Direct Mail Sows Solid Relationships (1,097 words)
Before loyalty marketing was all the buzz, a Midwest home improvement retailer, Quality Stores, began working its house-file data to find and reward its loyal customers. That was in 1991, and during the last decade, the Muskegon, MI-based company has used analysis and campaign management tools to grow and improve what's become its 700,000-member ThankQ Quality Advantage program.
During the same period, the 38-year-old Quality Stores has grown, most recently through the 1999 merger with Central Tractor Farm and Country, which had been in business 60-plus years. The combined company now has 340 locations in 31 states and describes itself as a niche retailer for rural and country farmers and their families, selling agricultural items such as fencing, feed and tractor parts, as well as hardware, lawn care, automotive and pet products, work clothes, and seasonal goods. The average store has 25,000 to 30,000 square feet of selling floor space.
Customers who sign up for the free, voluntary program provide very basic information such as whether they farm, have pets, what farm animals they own, etc. (The company does not rent its list.) The information is set up in a household-based database that is then supplemented with point-of-sale transactional data.
The goals of the loyalty program are two-fold, as Customer Loyalty Manager Karen Stapel notes: identify cross-selling opportunities and build stronger relationships with its customers.
Cross-selling: Need Some Horse Feed with that Tack?
Say a shopper has told Quality Stores that he owns a dog kennel but transaction data show he hasn't bought any dog food there. "That's a big opportunity for add-on sales," notes Stapel.
For several years, Quality Stores has been using Archer Software from NuEdge Systems (formed early in 2000 with the merger of RTMS and Customer Insight Company) to help it identify cross-sell opportunities and then communicate more effectively with members of its loyalty program.
Take the instance of the horse owner who is purchasing tack from Quality Stores but is not buying horse feed. "The Archer system allows us to find that opportunity, [create a mail piece] and accurately track what impact that piece is having," says Stapel.
Dave Schneider is executive vice president of consulting and education for NuEdge Systems, and has been the lead in helping Quality Stores use the information in its database to implement its loyalty program. He notes it's important for direct marketers like Quality to think of their customer data as an asset, just like inventory. "My favorite analogy is that you do inventory checks every night before you lock up. You need to do the same with any customer assets."
Quality has worked with NuEdge to develop personalized campaigns where 65 to 70 different messages were used based on transactional data and projection data, Stapel says. Schneider adds, "The data is what tells us 'What message Mr. Smith should get vs. Mr. Jones?'"
Benefits Boost Loyalty
To maintain long-term customer relationships, the ThankQ program's member benefits are numerous and diverse. A rebate plan lets shoppers earn cash back on purchases once they've spent a minimum of $200 annually. The program is tiered, starting with 1 percent cash back on $500 in purchases and stepping up in half-percent increments to a maximum of 3 percent back on purchases of $2,000 or more.
Other benefits of ThankQ include special members-only shopping events, a prescriptions by mail Heartland Home Pharmacy Program and free year-end account summary statements. These statements are particularly popular with the farmers, Stapel says, because some of their purchases are tax-exempt, and they can use the statements to identify these and help in preparing their taxes.
Direct Mail Is the Choice
To keep customers coming into Quality's stores, Stapel needs to communicate frequently with them about new products, special events and sales. "Because of our stores' rural locations, newspaper advertising isn't always an effective way of reaching them." Stapel notes, "Our customer will drive about 30 miles one way to get to our store."
To overcome the distance, "we use a lot of forms of direct mail to communicate with our shoppers," says Stapel. The company also has a catalog, which was acquired in the recent merger, but its merchandise is limited to harder agricultural products like tractor parts, not soft goods like clothing or housewares, and so it is currently mailed to only a segment of the housefile.
Stapel says the greatest challenge with such a long-standing loyalty program is "keeping it fresh." In her constant search for new ideas to test, she says, "I look at the things I get in my mail for interesting promotions, mail formats and creative." Adds Stapel, "It helps that we work with such a great group of [creative] people who are willing to consider anything." She also holds in-house brainstorming sessions to get some additional input—not from the creative or marketing staffs but from "outsiders" such as the accounting or IS departments.
One of the retailer's most successful direct mail promotions of late was a Mother's Day Event. "Even though the database is set up by household and includes male and female names, it showed a high percentage of male shoppers (about 60 percent) and revealed that many had never visited certain departments outside their core buying areas," says Stapel. A personalized mailing was created to redirect shoppers to other departments in the store. The program received a 50-percent response, and 70 percent went and bought in departments they had not been in before.
Watch the ROI
Of course, shopper loyalty means nothing if the back end doesn't hold up. With any loyalty program, "The name of the game is ROI," says Schneider. "You don't just do these things [loyalty programs] to be nice. A lot of people talk the talk but few really use their loyalty programs to make more money."
Schneider continues, "You don't have to give away the store. The program is supposed to reinforce in the consumers mind that this is a place where I like to shop."
A look at some sample mail pieces showed that's exactly what Quality seems to do: make simple offers that don't cost the company a lot of margin but drive traffic and bring in additional revenues. For example, free coffee, cider and donuts were promised at a Fall Shopping Event that also featured a scratch-off coupon good for 5-percent to 50-percent off. One added benefit of these events-based promotions, Stapel notes,"Our shoppers often talk to one another and plan a trip to our store as a social outing."
Quality Stores uses direct mail to keep its ThankQ program members coming into the stores.