July 29, 2004, 12:00 AM

Rewarding Behavior

With a web-based loyalty program, True Value is using 21st Century technology to bring the small-town feeling to today’s hardware store.

The neighborhood hardware store carries an aura that is almost Mark Twain-like: small-town, friendly, owned locally and the owner and employees know all customers by name and what they need. The hardware cooperatives go to great lengths to cultivate that image in their advertising.

But the reality is more like the rest of American society in the 21st Century: anonymous shoppers in a hurry, dashing in and out to get what they need and often shopping at the local outlet of a chain to get a better price.

Now TruServ Corp., the cooperative that is parent to True Value Hardware stores, is trying to restore some degree of individualization to the hardware shopping experience. And it is turning to the web to do so.

This year, TruServ has started rolling out to its stores a web-based customer loyalty and marketing program from database and direct marketing company Insight Out of Chaos. Under the program, known as True Value Rewards, local stores sign up customers to participate in the loyalty program. Customers identify themselves with a plastic card or a key fob as program participants whenever they buy something. Insight Out of Chaos gathers loyalty information from True Value point of sale terminals every night and updates participants’ status.

Store owners then access a web site to find out the status of their customers and to devise e-mail and direct-mail marketing campaigns based on the behavior of their most loyal customers. “The blinders have come off for the first time,” says John Schmidtke, TruServ’s manager of targeted marketing. “Stores really know their customers.”

The loyalty program involves rewards of one point per dollar spent, with each 250 points redeemable for a $10 reward certificate. Members also get discounts on selected merchandise.

The web is the key

The key to making the program work is the web. “We realized we needed an infrastructure that will allow us to scale this and manage it on a day-to-day basis,” Schmidtke says. “Stores access the web site to order supplies, understand the performance of their customers and troubleshoot problems without requiring us to have an entirely new department at TruServ.”

Store managers log onto the True Value Rewards web site and access their own home page. They can change information about their stores, such as hours of operation, look up individual customers, run reports to learn who their best customers are or who bought certain products, create marketing programs, order more material and perform other functions related to the program. “Without the web, we would not have nearly the robustness that we have with the web,” Schmidtke says.

In addition, the web component moves control of the program to store management without requiring additional technology expertise. “It allows the stores to be independent and run the programs themselves with guidance from corporate marketing at TruServ,” says Spencer Hapoienu, president of Insight Out of Chaos. “It puts the stores in the driver’s seat by allowing them to make all the marketing decisions based on the customer data.”

True Value store owners say the web is the key component in making their loyalty programs successful. “It would have been much more difficult without the web,” says Jeanenne Tucker, owner of Plantation True Value in Richmond, Texas. “It’s very easy for me to go online and get a list of, say, our top 200 customers and sort it any way I want, by dollars spent, by number of visits to the store or by what products they bought. It’s phenomenal what we can do with the information.”

The web has put all that information at store owners’ fingertips, Schmidtke says. “In the past, if a store wanted access to that data, they would have had to e-mail us or call with a specific query and it could have taken a week or even several weeks to get it to them,” he says. “With this program, they get an instant update.”

An easy pitch

TruServ expects 350 stores to be participating by year’s end. TruServe tested the concept in 20 stores last year. Another 163 have launched programs so far this year. Schimdtke believes the program has the potential of attracting 2,000 of True Value’s 5,400 retailers.

The pitch to customers has been easy; most understand the loyalty concept already, store owners say. In fact, it was an observation by store co-owner Dave DeRonne that led DeRonne’s True Value in Eastpointe, Mich., to sign up as a test store. “We noticed that when people would give us keys to duplicate they often had tags on their key rings that identified them as being part of other retailers’ loyalty programs,” DeRonne says. It thus made sense to DeRonne to participate in the True Value Rewards program and it made sense to the store’s customers-10,000 have signed up for it since DeRonne’s True Value started the program in May 2003. “We didn’t have to explain it to our customers at all,” DeRonne says. “They were chomping at the bit to get started with this.”

Tucker says the most successful way to sign up customers is at checkout. “We tried mailers and we tried advertising it in Money Mailers, but they weren’t too successful,” she says. “We mostly did it right at the point of sale.” She says the store’s goal was to sign up 2,000 customers, but a year after starting, the store’s Rewards rolls are reaching 4,000. “People feel like they’re part of a family with this,” Tucker says. “It’s created a nice atmosphere.”

Schmidtke reports that card-carrying loyalty customers have a 70% higher average ticket than the typical customer and that sales are up significantly at participating stores. In addition, Hapoienu says, participating stores are selling more high ticket items such as grills and lawnmowers and spending their marketing money more efficiently. “With the discounts and the better customer service, this allows local stores to compete against Wal-Mart, Target and Home Depot,” Hapoienu says.

Stores obtain other benefits as well. A store owner who wanted to open a second store used the geographical data about best customers to choose a location, Schmidtke says.

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