Developing Your Tasting Room Loyalty Program, Part 1
By: Kathy Kelley
Most likely you have some type of “case club” or “customer loyalty” program or you have though about implementing one at your tasting room. Whatever you call it the intent is probably the same – you try to reward customers who purchase large quantities of wine from you in the form of a discount and/or invitation to special events.
If crafted and administered correctly these programs benefit the customer and the tasting room, but sometimes they do not provide the desired return on investment. This two-part blog post is designed to help you take a look at your current (or potential) loyalty program and decide whether your program needs to be tweaked or radically changed to be more successful.
What Should a Loyalty Program do for Your Business?
Your loyalty program should help increase your tasting room’s profit. A white paper written by Sports Loyalty International, Inc. outlines some of the general benefits of creating a loyalty program (http://bit.ly/1GV7R5M). By enrolling in the program members:
- May be less likely to “defect” and purchase from another winery
- Could increase their spending over time
- Could be more responsive to promotions, which could reduce your marketing costs since you will have information about their preferences and habits – which allows for a more targeted promotional effort
- May shift spending to “higher margin products”
- Could refer your program to friends and family based on their positive experience
Developing an Outline for Your Loyalty Program
The great thing about offering a loyalty program is that customers understand their basic function, as they most likely belong to other programs. Regardless of the type of program you offer, consider these key concepts:
- Your overall goal – what do you hope to achieve
- If you will charge customers to join the program, limit the number of members, or if enrollment will be free
- How customer purchases will be recorded
- Questions to ask members that will help enhance the program and their experience
- What purchases will “count” towards loyalty program benefits, what can members redeem points on, and if a program co-developed with a complementary business could be perceived as being even more attractive
- How you will determine that loyalty has really been established
- How and when you might need to end the program and steps for doing so
Your Overall Loyalty Program Goal
Each loyalty program that you participate in was (hopefully) designed based on a goal that the business felt would help boost profits. As with the other goals and objectives that you develop for your business, you will also need to think about what you hope your loyalty program achieve. Though not an exhaustive list, which of the following might be the most appropriate for your business?
- Incremental rewards. Your program might give all members a particular reward, but once consumers spend a certain amount they would be entitled to more attractive and significant awards. You may even consider an “elite” tier that offers even greater rewards when ‘X’ dollars are spent, either on an annual basis or over the lifetime of the program.
- Upsell. A program that falls within this category would allow members to apply a 10% percent discount (for example) when they purchase at least $50 of wine and a greater discount when they spend even more.
- Encourage repeat purchases within a certain period of time. As with one very popular coffee shop program, members earn rewards not on the dollar amount that they spend but on the number of times they frequent the business and make a purchase. A basic membership, where participants only need to visit the shop once in a 12-month period, yields a single reward. If the customer visits “X” number of times in a year they get an even more appealing reward – regardless of the total dollar amount that is spent.
Each of these loyalty program goals could very well encourage customers to spend more. If you choose to focus on a program that provides incremental rewards you could send an email at the beginning of each season that includes a tabulation of purchases to date and indicate the amount needed to achieve the next level. This could encourage some “basic” members to move up in the ranks and eventually become “elite.” The same could be done if your goal is to encourage repeat purchases.
Though it is suggested that members are fully award of the rewards they receive based on their spending/visits, it is also suggested that you acknowledge members with a special reward when they spend a certain amount, visited ‘X’ number of times, or have been a member for a certain period of time. One particular program that I belong to does this and though I never know when I am going to earn these “extras” I do feel pleasantly surprised when I learn that I earned a $2.00 discount or the free beverage. These surprises do not need to be extravagant – but thoughtful and of value to the customer.
Will Your Loyalty Program be Free or Will You Charge a Fee?
Regarding whether you will charge members to join your program – there are quite a few things to consider:
- If the program is free will there be an overabundance of customers applying for discounts such that the program isn’t deemed “special” or “exclusive?”
- If you charge a fee how will you determine how much to charge, will it be a one time free or yearly, and will charging a fee deter some customers from joining?
- If you charge a fee will you apply all or a portion of the fee towards the customer’s future wine club purchases?
- Would a limited edition program fit your needs? If you choose to offer this type of program you probably will need to “reopen” the membership after a certain period of time. This may be necessary if you noticed that fewer members are participating in the program and/or if several years have passed since the program began.
One of the most important components of the loyalty program is keeping track of purchases. The use and value of a program can deteriorate quickly if program participants feel that their purchases are not being recorded correctly.
To reduce costs associated with administering the program, you may decide to make customers accountable for keeping track of award accumulations. In this case, you do not record or tally purchases; rather, customers are responsible for the safe keeping of their loyalty cards. When signing up for membership, customers should be told that they need to keep track of their purchases and that if they lose or damage their loyalty cards, coins, tokens, or receipts, then they, unfortunately, lose any accumulated benefits.
Better yet, with all the advantages that a mobile payment system offers (e.g. potentially lower credit card transaction fees, faster transfer of funds to your bank account; for blog posts that provide more information on mobile payment systems and security click here: http://bit.ly/1GlRCR2), why not use these systems to help manage your loyalty program? The software tied to these systems can record purchases and customers need only tell you their phone number, name, or other identifier for you to find them in the system.
Regardless of whether you use a “punch card,” point-of-sale system, or mobile payment system that key issue is to learn about your customers’ purchasing habits – what they purchase from you, how often, quantities they purchase at a time, and what promotion (if applicable) prompted their purchase.
Learn about Club Members’ Wine Consumption Behaviors and Preferences
Your loyalty program can provide an incredibly rich source of customer data – you just need to ask the questions. If you are concerned about what potential customers will feel and think when providing personal information, consider the following:
- Only ask for information that will help enhance the program and provide the best experience possible
- Customers can always choose not to provide responses to questions
- You should stress that questions are asked so that you can make sure that they only receive emails, mail, and other communications that appeal to them
- Give customers a privacy statement that indicates you will not share nor use their information other than the purpose for what is intended
You should collect data when the customer signs up for the program. You should also consider asking additional questions when they renew their membership and when they attend events and pick up their wine.
You could ask questions to gather information such as:
- Name address, email, preferred method for communication, how often they want to hear from you (every email, once a month, only when related to the wine club, other based on your current email schedule). If there appears to be a concentrated group of members who live in a particular city/zip code you could use this information to developed targeted promotions.
- If they would like to receive a reminder email to follow you on Twitter, Facebook, Instagram, etc. This could help in cases where the customer has the intention to follow or like you– but forget to do so after they leave your tasting room.
- Varietals of wines they enjoy drinking, how many other adults in the household also drink wine, and when they drink wine (daily, weekend, etc.). Based on member’s responses, you can use the information when deciding what rewards levels or tiers to incorporate into the program.
- Hobbies and leisure activities that they enjoy. This could help you plan special events that you hold at the winery. If a fair number of members like blue grass music then it might be worth investigating the possibility of hosting an event.
You have probably filled out a number of surveys and wondered why the business needs certain personal information (e.g. when you fill out a warranty register form for your new vacuum) – especially when they do not provide a reason why they are asking the questions. You may find that more club members will provide responses if you indicate how the information will be used and that it will not be shared with any other businesses and individuals not associated with the tasting room.
Next week’s post will focus on more specific benefit components, determining if the program is creating “loyalty,” and what to consider before you end your loyalty program.
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