Very few home furnishing retailers have any sort of reward program in place today. The conventional thinking is that reward programs are not a good fit for this category due to the low repeat visit count of the typical customer – but this sort of thinking is misguided. Consider the following:
1. Reward Customers Come Back More Often. In a category where repeat visits are fairly infrequent – it is vital to capture as many as possible – and a reward program can absolutely increase the odds that a customer does come back the next time they are in need of more home furnishings. Reward earners have a greater bond with the merchant who gave them the rewards. In fact, reward earners are more than 2X as likely to open a reward-related email from a retailer and are 64% more likely to make a repeat purchase versus a customer who does not collect/earn rewards.
2. Using rewards costs a lot less than discounting. Many home furnishing retailers think nothing of using enormous discounts to try and attract customers to their locations – but these discounts have a very real cost (a 10% discount reduces gross margin by 25-40%) and are not really very effective at pulling in customers. Ever since Black Thursday gained widespread popularity, very few consumers even bat an eye at discounts of 10, 20 or even 30% off. Discounting has become a very expensive yet ineffective practice. Consider the fact that most reward programs cost less than 5% of applicable transactions and when a retailer dangles an incentive such as popular travel rewards (Lift & Shift has access to 8 of the biggest travel mile programs – with tens of millions of members), people do not require such costly offers; they are content to add to their existing travel mile account balance; an offer of 1 mile per $1 is highly engaging to them and costs the retailer only about 5% of cost of goods sold. Retailers can really get reward collectors excited with 2X or 3X reward offers that will actually work harder than more expensive discounts and literally save the retailer money – about 10-15% versus the average discounted transaction.
3. Rewards Pull In New Customers. Glycmisvamende Over 3/4 of people who collect rewards will consider a merchant who offers a reward they value. Retailers who offer popular reward currencies (like travel miles) can leverage their popularity to attract new customers to their location(s). In the case of one Lift & Shift client, the retailer compared pre & post reward program transaction records and found that over 55% of people who came in to earn travel rewards were NEW customers – who came in because they wanted to earn more of their favorite travel miles.
4. Rewards Get People Talking About You. In today’s wired environment, people share information more easily than ever before and reward earners are no different. In fact, 70% of people who earn rewards will tell other people where they earned rewards. This type of word of mouth endorsement from a trusted source is invaluable to an retailer; using a reward program gets your customers to become brand ambassadors for your business.
5. Rewards Get People to Spend More. Reward earners tend to be better customers; they like rewards because they understand they are getting added value; they apply this logic to most of their purchasing. Because most people spread their purchases in any one category across multiple retailers, the opportunity for a retailer to simply capture more of a customers’ total purchases is very real; by simply dangling bonus offers tied to different purchase events, retailers can easily encourage customers to spend more while in their location(s) – at the expense of the competition. Reward earners routinely spend 50-100% more than non-reward customers.
By Graham Farrell, President, Lift & Shift Loyalty Programs