You’ve “liked” your favorite stores on Facebook, and are following them on Twitter, but will these retailers reward your social networking, or are you better off sticking with a more traditional store loyalty program? If you’re looking for deals or events that are meaningful to you, it's turning out to be best to stick with the classic membership program.
It took retailers — and other consumer businesses — years to establish successful loyalty programs. These are the kind of in-store programs that actually use the data and personal information you provide to send you targeted offers — the kind you’ll actually want to use.
But in the last year, especially, retailers have rushed to Facebook and Twitter, trying to connect with customers. They offer special deals and coupons to those who follow them or like them. Some stores have racked up huge followings, and you'd think that it's working like gangbusters, but that's just judging by the numbers that the public can see. It doesn't take into account conversion to sales, how much turnover there is and and how much people tune out social media messaging. And the biggest question of all: Does deals from social media really save the customer money?
Sue Sung, managing director of Stax Consulting and head of its consumer retail practice, equates the rush to social networking by retailers to the dot.com madness of the prior millennium, when retailers in particular were hastily launching online stores without any idea of how to operate them effectively or profitably.
"So far everyone is driven to be on Facebook or Twitter, or to have a mobile app," she says. "But they're just getting eyeballs, they haven't figured out how to make money."
Sung much prefers loyalty programs and believes they have a greater return on investment for both retailers and shoppers. "Loyalty programs require the consumer to engage with that particular retailer, it drives that loyalty," she says. "The risk of social media is that you're not collecting consumer information. If you can't track who uses the (deals), you've lost a lot of the effectiveness of your marketing."
And the shopper loses customized programs, coupons or other types of savings that well-run loyalty programs can bring, like Best Buy's Reward Zone. There's no cost to join and members get certificates to spend in Best Buy stores based on how many dollars they've spent, as well as special offers targeting individual users based on buying preferences and past purchases.
This holiday, Reward Zone members will be invited to attend private shopping events, like one on Sunday, Dec. 5. Stores will close early and reopen to invited members, and according to Best Buy executive vice president, Shari Ballard, these same customers will get special offers on electronics throughout the holiday season.
By contrast, retailers using social network sites like Facebook are mostly putting out information about sales or special deals. Sears and Walmart are both actively using Facebook to communicate holiday sales, but both are casting a wide net and that's not especially good at creating loyalty.
“The risk of social media, is that you’re not collecting (customer) information,” says Sung. "Retailers can’t track who’s responding to the deal or what their shopping needs are." When it comes to consistent value, she says, “loyalty programs win.”
Laura Heller is a freelance writer based in Chicago who specializes in mass market retail trends and consumer electronics industries. You can follow her on Twitter @lfheller. You can also sign up for an email alert for all dealnews features.
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