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What Furniture Retailers Need To Know About Loyalty Marketing

Furniture World News Desk on 7/15/2016


By Chad Burwell

In part one of this series, I discussed the success of loyalty programs within the furniture industry by comparing the traditional Loyalty program vs. the VIP program. Both models work for retailers but retailers often have difficulty getting started.

When a retailer decides to start a program, the biggest challenge is “How do we do it?” With so few furniture retailers in the industry with a program (Restoration Hardware being an exception), you can’t just copy what the competition down the street is doing! Furthermore, the difficulty of finding the time and the tools to create a program can be a challenge upon itself.

Here is a quick guideline to starting your customer loyalty program in 5 steps:

Step 1- Loyalty vs. VIP model
To charge or not to charge, that is the question? Most retailers want to charge their customers for a VIP membership as it obviously creates positive cash flow, can be used to close sales and will provide incentives for the customer to return. However, the traditional loyalty program which is provided to the customer for free will also meet these same goals without giving a discount on the initial sale. Retailers must take into consideration their history and previous marketing efforts. A new retail store shouldn’t attempt to charge for a membership as their reputation and customer base isn’t fully established. Also, stores that market solely on price and frequently discount will also find it challenging to charge for a VIP program. You need to ask yourself, “Would I want to pay for a membership to my store?”.

Step 2-Rewarding the customer
Once you have decided your model, you need to create the incentives for your customer. The VIP customer should get a discount on their initial purchase along with additional discounts on future purchases and in most cases, for a specific time period. This may or may not include discounting on extended warranties which in turn, will increase your closing rate on warranty sales. An example is a store currently charging $49.99 for a two-year membership had a 25% closing rate for their extended warranties. By giving their VIP members a 25% discount, they have almost tripled their closing rate! It does reduce the margins but it significantly increases volume of sales along with the membership fee equates to higher initial sales. In contrast, the Loyalty model which is free to the customer can often increase closing rates and a much quicker return for additional purchases. Imagine the reaction you get from a customer when you tell them they have a $100 in-store credit for their next purchase simply for signing up to the program! The loyalty model can also be set up to avoid backend costs! You can negate cost on additional sales by building in specific parameters to the program which will be much more cost effective vs. the VIP program. For example, limit the redemption amount to 50% of the secondary purchase to avoid giving away free product. Both models can include variations including tiered rewards, specific “members only” offers and additional rewards.

Step 3-Keeping the customer engaged
Do you follow up with every customer? Do you rely on a postcard or a call from your staff to ensure the customer is satisfied? Every loyalty program should include a welcome/thank you e-mail for their purchase to introduce the program and follow up on any service issues. It will also provide an opportunity to advertise or send a coupon to the customer. From there, you need to decide how often you will contact the customer as retailers typically send a quarterly e-mail to maintain customer contact, build brand recognition and at the same time, build their data base. The value of building a customer data base can not be overlooked!

Step 4-Operational set-up
At this point, you have a basic outline of your program and can now address the operational requirements of the program. For example; you will need to design and print your membership card, POS material, e-mail template, customer log-in access portal, retailer access portal, a tracking system for purchases and points, redemption allowances etc. Essentially, everything to make it “work”. Some POS systems will allow you to e-mail customers and build a data base, however, the functionality falls short for a proper loyalty program. There are several moving parts to a program and unfortunately, it is not a DIY project!

Step 5-Get started
Regardless of whether it is a VIP or loyalty model, you need to have the system and training of your staff in place before starting! You also need to have managers on board to continue to drive the enthusiasm required for continued success. Finally, retailers need to get started now! If your customer joins another loyalty program at your competitor, they will no longer be your customer!

Implementing a program can seem like a daunting project at first but in reality, with a bit of effort, it can be up and running within 30 days! The quicker you are, the bigger the “head start” on your competition you get!

Chad Burwell is the owner of Rewardslp.com, a company which specializes in the development of customized Loyalty and VIP programs for furniture, mattress and appliance retailers. For contact details, go to www.rewardslp.com.