Last year, six independent coffee shops in Washington, DC, had an idea: Why not band together to create a customer rewards program? Customers would receive free rewards cards, and then once they bought coffee and got their cards stamped at all six shops, they could redeem the card for a free coffee at any shop they chose.
The coffee shop collective is calling the new program, which launched in mid-January, a “disloyalty program,” because it’s not focused on encouraging customers to patronize one particular coffee shop.
“We all have different baristas and music and all the things that go into a great coffee shop,” says Max Brown, co-owner of Chinatown Coffee Co., one of the participating businesses. The idea, he says, is to encourage locals to spend their money at independent, locally owned coffee shops rather than at the Starbucks and Caribous of the world. “We all support promoting independently owned businesses,” Brown adds. “We don’t view it as competition.”
Brown says each coffee shop received 500 disloyalty cards to give out to customers; Chinatown Coffee’s were all claimed within two days. The participating shops aren’t sure whether they will extend the program beyond the initial run, but so far it seems to be working. “If everybody comes, we’ll have 3,000 come [to the shop]—probably half who haven’t been there” before, Brown says.
The Rewards of Loyalty
The concept behind the disloyalty program isn’t exactly new. In fact, similar concepts have surfaced in other cities in recent years. Highland Park, New Jersey, for example, gives residents rewards cards that provide discounts to many area businesses. Eat Local Cincy, a group of independently owned restaurants in Cincinnati, gives points to diners who eat at any of the participating restaurants. Once diners spend $150—racking up 150 points on their cards—they get a $10 gift certificate.
The idea “is not a ‘disloyalty’ program at all,” says Mark Johnson, owner of Loyalty 360, a Cincinnati-based association for loyalty marketers. “It’s actually the exact opposite: It’s a very targeted loyalty program.”
Such “coalition loyalty” programs, Johnson says, are an opportunity for independent businesses to help small businesses generate awareness about the value of buying locally and fending off competition from major retailers and brands while giving shoppers a little incentive. It can be a powerful way to engage customers.
Understanding the Risks
While banding together with other local businesses may be very effective, there are potential drawbacks and risks to consider, says Nicole Leinbach Reyhle, owner of Retail Minded, a Chicago-based educational resource for independent retailers.
There's the risk that a customer could have a bad experience at one of the participating businesses, which could reflect poorly on all the participating businesses or lead to disagreements among the business owners. “Any time you start to work with multiple personalities, you run the risk of conflict,” Reyhle says.
Moreover, whenever a business encourages customers to shop at similar businesses—like the six coffee shops in Washington, DC—there’s always the chance customers will discover they like another business better. One way around this risk, she suggests, is to collaborate with other independently owned businesses that sell different products or services.
Building a Disloyalty Program
So, how can a group of business owners start their own joint-rewards program? Reyhle offers these tips:
1. Find the right partners. The businesses might all be in one small geographic area, or they may be spread across the same city, but business owners who want to form a collaborative loyalty program should make sure to work with business owners who have similar goals for the program. The participating business owners should also have agreeable personalities and provide top-notch customer service. You have to remember “that your brand is now being positioned with another business,” Reyhle says. “Some businesses don’t want to give up that level of control.”
2. Identify a common goal. Before you design the program, make sure the participating business owners are all on the same page about the main purpose of the program. “Is your goal to just share a message of 'shop independent' or is it to increase sales by 10 percent across each business?” Reyhe says. “If you create a more firm goal, you’re more likely to get it because you know what you’re working toward.” Likewise, determine how you will track the success of the program once it is up and running.
3. Design the program carefully. The partnering business owners should think carefully and thoroughly about how they set up the rewards program. This includes determining how customers will get rewards and what rewards they'll receive, along with making sure the method prevents potential rewards program fraud. Participating businesses should also decide who will be in charge of paying for the rewards: Will it be at the business the customer chooses to redeem their reward, or will the businesses pool their money to cover the costs of the rewards equally? It’s important to figure out the expenses involved with the program and how they will be covered. Reyhle suggests putting together a detailed overview for each participating business in advance that lays out all the specifics of the rewards program to prevent confusion or miscommunication.
4. Communicate a clear, united message. Customer communications is of utmost importance with such a rewards program. Reyhle suggests designating one business owner to handle community outreach and media relations, and another owner to administer a Facebook page devoted to the rewards program. What you don’t want is mixed messages and confused customers. “Make sure that everyone’s role is clearly defined,” she says.
5. Consider how to maximize the effects of the program. Think about how the program and the extra business generated from it might be used to better engage customers overall. This may include hosting tours of local businesses or other special events for rewards program members. It might also include giving new customers a gift or asking if they want to join your email list.
Many businesses have their own loyalty programs as well, Reyhle says, and that's a good idea. But a collaborative rewards program can focus specifically on communicating the value of shopping at locally owned stores. “I come across so many independent retailers who think their next door neighbor is their competitor,” she says. “But in reality, you want your neighbor to succeed—unless of course your neighbor is a big-box store.”
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