Over 85% of shopping centre professionals plan to have a loyalty program by 2019. If you’re starting to understand the benefits of loyalty, it’s important to think about what aspects of loyalty are most important to you. Do you want to increase spend, frequency of visits, improve the shopper experience, gain more shopper data or reward your shoppers? It’s tricky to choose, most people we talk to want a bit of everything, and rightly so! The best programs focus on improving these aspects across the entire centre. To get started though, you need to know who your shoppers are – Or even better, who your best shoppers are. These are your shoppers who visit your centre regularly and spend more each visit.
Brian Woolf, otherwise known as the ‘Godfather of best customer marketing,’ defines best customers with the following guidelines:
- Spend the most each year
- Have the lowest defection rates
- Visit the store most frequently each month (we would add visits to the centre and tenants)
- Buy items with a higher average price
- Buy from more departments and categories (and we would add, different retailers/tenants in the case of shopping centres)
- Have lower processing costs (larger order sizes, fewer questions about where to find items, and fewer losses from bad cheques)
Woolf found from his research into large retailers around the world that the best of the best shoppers generally make up about 12-25% of your customers and will account for 40-60% of your sales. Here at Coniq, we’ve found that this can go even further in Shopping Centres, rising up to 30% of shoppers making up for 70% of sales. Woolf suggested an age old tip from us that ‘a loyalty program should be kept simple’. Woolf also comments that loyalty should ‘use total spend as a qualifier for the program and offer a basic set of benefits and rewards, then offer unannounced extra rewards that vary dependant on the shopper performance segment.’ We’ve often found that simple tiered programs which offer shoppers visible and attainable offers keep shoppers engaged and shopping for longer. Furthermore, offering rewards and extras to shoppers is a great way to spoil them and make them feel like a valued member of your program.
What Makes a Best Shopper?
Anything that adds to profit defines a best shopper. This includes:
Your best customers tend to visit your centre more frequently. According to Woolf, frequency is the primary driver of sales, and he has found a positive correlation between frequency and spending. In one major US food retailer he found that, while the bottom quintile of customers visited on average only once every ten weeks, the top quintile of customers visited 1.5 times per week.
Clearly, there is a difference in their level of spend on each visit (the top customers spending almost four times as much as the bottom ones) but, when frequency is taken into account, the average difference extends even more: the top quintile spends some 58 times as much as the bottom quintile in a year!
When your shoppers start to visit more, so does the size of each purchase. Our man Woolf estimates that between 70% and 80% of the total sales gain is due to the increase in frequency while the other 20-30% is due to the increase in transaction size. To super simplify this – The more customers visit a store, the more they know what products are available and where they are stocked. Increased frequency starts to ever so slightly retrace the fragmented customer journey, providing you with an opportunity to reach these best shoppers in a targeted manner.
Best shoppers will tend to buy more at each visit. This means that, per item or per euro/pound spent, the costs of handling the transaction are usually less and the contribution to turnover is more. Some of our recent data shows us that your grey pound shoppers (shoppers over 50) are your shoppers with the biggest basket size per visit.
The more recently a customer has visited, the more likely the relationship is to be still ongoing. Best customer marketing involves the use of win back programmes to identify when customers stop buying, to find out why, and to employ tactics to win their business back.
Your best shoppers are loyal, and a loyal shopper generates much more profit of a new shopper, for a number of reasons. A virtuous circle is the objective: the loyal shopper builds a relationship, dealings with the business are smoother and more profitable and over a longer period of time, and the shopper is rewarded at a higher level.
We thought we’d go just a touch further for Woolf’s definition, as we found that shoppers who spend more time in a shopping centre, usually spend more. By creating an exciting environment and using some top food offers, along with exclusive events can increase dwell time. Recent figures published by JLL and Coniq, show that shoppers who eat during a shopping centre trip spend on average 27 minutes longer across the shopping centre and spend 18% more in overall transactions.
We hope this has provided you with a framework to define your best shoppers so you can devise effective strategies to increase frequency, basket size, recency and dwell time. It is important to decide on the key metrics you would like to achieve or improve on. These can include some or all of the above, and combine with slightly softer metrics such as New Promoter scores to gauge the loyalty of relationships towards your brand and centre program.
If you’re interested in implementing a loyalty program or optimising an existing one, why not watch our free Shopping Centre Webinar. Coniq CEO, Ben Chesser speaks with industry thought leader Sean Curtis to discuss the current state of shopping centre loyalty, what the future holds, and how you can adapt to be at the forefront of change.
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What does your industry really think about loyalty? We asked 500 shopping centre owners, tenants and shoppers to find out.