling them to get that DVD player faster. "More people are now using the BP card in my locations, which is helping my operating costs tremendously," he said. "They get something of value and I get their business regularly with lower costs to me. We're all winning." Behind-the-Scenes Help Marson opted to outsource program management after several attempts to do it himself. "I found that if you can't continue to drive the program, offer incentives to the customer, manage the technical aspects on your own, it will fail," he reports. "Having a third party handle the aspects that you can't is a great way to keep the momentum going." "When you build loyalty, people stop looking at price and seek out the brand," noted George Stevens, general manager of Visible Results USA, which supplies loyalty program design, hardware, cards and data-management services to c-store operators, including North Star and Corner Pantry. That type of shift in consumer behavior can help operators succeed and grow in the face of competition from hypermarkets and other large retailers now marketing gasoline. Program costs vary according to the level of Visible Results' involvement in development and database management and number of stores participating. A basic loyalty package runs approximately $229 per site per month, according to the company's literature. The re-writable cards run 45 to 60 cents each. A third party comes in handy for retailers interested in taking their loyalty initiative to the next level: data mining. Visible Results tracks customer frequency and average amount spent. When customers decrease their frequency of visits or simply cease coming in, Marson is notified and can send out a letter inviting them back. "This helps us maintain our customer base," Marson said, adding that he foresees utilizing the data for additional communications in the future. "We're just developing our baseline customer database right now, watching the trends and getting a better feel for our customer." In the interests of preserving privacy, customer data remains the property of the retailer. Corner Pantry also sends coupons to Rewards customers who have not visited in three weeks, but Cox does not foresee utilizing the data further until the database has reached 50,000 enrollees. "We're focusing on driving enrollment this year," he explained. "When we reach 50,000, that's when data mining becomes effective for us." At this point, neither Corner Pantry nor North Star BP loyalty systems interfaces with the point-of-sale system, so basket-level analysis is not possible. However, Visible Results' Stevens anticipates some convenience retailers will make the extra investment to interface in order to mine the data for enhanced customized offerings, including brand-specific communications to individual customers. "The first focus has to be on getting customers involved in the program," he said. "You need to capture their demographic data first and then track their frequency so you can communicate effectively later."