By Kate Quackenbush, Managing Editor
They have a saying at Mirabito Fuel Group: “When you attract customers with cheap gas prices, you only buy their loyalty until the next gas fill-up.”
That’s the kind of thinking that lead the 58-store, Sidney, N.Y.-based retailer to create a loyalty program that has close to 80,000 members to date.
Mirabito Fuel Group began as a full service fuel supplier with home delivery and service of fuel products as well as a wholesale business. The chain introduced Mirabito Quickway Convenience Stores in the early 1980s with stores ranging from 1,200-sq. ft. to 5,000-sq. ft. mainly servicing rural communities. As the company saw a reduction in cigarette profits, it began upgradingstores with an improved food and deli offering, but needed a way to further differentiate itself and at the same time tie in its home-heating business with its c-stores.
When Mirabito first considered a loyalty program in October 2002, none of the chain’s 50 stores were scanning, so the first step was to implement the technology and build a pricebook. Ross Mirabito, CIO of Mirabito Fuel Group, worked with the company’s IT staff (six men, including him) to install scanning and implement a broadband connection to link all the stores through a Wide Area Network (WAN). The team created loyalty PCs for each store to interface with the Verifone Ruby POS systems in place. Finally, the company-installed printers in each store and reconfigured the servers. After almost seven months, the program went live in May 2003.
“The biggest investment was the time it took the IT department to build the loyalty PCs for each store and then implementing the WAN and Virtual Private Network (VPN),” Mirabito said.
Even after all that work, the company’s relationship with Verifone allowed it to create a new version platform that doesn’t require a separate printer or loyalty PC. Verifone integrated a form of the loyalty program in the next generation Sapphire systems to which Mirabito has upgraded.
Spreading the Loyalty Around
Twin Falls, Idaho-based Oasis Stop ‘N Go Convenience Stores also took a hands-on approach to its loyalty program. The chain first began considering loyalty as a strategic avenue in late 1999, as a direct response to big box retailers entering the fuel channel. After losing 30% of its volume and a similar amount of inside sales at one location, Oasis Stop ‘N Go was forced to take the threat seriously.
After considering many different options, the 12-store chain came to the conclusion that a robust loyalty program would be the best long-term strategy to mitigate customer defection.
By 2000, when Oasis Stop ‘N Go first searched for a loyalty provider, there was no company that provided an affordable, complete turn-key solution that was specifically designed to meet the needs of the convenience channel.
“We wanted integration into our POS system. We also wanted fast, realtime transactions,” said Pat Lewis, partner in Oasis Stop ‘N Go Convenience Stores. “Because we abhor discounting, we wanted a rebate-based program and not a two-tiered pricing model. We also wanted full reporting capabilities, a call center to handle the registrations and cardholder inquiries, and someone to help us leverage the data to market specifically to our top customers. Since we could not find what we were looking for, we decided to create our own system.”
What followed was a crash course on loyalty10 months of hard work and an initial program development expense of over a half-million dollars that resulted in a spinoff company called KickBack Points Customer Rewards System, of which Lewis is the CEO. The company not only handles Oasis Stop ‘N Go’s loyalty program, but it manages programs for nearly 100 other companies across the country.
Sweetening the Deal
Mirabito had two goals for developing its loyalty program. First, it wanted to become a destination for customers. Second, the company wanted a stronger understanding of its customerstheir purchasing patterns and what promotions were more valuable to themand, in turn, more profitable for Mirabito.
Since the company already had ample information on its home heating oil customers, it began its loyalty database with them. Mirabito then started a three-month blitz, educating customers about the program with point of sale materials, pumptoppers and TV and radio ads.
While the Quickway Rewards Plus program offers discounts at the stores and with the home heating business, Mirabito wanted to create an enhanced value package for the blue collar communities it services. The company decided to partner with Value Centric Marketing Group (VCMG), a firm that helps bring different merchants together to enhance loyalty offers.
“We integrated our c-store offers with rewards from 100 different merchants so our customers can enjoy instant gratification on top of a point system,” said Rich Mirabito, vice president of Mirabito Fuel Group. “In central New York, our customers want local discounts and rewards rather than credit card miles.”
In Oasis’s KickBack Points, a rebatebased loyalty program, each merchant decides how much they want to rebate back. A convenience store might give back 1% and a restaurant might give back 5%. Additionally, a customer might be eligible for rewards based on specific purchases, dollars spent or frequency thresholds attained.
KickBack Points does not require a customer registration to participate on a limited basis, which allows for greater card penetration by virtue of increased consumer acceptance, according to Lewis. For full program benefits, however, the customer must enroll the card by calling a toll-free call center, going to online registration or mailing in a tearoff registration card.
By utilizing program receipts and store-level business rules to encourage customers to register their cards, the company has seen 85% of all issued points going on registered cards system wide.
Match Point
The real value to Mirabitoand to an extent its patrons is the redemption customers can get through merchant partners. Customers who tally 750 points would get a $20 discount at local restaurants, bowling alleys or golf courses, according to Rich Mirabito.
“It’s hard to put a value on the point system because it depends on what customers redeem them for,” he said. “What’s great is that it costs us half as much to redeem the points because they’re often spent with our partners. Even better, most of the points are earned in our stores.”
Customers earn one point for gas purchases and two points for home energy and c-store purchases. The company’s various club programsmilk, coffee and pizzaare woven into the program and customers can collect points to use toward discounted c-store products or within Mirabito’s other home heating businesses.
The information Mirabito garners from its loyalty program helps the chain make better decisions and learn what promotions are driving gross margin dollars. Before, the company didn’t know how its promotions were going. While a beer promo might show a particular brand selling more, the company couldn’t see how the category as a whole was performing.
But more than simply offering blanketed deals, data mining allows Mirabito to separate its loyal customers from transients it only services on occasion.
“Benefits and bargains should go to our loyal shoppers,” said Rich Mirabito. “Weeding out transient shoppers has allowed us to raise our margins, deliver more dollars to our bottom line and market deals to our loyal customers.”
While margins may have been dwindling at Mirabito, the Quickway Rewards Plus program
helps the chain drive store traffic and create twice as much profit from its loyal customers than its transient customer base. The average gross profit Mirabito makes from a non-loyal shopper on a quarterly basis is 12.42%, according to Rich Mirabito, and that percentage is up to 26.97% for its loyal shoppers. Penetration is up from 5.5% to 18%.
“We’re driving store traffic and managing better margins, but it’s helping us develop long term relationships with our customers,” he said.
KickBack Points has also leveraged its member information and partnerships to create personalized interest in its customers. By cross-referencing the basic information used to register a card with other KickBack databases, the company’s Customer Retention Manager (CRM) department can find amazing insights in how to market.
“Information gathered from crossmarketing between merchants in different channels can be used in various ways to induce a behavioral change,” said Lewis. “For instance, an Oasis cstore customer who hasn’t had their oil changed in the last three months may get a coupon and a friendly reminder that it’s time to get their oil changed because we compare databases with Jiffy Lube, also a member of Kick-Back.”
The Value of Membership
With the company’s tiered rewards program, 2% of all KickBack members qualify for Elite status and receive a special embossed card. Not only does this entitle them to enhanced benefits, but it carries a cach every time customers present it in an Oasis store. Lewis is shocked by the difference it makes when employees respond to an Elite Customer how they were trained.
“The added respect and recognition that the customer feels is probably worth far more than the rewards that they are accumulating,” he said.
In the coalition program, KickBack topped 500,000 members earlier this year. Some KickBack locations enjoy participation rates as high as 40% or 50%, and the average is over 25%.
Lewis believes the response has been so strong because the one card is accepted at many locations and customers can use it nearly every day in their normal routines. Since they are earning points at each participating merchant, their point balances grow faster, which means quicker rewards and more overall program satisfaction.
“Relationships with our customers have never been better,” Lewis said. “We made the investment into their emotional bank accounts, and they are paying the dividends with their increased frequency and ticket averages. It truly is a win-win relationship.”
Loyalty’s Gentle Touch While biometric technology is slowly inching its way into the convenience class, a one-store grocery retailer has created the first of its kind payment-plus-loyalty program called SmartShop. Powered by Pay By Touch (www.paybytouch.com), SmartShop uses a finger scan not only for payment, but to access customized coupons, promotions and rewards from in-store kiosks. Gary Hawkins, CEO of Green Hills Grocery (Syracuse, N.Y.), was one of the first supermarket retailers to launch a loyalty program in 1993. He believed for years that technology would enable retailers to offer specials different shoppers that fit their specific needs. When technology wouldn’t make it up to speed, Hawkins decided to create SmartShop, his own Web-based infrastructure and communication system that allows him to create personalized specials. When Pay By Touch heard what Hawkins was doing, it seized the opportunity to incorporate SmartShop into its biometric payment program. “Loyalty cards are a poor way to identify your customers or to track shopping patterns,” Hawkins said. “Too often, cards are shared, making it difficult to gauge what is bought for each household. I knew biometrics would be a convenient and accurate way to identify my customers.” SmartShop creates a personalized ad flyer for each shopper based on products they buy most often. Green Hills creates a library each week working with 100 to 150 items broken down to specific brands and packages sizes. The several-hundred offers run through a targeting engine and are compared against shoppers’ purchase history. Each shopper gets 10 offers a week, but the company is considering bumping that up to 20 offers a week. Shoppers access their specials by e-mail, the SmartShop Web site or one of three four-sq. ft. kiosks in the stores where, with a touch of their finger, a list of specials is printed. Identifying themselves at the check out with the biometric finger scanner automatically rolls back pricing for any specials they’ve purchased. “Traditional marketing vehicles cost more each year and provide less return,” said Hawkins. “Going to market on an individual shopper basis is very effective.” Since Hawkins is piloting the integrated SmartShop and Pay By Touch set up, cost was nominal, but he insists that the return on the investment is very strong. “Cost varies by how many Pay By Touch finger scanners a store uses, and if they want to use the kiosks as well, which I recommend,” Hawkins said. “You’re maximinzing shopper lifetime value by creating relevant messages that increase their shopping frequency, market basket size and retention. Any one of those levers produces strong results and a quick ROI.” |