Loyalty Truth

Local merchants have consistently sought ways to market themselves more efficiently. In the years leading up to 2005, the most reliable methods continued to be participation in coupon books sent by direct mail to local residents, or advertising in a local newspaper. During the period of 2006 – 2008, consumers as well as business were introduced to all sorts of digital and socially driven online tools and toys. Facebook, Foursquare, Twitter, Yelp, and Trip Advisor became the face of this consumer age of digital discovery.

In the more recent three year period 2009 – 2011, business began to adopt social tools as part of their mainstream marketing mix. During this time, Social Loyalty has become a reality for business, both small and large. The challenge for business has not been to identify and adopt social media tools, but to understand the role each plays and how they can be put to use in a way that attracts the digital consumer and can later be measured for success. In other words, its easy to set up a Facebook page for your business and take ownership of its location in Foursquare, but more difficult to successfully create, deliver, and measure promotions that will have a consistently positive impact on the business.

There has been a trickle down effect of social media on the small business world. While big ideas constantly float through board rooms, the reality is that tools like Facebook, Foursquare, Groupon, Living Social, Belly, Perka, Shopkick and more present the potential to level the playing field between local merchants and their national competitors. What Sports Authority and Dick’s Sporting Goods are doing with The League and Scorecard, respectively, can be done just as well by a local tennis, running, or golf shop with one of the digital loyalty systems I’ve mentioned here. Actually, local merchants can do much better, considering that a visit to the landing page of Sports Authority this morning showed not one mention of The League on the front page, nor a single promotional message directing consumers to the program.

Probably the smartest way for local merchants to compete is to leverage digital loyalty systems in a coalition model. Over the past few years we’ve seen local merchant discount networks spring up in several states, aligning merchants in a specific town or city to encourage residents to spend their money locally rather than mindlessly running to the mall for everything little thing. The most successful local merchant coalition in the country might be KickBack Points, a system that started modestly to provide a loyalty program for a small chain of convenience and gas retailers in Western states and which has now grown to support loyalty programs across almost 1,000 Phillips 66 gas stations. You can read the KickBack story here.

I’m always thinking about local merchants, but today in particular due to a letter received in the mail this week. The little town where I live in South Florida is launching “Shop the Point”, a “resident card that entitles you to discounts, incentives, and other rewards for patronizing businesses in our community”. The program is sponsored by the local Chamber of Commerce and will kick off with a first round of activity next week on Black Friday. As you might expect, there is a page created within the Chamber of Commerce website for the program as well as the mandatory Facebook page.

I’m excited that city business leaders have recognized the need to create a marketing umbrella for the City and that they have warmed up to a loyalty program as the answer. I’m also worried that the opportunity will not be optimized for local businesses participating in the program if planners adopt the tempting DIY approach to loyalty. Discounts are always attractive to consumers, but the big win for local business is to create cross-shopping activity among and between businesses, while customers accumulate value that can be cashed in for something more interesting than “10% off”. The opportunity to identify residents and be able to provide them specific offers based on where they shop most often is a standard in loyalty marketing. The method of enrollment and data collection for this program will determine how powerful this program can be for merchants in the long run.

I know what you’re thinking. “just keep it simple……you can’t build Membership Rewards for the local community”. I get that. But I also know that a successful social shopping program, Zavee.com, is based in the next community over and could be adopted as the backbone of this new local discount club using a registered card model. Alternatively, I’m sure the folks at Belly or Perka would welcome the opportunity to present to the Chamber, offering merchants a paper-free way to conduct their business and shifting rewards from just discounts to experiential rewards. A third option would be to build a program based on Foursquare, with SMS support for those not rocking a Smartphone.

The power of the coalition model is to share offers, data, and cost to drive better results for the whole. There are inexpensive digital tools that can support a local coalition. My little town has taken a first step in the loyalty race in hopes of keeping hard earned dollars within the community. Their journey represents a case study which is being repeated across the United States. As we enter into the third phase of adoption of digital marketing tools, we’ll find out who will execute best to delight local customers.