Developing Your Tasting Room Loyalty Program, Part 2

By: Kathy Kelley

Last week, I focused on developing the overall loyalty program goal, deciding if membership should be free or for a fee, options for recording purchases, and questions you should ask to learn about loyalty members’ wine consumption habits and preferences (http://bit.ly/1bGYLjy). This blog post will provide some ideas to help you decide:

  • What purchases will “count” towards loyalty program benefits, what members can 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

Will You Impose Earning and Redeeming Restrictions?

No matter how you structure your program it will not be successful unless its benefits appeal to members and if it is convenient for customers to redeem their rewards. Have you ever participated in a program that either makes it difficult to redeem rewards (e.g. limited time period) or the “rewards” just did not appeal to you?

  • Consider a wine drinker who prefers only white or red wine but the loyalty program benefit is a discount on a mixed case
  • Or, the wine drinker who prefers dry wines but ends up with a case that includes sweet or fruit wines

Sure, they could give the unwanted wine to family and friends as gifts, but might their enthusiasm to make purchases to earn the reward be diminished a little if the reward is not inline with their interests?

  • Perhaps, based on responses to questions asked on the membership form (or other survey), you learn that some customers really enjoy your wine but only drink a couple of times a month. Could you offer a half or quarter case club option?

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A loyalty program that consists of a “bunch” of inactive members does you no good. In fact, it may indicate a greater problem – that your program is not providing customers with desirable benefits. The figure below provides an example of a membership policy that alerts members that if their membership is inactive for two years their membership is canceled and they will loose any unredeemed rewards and points.

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Would a Loyalty Program that Provided Benefits Including Complementary Goods or Involved Other Businesses Be Appealing?

What if you learned that a rather large group of loyalty program members are also “foodies?” Could you offer a club option that includes a selection of complementary specialty foods, such as: flavored oil oils, crackers and biscuits, sauces and mustards, olives and other pickled products? Some tasting rooms have found that specialty foods are so popular that they developed a rewards option that only includes food items – not one bottle one is in included in the shipment.

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If you do not offer many specialty foods, it may be worth approaching other local businesses that offer these products and develop a joint-program, or a club option that includes both food and wine.

You could also consider partnering with restaurants, lodging, or entertainment providers. A discount offered by a hotel associated with the wine club, could very well pursued customers to stay the night at the establishment. Perhaps the restaurant that offers a discounts to your club members would highlight your wines on their menu.

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Benefits Other than Wine Discounts

Program benefits could also include a newsletter specifically for members, advanced notice of events and sales, invitations to exclusive events, free shipping, and so on. Or, your program could include experiences, as the Boisset rewards program outlines below. Members have access to cave tastings, blending sessions, retreats, pizza social, and more.

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According to Noah Fleming, who wrote the book “Evergreen: Cultivate the Enduring Customer Loyalty That Keeps Your Business Thriving” (2015, AMACO Publishing), developing a brand community where customers with “similar interests, values, and beliefs,” have a space to share their experiences, talk about your wines, and ask questions is an essential component for creating customer loyalty.

Fleming provides a couple of examples of businesses that have developed successful communities (online and off-line): CrossFit and Belle Tires. Both encourage customers to participate in discussions about the goods and services sold (the grueling training program and challenges), related topics (car care, weekend road trips), and the local community.   The author points out that by providing the space where these conversations take place – these businesses know what is being discussed, can provide input and suggestions, and learn when customers have issues with their goods and services.

Think of all the information you could share with your customers both online and in the tasting room with very little effort. You probably already offer your space to organized groups who want to hold meetings and celebrations at your winery – why not host a club member Q & A with the Wine Maker or A New Release session on your slowest night. Provide customers with a few samples and chance to purchase your new vintages before they are available to other tasting room customers.

Have You Achieved Loyalty?

Merely offering a loyalty program and investing little else into your tasting room may produce positive responses for only a short period of time. When you do not improve the tasting room experience beyond offering select discounts, you cannot win loyalty and your customers can become trained to only shop when you offer sales or promotions. You will need to make certain that customer service, product availability and selection, and other experiential factors (e.g., aesthetics and educational opportunities) meet (hopefully, exceed) customer expectations and persuade them to return again and again.

Though you will find lists that describe rather involved calculations to help you determine the success of your loyalty program, Customer Think (http://bit.ly/1uhKnSC) provides a list of point to evaluate that is easy to understand:

  • Customer Retention Rate: “measurement of how long customers stay with you.… [m]easuring the difference [in months, years, etc.] in customer retention between program members and non-program members is one of the best ways to determine if your loyalty program is effective.”
  • Customer Effort Score: “measures your business’ customer service based on actual experiences customers have had with your company.” If a group of loyalty program customers have indicated a need or want for a certain program option or benefit – have you fulfilled this request? Or, if they have alerted you to a problem – have you provided a solution and fixed the issue?
  • Negative Churn: “churn is the measurement of how many customers leave your business overtime. Thus, negative churn is the measurement of customers who instead of leaving, upgrade their membership and purchase added services.”

You should be able to review your members’ purchases and, based on your overall goal (described in last week’s blog), to calculate the percentage of members who’s purchases have increased (in number, individual price point, total dollar amount), remained the same, or declined (including those who have not made any purchases) for a particular period of time. Of course you will need a point-of-sale or mobile payment system to capture these statistics.

  • Net Promoter Score: a measure of customer satisfaction, which can be obtained by asking the following questions: On a scale of 1 to 7 (1 = very unlikely, 4 = neither unlikely nor likely, 7 = very likely), how likely are you to: a) continue your membership based on current benefits and b) recommend our wines to friends and family. These are just a few questions that you could ask members to learn about their level of satisfaction and dissatisfaction. Consider asking “open-ended” questions that allow customers to write responses and provided even more insight.

Ending the Program

There are many loyalty programs that are put into place and then often changed because they do not fulfill the business’ hopes of enhancing profits.   Some of these programs change overtime or are discontinued, much to the disappointment of customers who participate and have not redeemed rewards before the program ends.

Perhaps you experienced this type of frustration if you were a member of Subway’s Sub Club promotional program. It was quit a popular program that:

  • Anyone could join the program
  • “Membership” was free
  • Earning and redeeming were very easy to understand.   Customers earned a “stamp” for each sub purchase, which they attached to a card, and after they earned eight stamps they could redeem the card for a free sandwich.

Unfortunately, the program was phased out in 2005 because the stamps and cards were so easy to duplicate and “thousands of stamps [were] for sale at online auction sites” (http://nbcnews.to/1EleTTP).

Some customers were one or two stamps from receiving a free sandwich only to learn that they would not be able to “earn” more stamps nor given credit for partially completed cards. Customers were told that they had a small timeframe to redeem fully completed cards, at the discretion of each franchisee. I am sure you can imagine how upset customers were and, even in 2005, the number of them who went online to vent.

This is an issue that needs to be addressed well before you implement the program.

If you must discontinue a loyalty program, make every effort to contact customers about changes or cancellation and announce the information in your tasting room, online, in newsletters, and so forth.

Be sure to inform members several weeks or months in advance and offer compensation comparable to the benefits or discounts they can no longer redeem. Offer a coupon with an open-ended expiration date so customers understand you are sincere in efforts to help them adjust to the change. Compensatory coupons could be based on several factors, such as:

  • An actual discount based on past amount purchased
  • An award amount that is slightly greater than the actual amount owed (a good faith effort)
  • An entirely new type of reward system you are interested in implementing

Whatever option you choose, it is imperative that customers find value in the program and that redeeming the reward is worth a visit to the store.

Final thoughts

While drafting the plan for your program, ask employees for their input and to provide comments and suggestions based on loyalty programs that they belong.   Incorporate features they like and believe your customers will value.

In addition, you might want to “trial” the program with a small set of customers. Before and/or during the trial period, invite customers to provide their thoughts about the program and if any part of the program confused them or if they experienced difficulties redeeming rewards. It is best to identify any problems that need to be fixed with a small group than to hastily launch the full program only to find that there are huge issues. It is best not to change the program too much after the unveiling. Customers may become confused or upset if they feel you are not delivering what you promised.

The bottom line is that a loyalty program alone does not guarantee repeat purchases; rather, it is only one component that successful retailers implement. You must assure your customers that you value their patronage. The resulting outcome can be a lasting relationship that is beneficial for both parties. A continued series of positive experiences further encourages customers to shop there; hence, customers truly become loyal.

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