Loyalty Truth

A Loyalty program can be to a retailer as snakeskin is to a reptile. The program is an external manifestation of the retailer’s identity (in this case, brand) which must evolve in response to growth and change within its environment (the business).

The analogy is intriguing but has limitations. Snakes shed their skin up to four times per year without having any say in the matter. Nature knows when refreshment is necessary and a new skin allows for growth as well as purging of parasites from the outer layer of the reptile. Not conforming to this pattern, retailers have been known to launch loyalty programs and leave them unattended for years.

Secondly, when a snake moults its skin, a new one is always created. There is no choice in the matter and the new skin is normally bigger, brighter, and moist with brilliance. The fate of a retailer’s loyalty program lies in the hands of the reigning executive team. Corporate acquisition, new directions in brand identity, or fundamental changes in the competitive landscape impact the perceived usefulness of the loyalty program and threatens its future existence.

The manner in which retailers or any customer facing organization manage changes to their loyalty programs has direct impact on their customer base. If you are tempted to think that loyalty doesn’t matter or that program saturation translates to consumer apathy, take note of the massive volume of emails received by the airlines each time they change their program rules. Believe me, consumers are paying attention.

Vitamin Shoppe doesn’t sell snakes or snake oil but caught my attention by the way they handled a tricky circumstance relating to their loyalty program. The company recently acquired Nutrition Depot, a homey chain of health food stores that had earned a strong following. As part of the purchase, Vitamin Shoppe inherited an existing rewards program and needed to manage customer expectations with care.

In Nutrition Depot’s VIP Rewards, customers could earn 1 point for every dollar spent in the store and received money off purchases when reaching specific thresholds. Point balances were reflected on purchase receipts and redemptions were transacted seamlessly at the point of sale. No website was needed for support and program communications were minimal. This very basic frequency program awarded regular shoppers and capitalized on POS messaging to keep expenses low.

As local stores were shuttered and “coming soon” signs were posted, customers raised questions on several fronts. Would loyal Nutrition Depot customers identify with the slicker, corporate feel of the Vitamin Shoppe stores? Would prices increase to support national advertising? How would Vitamin Shoppe handle point balances from VIP Rewards?

The company took a big first step in helping customers find the right answers to these questions through their intelligent and caring communications regarding their own loyalty program, Healthy Awards Club.A Welcome letter was sent to all customers in the Nutrition Depot program informing them of the acquisition and pointing out benefits of the Vitamin Shoppe chain. Customers were sent a coupon good for 20% off an entire purchase and were informed of their automatic enrollment in Healthy Awards Club. Membership cards were enclosed for wallet and key chain.

Best of all, Vitamin Shoppe made clear that “we will add the points you earned this year at Nutrition Depot to your Vitamin Shoppe Healthy Awards account” and emphasized that “every dollar you spend earns points towards FREE merchandise”. A minor criticism is the unclear messaging about point transfer. Would the total account balance be brought forward or just those “earned this year”. Regular readers of Loyalty Truth know how we detest the marketing “asterisk” and this phrase appears to bear strong resemblance.

Not all customers embrace change. Bigger is not always better and just because Corporate Finance determined that an acquisition to expand the footprint would be beneficial to shareholders does not ensure that customers will see it the same way. Change can stimulate unwanted reevaluation of purchase decisions and habits. How many times have you, as a consumer, witnessed an acquisition and wished for the “good old days” in the aftermath?

Loyalty programs are meant to be differentiating factors in a business. All things being equal, they should make a difference, turn a head, and encourage consumers to give up a little “share of preference” towards the sponsoring business.

In this case, Vitamin Shoppe elegantly and effectively communicated with the loyal Nutrition Depot customer base and set the tone for this group to give them a chance. The 20% off coupon will stimulate lots of visits to trial the new stores. The enclosed membership cards and promise to make good on points earned provides further assurance that Nutrition Depot customers will take a liking to the new owners. Most importantly, Vitamin Shoppe communicated with sincerity and created a foundation of trust through their highly positive message.

Nutrition Depot customers could have felt “snake bit” in this transition, but instead feel like they have been invited to be part of a new creation. My bet is that the letter generates a high response rate. What happens next will be dependent on the availability of familiar product, pricing, and service – those factors that Loyalty cannot overcome, just emphasize to make a difference…….Bill Hanifin