Article

Loyalty programs: keeping the customers satisfied

Loyalty programs show one upside to the kiosk business: well-designed applications with a strong business case-and positive ROI.

March 19, 2004

When John Glitsos, chief executive officer of kiosk application designer First-Wave, was interviewed for an article about the demise of the kiosk industry, the call took an unexpected turn.

According to Glitsos, the writer commented, "Hey, I heard you guys are actually doing well and are profitable."

The surprised Glitsos commented, "We don't do a project unless it has the potential for a positive ROI."

Loyalty programs, or applications that reward customers for shopping, are examples of kiosk projects that are succeeding.

One of the first successful loyalty programs was S&H Green Stamps. Created by Sperry and Hutchinson in 1896, the stamps were collected by grocery store customers and exchanged for merchandise. More recently, airline frequent flyer programs have become one of the definitive loyalty programs.

Now, by marrying loyalty programs to kiosks, the concept is finding new life.

Keep on truckin'

A new breed of loyalty applications are driven by the folks who spend a good portion of their lives on the highways.

About two years ago, El Paso, Texas-based Petro Stopping Centers wanted to revamp its trucker reward program. It asked Scottsdale, Ariz.-based First-Wave to design a kiosk-based system. The program, called the Petro Passport, quickly went into high gear.

Dave McClure, director of marketing for Petro, said, "It was pretty much instantaneous. We had a significant increase in sales from the first day we put it in. And we've got more than half a million active members in our program now."

Revenues also went into high RPM.

"I wouldn't want to give you a specific number, but we're talking double digit sales increases," McClure said.

When Westlake, Ohio-based TravelCenters of America instituted its own program last September, the results were similar.

Sylvia Berens, vice president of San Diego-based Apunix, the company that designed the Linux-based system, said, "Nobody could have predicted the excitement the drivers have for this program. They're literally standing in line to use these kiosks at most locations."

TravelCenter's "Road King Club" has been in existence less than a year but its kiosk program likewise gained popularity quickly.

"There are already more than 300,000 drivers enrolled in the program and there are more than 50,000 transactions done on the kiosks every month," Berens said. "TravelCenters considers the kiosks as one of the most successful initiatives in the history of the company."

The Petro network currently has 58 kiosks, while TravelCenters has 162 in its system.

Instant gratification

Unlike the S&H Green Stamps of old, which required shoppers to collect stamps in books and then browse a catalogue to get their rewards, the traction of modern loyalty programs is the immediate gratification made possible by computer networks.

"We felt that one of the most important things was that it had to be an immediate positive experience," Glitsos said. "If truck drivers had to drive back home and look through a catalog to redeem points, the effectiveness would be minimized. As it is, if they request time on their calling card, for instance, it's credited to their card instantly. They can walk from the kiosk to a phone and use it right then. The instant gratification method is what we believe drove the high ROI at Petro."

Drivers accumulate points for fuel and other purchases. They swipe their cards at kiosks to receive gift certificates for free meals (virtually all of the truck centers include restaurants in their complexes), long distance phone time, showers, fuel, tires, gifts, and other items.

Drivers can, however, opt to accumulate points over time to receive more expensive rewards such as TVs-and many of them do.

"A lot of them did their Christmas shopping at our travel stores," McClure said. "Last December had by far the strongest number of redemptions we've ever done."

Not for adults only

One area where instant gratification is a big issue, as any parent knows, is with kids.

That issue was particularly critical when First-Wave developed a kiosk-based program for kids' clothing store Kids "R" Us, a division of Toys "R" Us Inc.

The program, called "R Club" is meant for both adults and children aged four through nine. The kiosk cabinet design reflects this, with one side for kids and the other for the parents.

"Parents sign up their kids for the program and right then and there the kiosk prints out a membership card on perforated card stock," Glitsos said. "So the kid punches it out of the paper, goes to the other side of the kiosk, and can start playing games and do other cool stuff immediately."

The cool stuff includes a child giving the kiosk his name and other information to create a story that not only can be printed out to take home, but also can be read to the child by the kiosk's computer-synthesized voice.

"And the membership card-that's probably the first and only card they have that looks just like mom and dad's," Glitsos said, pausing for effect. "There's a psychology to this."

Other point redemptions allow the kids to receive a monthly calendar with their picture on it. The kiosk "voice" invites children to come back the next month to get a new calendar. "Repeat visits," Glitsos said, "are an important part of that kiosk."

Adults, meanwhile, use their side of the kiosk to find out about in-store specials, access a cross-reference sizing chart (since different kids clothing manufacturers employ different sizing information), and sign up for a mailing list.

All bets are on

Another moneymaker for loyalty programs are the adults who gamble at casinos. Cybertotems teamed with Grand Casinos in Minnesota to demonstrate a rewards program. The two Native American casinos installed kiosks in March. Each property trialed a different promotion, one offering a cash prize, the other giving vouchers for a drawing.

"What's amazing is that they had 30,000 users at the location that offered a cash prize. I've never seen that," said Robert Gallner, vice president of sales and marketing for Cybertotems. "Frankly, most kiosks don't get 30,000 uses in two years. But here you were dealing with something that was basically a lottery machine and it was free."

Equally significant, at the voucher site where there were no instant winners, the kiosk still had nearly 11,000 hits in its first month.

"The idea is to make it something fun and interesting and get customers to interact," Gallner said. "We tied in a bar code scanner to it and the casino ties that into their direct mail program. One of the promotions is a direct mail piece to 80,000 people for a giveaway. In order to see if they've won, they have to come in and scan their card on the kiosk."

Calculating mileage

With the truckstop programs, a clear criteria for success, and one that was apparently reached, is increased traffic.

"The cost of the kiosks is a very small percentage of what the total cost of the rewards program is, which is issuing all the points every month," McClure noted. "The first year we spent well over $6 million in reward points. Generating traffic is what it's all about, and the kiosks did that. We were fortunate to employ a system that did not cost us a whole lot."

To make a successful application, Petro paid attention to the unique lifestyle of truckers, who often are on the road up to 25 days a month and typically rent rather than own homes, since they often have to relocate to where the jobs are.

"A lot of loyalty programs use mail to advise customers of point status and get coupons to them, but we knew that wouldn't work for us," McClure said. "We really needed a way to let customers know what our special offers were, let them check their point balance, and pull their own coupons to redeem when they wanted to. We worked through a number of options before we decided we needed a dedicated kiosk."

The Kids R Us "R Club" program was measured in part by the kids' interest. Kristi Tolman, marketing director for First-Wave, said that Kids R Us wanted to see long lines at the kiosks. Important criteria also included the number of kids registering for R Club cards and the number of kids returning. Tolman said that thousands have registered and returned, demonstrating their loyalty, and providing demographics to the store.

Casinos measure their programs similarly.   "When people use the kiosk, the casino knows exactly what brought them there," Gallner said. "They also begin to identify their bigger players and can make better promotions, tying it into their advertising campaign. A lot of this is to capture more customer information. And I don't think you can put a price tag on that."

Flattery will get you lower sales

So while the reporter that first contacted Glitsos may have wanted to spell doom and gloom for the kiosk industry, loyalty programs are one area where the trade has not been grinding its gears. In fact, in a sincere form of flattery to truckstop loyalty programs, companies have begun imitating the Petro and TravelCenters programs.

"There are three competitors that rolled out copycat programs in January," said Petro's McClure. "Naturally, we're losing some of the business as they offer their programs. But we had a head start and we've kept the program moving forward."