Jan 13, 2009

Hawaii shop finds customer loyalty is in the cardsBy Janis L. MaginPacific.BizJournals.com

Malia Johnson is practical when she talks about the little purple-and-white cards that customers redeemed during the holidays for discounts on jewelry, candles, crystals and other gifts at Sedona, her gift store in Ward Centre.

While the impact of giving $10 off for each card may have prevented Sedona from exceeding 2007’s holiday sales, “at least they’re being used and it brings people back,” she said.

Johnson began Sedona’s customer loyalty program in 1998 in response to big-box retailers such as Wal-Mart and Pier One Imports moving into the metro Honolulu market.

As a small-business owner who had been operating the metaphysical and spiritual gift store since 1988, she wanted to give local customers an incentive to return to her store instead of one of the national chains. More than 10 years later, she has more than 2,800 shoppers signed up as “Sedona Star” customers, and is able to promote the store to all of them through traditional snail mail and e-mail.

“It’s basically like a sales-incentive program that runs all year,” she said.

Back in 1998 when Johnson started the program, people called the cards “coffee cards,” because they reminded them of the cards given out at many coffee and sandwich shops that offered free beverages or food with a fully stamped card.

But loyalty programs have grown in the intervening years to the point that some 93 percent of retail businesses use them as standard offerings for their store, Web and catalog customers, according to a survey of 231 retailers released last summer by the Boston-based Aberdeen Group.

The survey found that the top reason businesses create loyalty programs is to develop “lifetime customer value,” which was defined as the present value of future spending through long-term customer relationships.

That’s especially important during times of stagnant growth, such as during a recession, according to Sahir Anand, senior analyst and author of the customer loyalty report. Building long-term customer loyalty can help ensure a future revenue stream through customers who are expected to spend for several years, he said.

Johnson saw that come into play during the holidays, when shoppers browsing in Sedona suddenly remembered they had fully stamped cards and dashed home to retrieve them so they could receive a discount with a purchase. Johnson said she designed the program by taking the things she liked about other stores’ programs and adapting them to her store.

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