Ripe for a Revamp

Customer loyalty is hard-earned these days.

For decades, retailers have wooed shoppers with points-driven, rewards-based loyalty programs that were pretty much indistinguishable from merchant to merchant. But in this post-recession climate in which shoppers have tightened their purse strings, these time-honored programs often don’t cut it anymore.

Consumers faced with ever-widening retail choices need more compelling incentives to shop and spend.

To that end, golf merchant Golfsmith is working with rDialogue, a customer loyalty and relationship marketing firm, to help bring loyalty rewards offerings to the next level by tapping into the idiosyncratic wants and needs of its golf-enthusiast customer base.

The collaboration is the outgrowth of a new partnership with Citi Retail Partner Cards, provider of consumer and commercial credit programs and services to retailers such as Macy’s, The Home Depot and Sears, and rDialogue. The companies are working with merchants to develop customer loyalty programs that reflect a brand’s essence and selling proposition, says Phil Rubin, president and CEO of rDialogue.

The idea comes none too soon. “When the economy was great, [retailers] could do what they wanted and business could be good,” Rubin says.

But things changed. “After the recession, it became harder to get customers’ attention and -- to use the word that’s overused today -- get them engaged,” he says.

“People became categorically disengaged. They were worried about discretionary income because it became all about ‘must haves’,” as opposed to wants. Recession aside, retailers’ customer loyalty programs have been ripe for a shakeup for some time, he says.

Brand-specific loyalty
Because retailing is a “merchant-driven business,” marketing often gets the short shrift when compared to merchandising. “Where there are investments in technology,” Rubin says, “they would be to help the buyers, not necessarily to help the marketers.”

Stores often make substantial investments in branding, signage, fixtures and shopping bags, but by contrast, “a lot of retailers are doing the same loyalty program -- where you spend and earn points, for every $200 you earn $5 dollars, for example -- and that to us was just nonsense,” he says.

As a result, in 2006, Rubin -- a former retail executive and airline industry marketer -- helped form rDialogue. The company counts Sprint, Spanx and Arby’s among its clients.

rDialogue sets out to make retailers’ loyalty programs as specific to the retailer as its merchandise, store locations and advertising. The idea is to develop, with Citi, custom-designed programs that drive sales and loyalty beyond private label credit card use -- including “tender neutrals programs,” Rubin says.

“Loyalty programs ought to reflect a retailer’s strategy and mean something to the customer,” he says. “Our approach has always been to make it very brand-specific.

“As much as you might have two retailers competing against each other, there are a lot of differences [between them] when you peel it back.”

Diving into data
Golfsmith, the specialty retailer of golf and tennis equipment, apparel and accessories, is devising a new loyalty program with rDialogue.

Its Player Rewards program, which includes discounts such as 10 percent off your next purchase, coupons and VIP events, had grown “stale,” says Chris Miller, director of marketing and strategic planning for the retailer.

What’s more, there’s “a new frontier in customer spending -- customers are much more conscientious in how they spend their money,” which ups the ante for retailers, Miller says. Standing apart from competitors ranging from Golf Galaxy to Dick’s Sporting Goods means “you can’t get into price wars all day with people.” Price alone will not differentiate your brand, he says.

The question is: “How do we really create a differentiated experience with customers new and old, so that when they think about buying club and balls, we win that battle of the mind?”

Working with rDialogue, Goldsmith’s first order of business is to understand what defines a “best-in-class” loyalty program that “goes beyond just price and spending,” Miller says. He pointed to loyalty programs such as Amazon.com’s Amazon Prime and Best Buy’s Reward Zone as examples that have struck a resonant chord with shoppers.

By understanding the types of shoppers that came into its stores, Best Buy did a “deep dive into the data and put them in profile buckets to better communicate and build a relationship with shoppers” -- which helped the retailer outperform Circuit City, he says.

For its part, Golfsmith sees a big opportunity to “be smarter about our data and understanding our customers better, and be more relevant in the marketplace.”

Selling the lifestyle
The idea is that loyalty programs should be tailored to customer sub-segments.

“If a customer bought an iron set, why would we send them an e-mail the next day for an iron set,” Miller says. “Let them know about the greatest drivers, wedges or putters. It’s about understanding our data more.”

Golfsmith’s niche lends itself to developing a rich loyalty program because it’s not just selling golf merchandise; it’s selling an entire lifestyle. A new loyalty program would tap into that lifestyle, and shoppers’ passion for the game.

“Their golf lifestyle translates into being in a golf club, travel and the social aspects [of the game], the wine and cigars,” Miller says. “It’s a higher-end consumer that has a lot of different interests and enjoys the good life.”

That could mean providing shoppers with travel deals, for one, he says. Golfsmith and rDialogue are also working on a loyalty program that addresses the spectrum of golf enthusiasts.

“There are such different profiles out there -- a new golfer vs. a seasoned golfer,” Miller says. “We’re trying to move to a program that delivers more intelligent communications, recognizes where [customers] are in their golf career, understands their purchase behavior and provides the great, next logical opportunity to upgrade their game and buy the latest equipment.”

This could mean partnering with companies to provide golf lessons, for example. Rewarding its shoppers who engage with the brand in social media is another goal.

Golfsmith has an active Facebook page where shoppers discuss the game of golf and products via question-and-answer, ratings and reviews. The retailer is working with rDialgoue to determine how to best engage and reward its social media advocates with special offers in the virtual space, Miller says.

Partnership marketing programs -- whereby Golfsmith would work with a particular vendor on special promotions -- geared toward brand-loyal shoppers is yet another opportunity.
The payoff from loyalty programs can be sweet.

“We can look at basic measurement criteria -- annual spend, purchase frequency and basket size,” Miller says. “People who are involved in our loyalty programs spend more and [purchase] more frequently than other customers because they’re more engaged.”