Developing Your Tasting Room Loyalty Program

If crafted and administered correctly, these programs benefit the customer and the tasting room, but sometimes they do not provide the desired return on investment. This article is designed to help you take a look at your current (or potential) loyalty program and decide whether your program needs to be tweaked or radically changed to be more successful.

What Should a Loyalty Program Do for Your Business?

Your loyalty program should help increase your tasting room's profit. A whitepaper written by Sports Loyalty International, Inc. outlines some of the general benefits of creating a loyalty program. By enrolling in the program, members:

• May be less likely to "defect" and purchase from another winery
• Could increase their spending over time
• Could be more responsive to promotions, which could reduce your marketing costs since you will have information about their preferences and habits – which allows for a more targeted promotional effort
• May shift spending to "higher-margin products"
• Could refer your program to friends and family based on their positive experience

Developing an Outline for Your Loyalty Program

 The great thing about offering a loyalty program is that customers understand their basic function, as they most likely belong to other programs. Regardless of the type of program you offer, consider these key concepts:

• Your overall goal – what you hope to achieve
• If you will charge customers to join the program, limit the number of members, or if enrollment will be free
• How customer purchases will be recorded
• Questions to ask members that will help enhance the program and their experience
• What purchases will "count" towards loyalty program benefits, what can members redeem points on, and if a program co-developed with a complementary business could be perceived as being even more attractive
• How you will determine that loyalty has really been established
• How and when you might need to end the program and the steps for doing so

Your Overall Loyalty Program Goal 

Each loyalty program that you participate in was (hopefully) designed based on a goal that the business felt would help boost profits. As with the other goals and objectives that you develop for your business, you will also need to think about what you hope your loyalty program achieves. Though not an exhaustive list, which of the following might be the most appropriate for your business?

• Incremental rewards. Your program might give all members a particular reward, but once consumers spend a certain amount, they would be entitled to more attractive and significant awards. You may even consider an "elite" tier that offers even greater rewards when 'X' dollars are spent, either on an annual basis or over the lifetime of the program.

• Upsell. A program that falls within this category would allow members to apply a 10% percent discount (for example) when they purchase at least $50 of wine and a greater discount when they spend even more. 

• Encourage repeat purchases within a certain period of time. As with one very popular coffee shop program, members earn rewards not on the dollar amount that they spend but on the number of times, they frequent the business and make a purchase. A basic membership, where participants only need to visit the shop once in a 12-month period, yields a single reward. If the customer visits "X" number of times in a year, they get an even more appealing reward – regardless of the total dollar amount that is spent.

Each of these loyalty program goals could very well encourage customers to spend more. If you choose to focus on a program that provides incremental rewards, you could send an email at the beginning of each season that includes a tabulation of purchases to date and indicates the amount needed to achieve the next level. This could encourage some "basic" members to move up in the ranks and eventually become "elite." The same could be done if your goal is to encourage repeat purchases.

Though it is suggested that members are fully aware of the rewards they receive based on their spending/visits, it is also suggested that you acknowledge members with a special reward when they spend a certain amount, visit 'X' number of times, or have been a member for a certain period of time. One particular program that I belong to does this, and though I never know when I am going to earn these "extras," I do feel pleasantly surprised when I learn that I earned a $2.00 discount or a free beverage. These surprises do not need to be extravagant – but thoughtful and of value to the customer.

Miner Family Winery, Napa Walley, CA, offers a program based on wine preference and consumption frequency. Permission to use the image granted by Miner Family Winery

Will Your Loyalty Program be Free, or Will You Charge a Fee?

Regarding whether you will charge members to join your program, there are quite a few things to consider:

• If the program is free, will there be an overabundance of customers applying for discounts such that the program isn't deemed "special" or "exclusive?"
• If you charge a fee, how will you determine how much to charge? Will it be a one-time fee or yearly, and will charging a fee deter some customers from joining?
• If you charge a fee, will you apply all or a portion of the fee toward the customer's future wine club purchases?
• Would a limited-edition program fit your needs? If you choose to offer this type of program, you probably will need to "reopen" the membership after a certain period of time. This may be necessary if you notice that fewer members are participating in the program and/or if several years have passed since the program began.

Recording Purchases

One of the most important components of the loyalty program is keeping track of purchases. The use and value of a program can deteriorate quickly if program participants feel that their purchases are not being recorded correctly.

To reduce costs associated with administering the program, you may decide to make customers accountable for keeping track of award accumulations. In this case, you do not record or tally purchases; rather, customers are responsible for the safekeeping of their loyalty cards. When signing up for a membership, customers should be told that they need to keep track of their purchases and that if they lose or damage their loyalty cards, coins, tokens, or receipts, then they, unfortunately, lose any accumulated benefits.

Better yet, with all the advantages that a mobile payment system offers (e.g. potentially lower credit card transaction fees, faster transfer of funds to your bank account; click on the link for blog posts that provide more information on mobile payment systems and security), why not use these systems to help manage your loyalty program? 

The software tied to these systems can record purchases, and customers need only tell you their phone number, name, or other identifiers for you to find them in the system.

Regardless of whether you use a "punch card," point-of-sale system, or mobile payment system, the key issue is to learn about your customers' purchasing habits: what they purchase from you, how often, quantities they purchase at a time, and what promotion (if applicable) prompted their purchase.

Learn about Your Club Members

Your loyalty program can provide an incredibly rich source of customer data, you just need to ask the questions. If you are concerned about what potential customers will feel and think when providing personal information, consider the following:

• Only ask for information that will help enhance the program and provide the best experience possible.
• Customers can always choose not to provide responses to questions.
• You should stress that questions are asked so that you can make sure that they only receive emails, mail, and other communications that appeal to them.
• Give customers a privacy statement that indicates you will not share nor use their information other than the purpose for what is intended.

You should collect data when the customer signs up for the program. You should also consider asking additional questions when they renew their membership and when they attend events and pick up their wine.

You could ask questions to gather information, such as:

• Name address, email, the preferred method for communication, how often they want to hear from you (every email, once a month, only when related to the wine club, other based on your current email schedule). If there appears to be a concentrated group of members who live in a particular city/zip code, you could use this information to develop targeted promotions.
• If they would like to receive a reminder email to follow you on Twitter, Facebook, Instagram, etc. This could help in cases where the customer has the intention to follow or like you – but forgets to do so after they leave your tasting room.
• Varietals of wines they enjoy drinking, how many other adults in the household also drink wine, and when they drink wine (daily, weekend, etc.). Based on member's responses, you can use the information when deciding what rewards levels or tiers to incorporate into the program.
• Hobbies and leisure activities that they enjoy. This could help you plan special events that you hold at the winery. If a fair number of members like bluegrass music, then it might be worth investigating the possibility of hosting an event.

You have probably filled out a number of surveys and wondered why the business needs certain personal information (e.g. when you fill out a warranty registration form for your new vacuum), especially when they do not provide a reason why they are asking the questions. You may find that more club members will provide responses if you indicate how the information will be used and that it will not be shared with any other businesses and individuals not associated with the tasting room.

Will You Impose Earning and Redeeming Restrictions? 

No matter how you structure your program, it will not be successful unless its benefits appeal to members and if it is convenient for customers to redeem their rewards. Have you ever participated in a program that either makes it difficult to redeem rewards (e.g., a limited time period) or the "rewards" just did not appeal to you?

• Consider a wine drinker who prefers only white or red wine, but the loyalty program benefit is a discount on a mixed case.
• Or, the wine drinker who prefers dry wines but ends up with a case that includes sweet or fruit wines.

Sure, they could give the unwanted wine to family and friends as gifts, but might their enthusiasm to make purchases to earn the reward be diminished a little if the reward is not in line with their interests?

• Perhaps, based on responses to questions asked on the membership form (or other surveys), you learn that some customers really enjoy your wine but only drink a couple of times a month. Could you offer a half or quarter-case club option?

A loyalty program that consists of a "bunch" of inactive members does you no good. In fact, it may indicate a greater problem – that your program is not providing customers with desirable benefits. The figure below provides an example of a membership policy that alerts members that if their membership is inactive for two years, their membership is canceled, and they will lose any unredeemed rewards and points.

Including Complementary Goods and Other Businesses 

What if you learned that a rather large group of loyalty program members are also "foodies?" Could you offer a club option that includes a selection of complementary specialty foods, such as flavored oil oils, crackers and biscuits, sauces and mustards, olives, and other pickled products? Some tasting rooms have found that specialty foods are so popular that they developed a rewards option that only includes food items – not one bottle is included in the shipment.

If you do not offer many specialty foods, it may be worth approaching other local businesses that offer these products and develop a joint program or a club option that includes both food and wine.

You could also consider partnering with restaurants, lodging, or entertainment providers. A discount offered by a hotel associated with the wine club could very well encourage customers to stay the night at the establishment. Perhaps the restaurant that offers a discount to your club members would highlight your wines on their menu.

Benefits Other than Wine Discounts

Program benefits could also include a newsletter specifically for members, advanced notice of events and sales, invitations to exclusive events, free shipping, and so on. Or, your program could include experiences, as the Boisset rewards program outlines below. Members have access to cave tastings, blending sessions, retreats, pizza socials, and more.

According to Noah Fleming, who wrote the book "Evergreen: Cultivate the Enduring Customer Loyalty That Keeps Your Business Thriving" (2015, AMACO Publishing), developing a brand community where customers with "similar interests, values, and beliefs" have a space to share their experiences, talk about your wines, and ask questions is an essential component for creating customer loyalty.

Fleming provides a couple of examples of businesses that have developed successful communities (online and offline): CrossFit and Belle Tires. Both encourage customers to participate in discussions about the goods and services sold (the grueling training program and challenges), related topics (car care, weekend road trips), and the local community. The author points out that by providing the space where these conversations take place, these businesses know what is being discussed, can provide input and suggestions, and learn when customers have issues with their goods and services. 

Think of all the information you could share with your customers both online and in the tasting room with very little effort. You probably already offer your space to organized groups who want to hold meetings and celebrations at your winery; why not host a club member Q&A with the winemaker or a new release session on your slowest night? Provide customers with a few samples and a chance to purchase your new vintages before they are available to other tasting room customers.

Have You Achieved Loyalty?

Merely offering a loyalty program and investing little else into your tasting room may produce positive responses for only a short period of time. When you do not improve the tasting room experience beyond offering select discounts, you cannot win loyalty, and your customers can become trained to shop only when you offer sales or promotions. You will need to make certain that customer service, product availability and selection, and other experiential factors (e.g., aesthetics and educational opportunities) meet (hopefully exceed) customer expectations and persuade them to return again and again.

Though you will find lists that describe rather involved calculations to help you determine the success of your loyalty program, Customer Think provides a list of pointers to evaluate that is easy to understand:

• Customer Retention Rate: "measurement of how long customers stay with you.… [m]easuring the difference [in months, years, etc.] in customer retention between program members and non-program members is one of the best ways to determine if your loyalty program is effective."

• Customer Effort Score: "measures your business's customer service based on actual experiences customers have had with your company." If a group of loyalty program customers have indicated a need or want for a certain program option or benefit,  have you fulfilled this request? Or, if they have alerted you to a problem, have you provided a solution and fixed the issue?

• Negative Churn: "Churn is the measurement of how many customers leave your business over time. Thus, negative churn is the measurement of customers who, instead of leaving, upgrade their membership and purchase added services."

You should be able to review your members' purchases and, based on your overall goal (described in last week's blog), calculate the percentage of members whose purchases have increased (in number, individual price point, total dollar amount), remained the same, or declined (including those who have not made any purchases) for a particular period of time. Of course, you will need a point-of-sale or mobile payment system to capture these statistics.

Ending the Program

Many loyalty programs are put into place and then often changed because they do not fulfill the business' hopes of enhancing profits. Some of these programs change over time or are discontinued, much to the disappointment of customers who participate and have not redeemed rewards before the program ends.

Perhaps you experienced this type of frustration if you were a member of Subway's Sub Club promotional program. It was quite a popular program that:

• Anyone could join the program
• "Membership" was free
• Earning and redeeming were very easy to understand. Customers earned a "stamp" for each sub purchase, which they attached to a card, and after they earned eight stamps, they could redeem the card for a free sandwich.

Unfortunately, the program was phased out in 2005 because the stamps and cards were easy to duplicate, and "thousands of stamps [were] for sale at online auction sites."

Some customers were one or two stamps from receiving a free sandwich only to learn that they would not be able to "earn" more stamps nor be given credit for partially completed cards. Customers were told that they had a small timeframe to redeem fully completed cards at the discretion of each franchisee. I am sure you can imagine how upset customers were and, even in 2005, the number of them who went online to vent.

This is an issue that needs to be addressed well before you implement the program. If you must discontinue a loyalty program, make every effort to contact customers about changes or cancellations and announce the information in your tasting room, online, in newsletters, and so forth.

Be sure to inform members several weeks or months in advance and offer compensation comparable to the benefits or discounts they can no longer redeem. Offer a coupon with an open-ended expiration date so customers understand you are sincere in your efforts to help them adjust to the change. Compensatory coupons could be based on several factors, such as:

• An actual discount based on past amount purchased
• An award amount that is slightly greater than the actual amount owed (a good-faith effort)
• An entirely new type of reward system you are interested in implementing

Whatever option you choose, it is imperative that customers find value in the program and that redeeming the reward is worth a visit to the store.

Final Thoughts

While drafting the plan for your program, ask employees for their input and provide comments and suggestions based on the loyalty programs that they belong to. Incorporate features they like and believe your customers will value.

In addition, you might want to "trial" the program with a small set of customers. Before and/or during the trial period, invite customers to provide their thoughts about the program and if any part of the program confused them or if they experienced difficulties redeeming rewards. It is best to identify any problems that need to be fixed with a small group rather than hastily launch the full program only to find that there are huge issues. It is best not to change the program too much after the unveiling. Customers may become confused or upset if they feel you are not delivering what you promised.

The bottom line is that a loyalty program alone does not guarantee repeat purchases; rather, it is only one component that successful retailers implement. You must assure your customers that you value their patronage. The resulting outcome can be a lasting relationship that is beneficial for both parties. A continued series of positive experiences further encourages customers to shop there; hence, customers truly become loyal.