Greater segments of the population are returning to urban cores to leverage the convenience and vibrancy of living downtown. In fact, Millennials and Baby Boomers alike are gravitating toward mixed-use downtown neighborhoods that offer safe and walkable environments, amenities, and employment opportunities.
In 2015, a ULI survey revealed that 50% of adults indicated walkability and convenience of a neighborhood as a top or high priority for housing location. This preference is much higher for Millennials (54%).
The growing captive downtown customer base has driven many Business Improvement Districts (BIDs) around the country to find creative ways to ensure that local resident and employee spending is being captured by downtown businesses. One popular strategy being employed these days is the district-wide shopper loyalty program.
These are simple ‘show your card and save’-style programs that offer percentage discounts and other types of deals and promotions to privileged customers subscribed to the program. While most BIDs carry out such programs with analog cards, some are finding ways to integrate their programs into broader downtown apps and websites.
The program might sound simple enough to implement… distribute cards, coordinate promotions, market the program, and apply discounts…but there are a host of other things you need to take note of before deciding to dedicate time and resources to such an effort. Will Lewis, Director of Marketing, Communications, and Events at the Village Alliance, Amy Tse, Director of Neighborhood Engagement at the Meatpacking District, and Brian Carr, Director of Marketing and Communications at Midtown Alliance, provide their insights on implementing district-wide shopper loyalty programs.
Determine the target audience of the program
Depending on the customer segment whose spending you’re seeking to maximize, you may structure eligibility requirements of your shopper loyalty program differently. ZIP code or district boundaries are often the simplest way to determine eligibility of subscribers. The Village Access card in Greenwich Village, for example, is only distributed to residents and employees in four selected ZIP codes. Meanwhile in the Meatpacking District, cards are mainly distributed to residents and employees within the service boundary of the BID.
To ensure that shopper loyalty cards are indeed distributed to eligible applicants (typically those living and working in the area), they are mailed directly to addresses in approved ZIP codes or distributed via employers.
Determine types of perks
Coordinating the perks and discounts offered through the program should be a collaborative process with local merchants. After all, retailers themselves will bear the cost of the perks – not the downtown organization.
Depending on the mix of businesses participating in your district shopper loyalty program, a straight percentage discount may not be widely applicable. 10% off purchases at a furniture store, for example, may be far greater than 10% off purchases at a fast casual restaurant. So it’s important to include a broader list of offers and promotions to sustain merchant participation and to diversify offerings to customers. Think ‘Buy One Get One (BOGO)’, free drink with a meal, or bring a partner and get a free class pass etc.
At the same time, however, Will Lewis, Director of Marketing, Communications, and Events at the Village Alliance, admits that over the years customers have shown appreciation for simpler perks. To achieve this balance between diversifying and simplifying offers, the Meatpacking District shares existing promotions from participating businesses with new merchants to guide their decisions. Even creating a general set of guidelines of perks and discounts organized by retail categories may be useful to have on hand.
As customers continue to seek more unique experiences in stores, perks offered through your shopper loyalty program will also need to skew in the direction of experiences and customer engagement. Brian Carr, Director of Marketing and Communications at Midtown Alliance, shared his thoughts on different types of experiential perks being offered on and planned for the IN*MidtownATL program but one that stuck was a hypothetical example of a coffee shop that may soon offer free coffee-brewing demonstrations with a barista. He adds that other experiential retail offers that have been popular in Midtown Atlanta revolve around health and fitness classes. It is important to note, however, that the popularity of experiential offers may differ by customer base. Fitness and coffee brewing classes are most likely to work in Midtown Atlanta because it has a higher proportion of young Millennial residents and higher median household incomes than the rest of the city.
Onboard merchants to the program and stay in touch
Retailers and restaurant owners are often time- and resource- starved, especially when they’re small, local businesses. Persuading these retailers to join your district shopper loyalty program and getting them to stay committed will therefore take a lot of time and effort. So be prepared to dedicate staff time to this endeavor. A staff person at your BID will need to pound the pavement and meet with business owners to get buy-in. In Midtown Atlanta, a part-time ‘Community Manager’ spends about 20 hours a week meeting with merchants and staying updated of every merchant’s offer. After all, offers will need to be dynamic and changed periodically to pique local customers’ interest.
To better manage this task, Midtown Alliance (in partnership with Geocentric) set up a content management system that enables their staff person to easily update offers on-the-go through a mobile device.
As retail staff turnover is often high, be sure to also set aside time and resources to continually train retail staff on how the program works and how data should be collected (more on this later).
Promote the program and deals
A huge draw for small businesses to be part of a district-wide shopper loyalty programs is to get their names out there because most merchants don’t have sufficient time and resources to carry out their own marketing campaigns. So any kind of marketing support can go a long way. Newsletter features to card holders have been cited as one of the most effective ways of promoting district deals without being overly public.
Although window decals are another popular way to promote the program, Amy Tse, Director of Neighborhood Engagement at The Meatpacking District warns that brand-conscious retailers may be less willing to display decals that clash with store brand and aesthetics.
Funding the program
In order to erase barriers to entry, most district shopper loyalty programs do not charge merchants to participate. Many are funded primarily by BID assessments or organization memberships, and supplemented by sponsorships from brand partners. Nominal fee payments made by participating merchants that are located outside the program boundaries is also another potential funding source.
Keep in mind that the major line items for the program include: card printing, card distribution/ mailing, marketing staff time (to update website or app on latest offers, and promote through newsletters and social media). In Downtown LA, for example, printing and distribution of 100,000 cards/ brochures alone cost approximately $50,000.
6. Collect data
As with any other downtown program, measuring success is vital to sustaining funding and resources. With district shopper loyalty programs, data can be collected at different stages – during sign-ups, during usage, and post-usage. In the Meatpacking District, for example, employees who have received a card are required to submit basic information when activating the card for use. This data enables the BID to understand who their typical card users are and to track any changes in the dominant user groups over time.
However, to keep track of where cards are being used, participating businesses should be required to build a unique item into their Point-of-Sales systems. Writing this into your signed agreements with participating businesses will be crucial as self-reported card usage by businesses is often inaccurate.
In Atlanta, Midtown Alliance has integrated its shopper loyalty program in its district app. App users that have successfully registered as a local worker or resident can then redeem offers in stores by clicking the ‘Redeem’ button set up for each participating retailer. The total number of ‘Redeem’ clicks helps the BID understand usage patterns of the program. The only challenge with this data collection method, however, is a potential undercount. Retailers have been known to give out perks to customers who simply pull up the ‘Redeem’ page – without clicking the buttons.
If a shopper loyalty program for local residents and employees doesn’t already seem overwhelming to take on, consider the challenges of differentiating your program deals and offers from ones already being carried out by individual retailers and by third-party apps like Yelp, Scoutmob, or ClassPass. Customers today are bombarded by deals and promotions through so many different platforms so be sure that your district shopper loyalty program offers are not over-crowding the heads of shoppers.
Furthermore, as consumer buying behaviors continue to evolve, think about using the program to not only drive sales but also drive customer engagement. With the exception of certain retail categories like convenience goods and groceries, physical stores are increasingly being used to connect with consumers through experiences. Don’t be afraid to offer creative experiences through your district shopper loyalty program: think cooking classes, stylist services, and even limited-run craft beers.Most importantly, pay care and attention to curating the types of deals offered through your program so that they match your resident and employee lifestyle and shopping preferences. If your district has higher household incomes with more high-end retailers, discount offers may not be the most appealing for local residents or businesses.
Special thanks to Will Lewis, Director of Marketing, Communications, and Events at the Village Alliance, Amy Tse, Director of Neighborhood Engagement at the Meatpacking District, and Brian Carr, Director of Marketing and Communications at Midtown Alliance, for providing their insights on implementing district-wide shopper loyalty programs.