Grocery stores across the country use in-house loyalty programs to incentivize customers to buy more and buy more frequently. These programs are essential for maintaining relationships with loyal customers, but aren’t as effective at driving new business as most store owners and brand managers may think. 

As you work through how to improve your business performance, consider what your loyalty program does well for your business and how it may fall short. Let’s dive into the strengths and limitations of most loyalty programs, and the ways in which the right third-party marketplaces can elevate — not erase — the investments you’ve already made to retain lifetime customers.
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Customer loyalty programs: strengths and limitations

Strengths

1. Convert regular customers into consistent, loyal ones — Every store has occasional, non-committal customers who would easily go to other stores if the prices were better. Loyalty programs help defeat that temptation by providing incentives for repeat business.
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2. Increase average basket size — Loyalty programs can also boost your existing customers’ sales. In fact, a recent survey found that 43% of customers spend more at stores when they use these programs.

Limitations

1. Only reach your existing customers — Your loyalty program might increase the basket size of your existing customers, but they rarely do any legwork to draw in new customers or expand your brand’s local reach.
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2. Limited personalization and targeting hurts profit margins — Rewards programs offer promotions on popular products, but these promotions aren’t always generated for each individual based on their own data. Even if yours does (which is a great first step), it isn’t driven by an understanding of what will change customer behavior to convert them into loyalty program members. As a result, your overall margins could shrink when unnecessary incentives go to regular customers who would have paid full price regardless.

What digital marketplaces can do

1. Build on existing loyalty programs
   
   Effective digital marketplaces should complement your business and boost the investments you’ve already made. Find the platforms that expand your capabilities and strengths and protect your margin instead of double-discounting and cannibalizing your profit.  
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2. Deliver personalized offerings
   
   Blanket offers for a given customer segment often overestimate how much incentive certain customers need to change their behavior. Instead, you need a platform that delivers personalized offers to each individual customer, leveraging your in-store capacity and the historic shopping data you already have to pinpoint the exact promotions that would encourage them to choose your store over competitors (that’s within margin and profitable for you, of course). 
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3. Expand store reach with new customers
   
   Your existing customer loyalty programming incentivizes your existing customers to shop more. But only a portion of your customers today use these benefits — in fact, best-in-class programs only see about 10% to 15% adoption and regular usage. Working with a marketplace that expands your store’s overall reach can help you funnel even more potential customers toward your in-house programs and foster loyal relationships.
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Using the best marketplaces effectively

The right digital marketplace partner will combine all of these scalable benefits in ways that amplify the impact of your existing program. With Upside, your stores can leverage the anonymized transaction data that you already have — in real time — to generate one-to-one promotions for thousands of customers around your store. This is a huge, profitable motivator for new and infrequent customers while maximizing the impact of your customer loyalty program. In doing so, Upside complements — not replaces — your existing strategies, amplifying what already works while adding in the power of an acquisition tool to expand your reach even further.
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To learn more about how you can amplify your loyalty programs and use digital marketplaces, read our latest eBook with more helpful tips.