Rethinking Customer Loyalty Programs

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In the 1990s, as corporate superstores opened hundreds of locations nationwide, indie booksellers grappled with ways to compete. Some created frequent buyer or loyalty programs that offered discounts or rewards after a certain monetary amount was reached, and many are still in effect today. However, some independent booksellers are starting to rethink customer loyalty programs that focus on discount and are designing new programs that they believe better reflect and promote the unique values their stores offer customers and the reasons that keep readers shopping indie.

Cambridge, Massachusetts’ Harvard Book Store values its frequent buyer program because of the connection it builds between the customer and the store, said General Manager Carole Horne. When the program began more than 25 years ago, it offered customers a 30 percent discount on their next purchase after spending $100. Sales were originally tracked through customer cards that were manually stamped. This later evolved to a plastic card and, finally, to a key-ring card, which is less expensive and is tracked through the store’s POS system. After a local discount bookstore went out of business, Harvard reduced its program’s discount from 30 percent to 20 percent, which customers willingly accepted, said Horne. Other benefits of the program include discounts on membership at many Harvard museums and a local theater, as well as on purchases at a local hardware store. (Customers present the frequent buyer card to garner the discounts.) Harvard also holds an annual sale open to all frequent buyers, during which everything in the store is 20 percent off.

“It’s very clear that customers care about the program,” said Horne. “From conversations, from watching people plan their purchasing (many people save up redemptions for holiday shopping), and from the success of our annual frequent buyer sale.”

The program is worth the cost and effort in that it allows staff to connect with customers in an important way that both benefits the business and informs the customer, said Horne. “We’re constantly asked about discounts. The program lets us have conversations with customers about shopping locally and all the other issues we want to discuss with them.”

At Brooklyn’s Greenlight Bookstore, there are approximately 32,000 customers enrolled in the store’s “Friends of Greenlight” program, which tracks spending by customer name through the store’s POS system and awards customers a gift when purchase totals reach $250.

“We deliberately word our customer loyalty program as a gift program,” said store co-owner Rebecca Fitting, “because who doesn’t like to receive gifts and presents?”

For their reward, customers can choose between any branded Greenlight merchandise or a designated gift title. The store claims publisher co-op for titles in the Greenlight Gifts program, and the books get featured in a display behind the register.

Greenlight’s customer rewards program was modeled after –– “of all things,” said Fitting –– the chain cosmetic store Sephora, where customers are offered generous samples as a reward after they have spent a certain amount of money. “The samples are provided by the vendors, so we view it similarly, by having the publishers subsidize the cost of the titles we are featuring,” said Fitting.

The bookstore’s staff monitors the book redemptions and has found that titles move at a good clip, which they believe is evidence of the program’s success. In addition, customer redemptions for Greenlight merchandise are a cost-effective way for the store to strengthen its brand.

However, with the recent changes to co-op programs by major houses, the store is revisiting the program to find a simpler way of managing it, since it is now difficult to attribute portions of the quarterly credits to the program. “This is admittedly a high maintenance program,” said Fitting, since it requires a constant mining of publisher lists for titles that are appropriate both in content and cost.

About a year and a half ago, Four-Eyed Frog Books in Gualala, California, began a Community Supported Bookstore (CSB) program, modeled after Point Reyes Books in Point Reyes, California. As a CSB, the store is better able to manage its cash flow during slow times, while giving customers a stake in the store, according to owner Joel Crockett. In the Four-Eyed Frog program, customers deposit $100 to $500 in their store account, from which future purchases are drawn. CSB members are also entitled to members’ only sales, which are held several times a year, event sales, and monthly surprises, such as a low price on a specific title, a one-day Members-only discount, advance notice of a new product or title, or a special Members-only event.

When Four-Eyed Frog opened in 2004, it had a more traditional frequent buyer program that awarded customers a $20 credit after their cumulative sales added up to $200. “After about 18 months, we came to the conclusion that those who benefited were our very best customers and that they would buy from us whether or not they got the credit,” said Crockett. Concluding that the program ultimately was too costly, “with a bit of fear and trepidation, we canceled the program,” said Crockett. “Our customers fully understood and sales continued to grow without the program.”

The bookstore measures the success of the CSB program by the level of participation. It is up to 156 members and has generated just under $30,000 to help with cash flow. “In our small community, that’s huge,” said Crockett. “Without exception, customers renew when they get down to $25 or $30.” Many customers leave money in their account and pay for books separately. “Customers tell us they love the program — not only the ability to come in and say, ‘charge it to my account,’ but also to give their visitors permission to charge a book at the Frog to their account.”

“While it’s not exactly a traditional frequent buyer program, it’s sure worked well for us,” said Crockett.

Ninth Street Book Shop in Wilmington, Delaware, has had the same frequent buyer program in effect since the mid-1990s, and “it has been very effective in promoting customer loyalty,” said store co-owner Gemma Buckley.

For every five qualifying items — which, in addition to books, includes cards, book accessories, gifts, and toys — customers receive a coupon worth 10 percent of the total of their purchases. The coupon can be redeemed immediately or at a later date for up to one year. There is no fee to enroll in the program, though customers must make one purchase per year. Upon signing up, customers provide the store with their mailing address and birthday month. For their birthday, they receive a coupon for $4.95 ­­— the average price of a mass-market paperback when the program first started — to be used toward the purchase of two books. “We get a lot of compliments on the birthday card,” said Buckley. “People really look forward to it.” There are currently about 5,000 active members in Ninth Street’s frequent buyer program, which was created in response to the opening of an Encore Books location in Wilmington in 1992, when the city wanted to bring nationally recognized stores to the area. “We were willing to take a 10 percent cut to bring people back to the store,” said Buckley.

Even though the program does not bring in a lot of new business, its maintenance is worth the extra effort, said Buckley. “I think people are looking for some sign that you’re giving. We can’t compete with Costco’s prices, but we can give you a small credit towards your next purchase, and we can make sure we have the books you need.”

The program also helps the store staff connect with customers. “We know so many of our customers by name,” she said. “I think that coupon helps builds those relationships.”

Washington D.C.’s Politics & Prose is in the process of rethinking its membership program to focus less on monetary benefits and more on a customer’s sense of being a part of the store, said co-owner Bradley Graham.

Currently, there is one type of membership with Politics & Prose, though customers have the option of signing up for one, two, or five years. The price of the membership is $25 for one year, $45 for two years, and $100 for five years. Members receive 15 percent off CDs and DVDs and 20 percent off all books mentioned in the monthly events calendar, featured in summer and holiday newsletters, and appearing on the weekly hardcover fiction and nonfiction bestseller lists. They are also invited to member sales, which are held four times a year.

The program has been in effect since Graham and Lissa Muscatine assumed ownership two years ago. Despite it being a “very strong program,” said Graham — membership is currently at an all-time high with about 8,500 members — the owners are concerned that the main benefit of the program is the discount. “We don’t necessarily want a program where a discount is the major benefit,” he said. “We think that people want to feel a sense of belonging, and [benefits] can be less monetary.”

The discount can also be confusing, said Graham, as it limits the discount to new hardcover books. Customers often approach the register with a pile of books that do not fall into the discount categories.

In considering a new membership program, the owners hope to put more focus on customers’ affiliation with Politics & Prose. “We can’t compete on discounts,” said Muscatine. “But we can offer other benefits,” such as first priority in signing up for store events and trips.

Graham and Muscatine also want to make the program fairer to loyal customers who don’t buy a lot of frontlist bestsellers or attend many events. “The people who buy a lot of paperbacks and greeting cards are not rewarded by the current program,” Muscatine said.

“Overall, the program is beneficial both in terms of customer satisfaction and in financial terms for the store, because it does help us increase sales,” said Graham. This was made clear when Politics & Prose did not hold one of its member sales this spring.

“We were thinking of cutting the number of sales we have, but not doing one this past spring showed us importance of these weekends,” said Graham. “Sales that weekend were identifiably lower than they have been historically.”

When Jeremy Ellis took over as general manager of Brazos Bookstore in Houston, Texas, he inherited an “extraordinarily complicated” frequent buyer program, called “Friends of Brazos,” which offered about nine different levels of membership. The higher the level, the more the customer had to pay to join. “It became impossible to keep afloat without a dedicated rewards manager,” said Ellis. Because there were so many different benefit levels, rewards were difficult to track and sometimes did not end up reaching the customer. This was not a practice that Ellis supported. The first rule in advertising, he said, is for businesses to keep their promises. “When you get someone to spend money and don’t follow through, it’s an unforgivable offense.”

Ellis has since simplified the program to one level, a “basic membership” that is $40 annually. With that, customers receive a Friends of Brazos card that entitles them to a 10 percent discount on purchases for the entire year. Additionally, cardholders receive two invitations to two annual book parties featuring special guests and presentations from publishers and authors. Following the event, everything in the store is 20 percent off.

Though there are about 50 to 60 people enrolled in the Brazos program. It is no longer actively promoted and Ellis is still trying to come up with a more effective system.

“My impulse is to phase it out,” said Ellis, “and focus more on good customer service tactics to retain customers. We need a loyalty program that values other attributes that real loyalty is built around. I don’t know what that is yet, but I think that’s what will ultimately be successful…. An incentive isn’t going to create new customers. If they’re loyal to the discount they’re probably not your best customer anyway.”

Ellis wants his customers to feel as though they are part of the store and to know that their loyalty is ultimately what is keeping the bookstore in business.

“I’ll never win a price war, and attempting to fight it seems silly,” he said. “I’d much rather add value to experiences and present our expertise as the thing that makes it worth it to pay full price. Every time we focus on that is when we find success.”