July 29, 2004, 12:00 AM

Rewarding Behavior

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That geographical knowledge also helps with marketing, Tucker says. The program’s mapping feature shows an X at each participant’s address, with the top 10 customers marked by a star. “That helps us target our mailings when we want to mail to certain ZIP codes,” Tucker says. “We were very surprised, for instance, that our top 10 customers live outside of what we consider our hot area. We’ve never been able to have that information before.”

In addition, the web-based nature of the program makes it easier for store managers to sort on their own criteria and determine, for instance, not only what’s selling but also what appeals to their best customers. “We’re even learning what to put on our endcaps based on what our best customers are buying,” Tucker says.

Extra coachings

While the technology is what can make a loyalty program successful, independent retailers tend to lag in terms of technology adoption, and so could require extra coaching, notes George Whalin, president of San Marcos, Calif.-based Retail Management Consultants. In addition, since small retailers do everything, they may let the analysis of data slide. “Anyone doing a loyalty program with small retailers needs to ask if the participating retailers have the time, expertise and inclination to use the data in a meaningful way,” Whalin says.

Schmidtke reports that training is an integral part of the True Value Rewards program, and it includes training on the software in POS terminals that allows Insight Out of Chaos to gather data as well as training on loyalty programs in general and in how to use the web-based True Value Rewards program in particular. “Training is a crucial success factor,” he says.

True Value Rewards training is based on a web program that contains modules for different users, including an owner/manager module and an employee module. Stores go through the training, then take a series of quizzes. Store owners/managers must score at least 80% on the quizzes before proceeding with implementation. Store owners can also access a classroom instruction module that teaches employees about the program. Owners can monitor how well employees are doing and provide extra training to those who need it.

Monitoring participation

Another advantage to having a web-based loyalty program is that TruServ can easily monitor how stores are using the program. Insight Out of Chaos can report web site usage to TruServ, which can then see which retailers are not using the full capabilities of the program and coach them on how to do so. “We weighed our options and thought about sending SWAT teams to each store, or requiring store owners to come to our headquarters in Chicago or conducting regional training, but there were so many issues involved in those kinds of training, like what does a store do when it gets new employees,” Schmidtke says. “We finally decided that since we were requiring stores to have Internet access to participate, we could do the most cost effective training via the web. Without the web, it would have been exceedingly difficult to manage this and much more costly.”

The cost to stores to participate depends on the number of customers and their activity level, Schmidtke says. The typical store pays $5,000 the first year for all materials and participation fees, excluding the cost of a browser-equipped computer and phone line in the store. Stores also pay the cost of the $10 reward for every $250 in purchases. And while Tucker says she thought at first that was a daunting amount, she has since changed her mind. “When customers talk about how they’re going to spend the reward, we hear them saying they’re going to spend it on something they wouldn’t ordinarily buy,” she says. In addition, she adds, when customers come to the store to redeem the reward, they always buy additional items.

DeRonne says his store has been happy with the program so far. “We looked at a number of loyalty programs, but they all missed the mark in some way,” he says. “This one is just what we were looking for because we can tailor it to our needs.”

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