Why Retail Incentives Are More Important Than Ever During the Covid-19 Era

September 08, 2020

Why Retail Incentives Are More Important Than Ever During the Covid-19 Era

The business of retailing has been decimated by the impact of Covid-19, so the last thing you probably want to hear is that you need to invest more in purchase incentives, right? Well, we hate to say it, but trends that were already apparent before the outbreak have been accelerated and that means that incentives are likely to be more, rather than less critical in the future. Your customers are in "save-mode" and looking to save a dollar where-ever possible. What follows is a look at each of those accelerating trends and their impact on the importance of rewards.

The Stampede to Online

The Covid era has driven, through necessity, a contactless and paperless environment. Obviously, online transactions are ideally suited for this era. Prior to the pandemic, retailers had a mindset of enhancing customer experiences through digital channels. Now the mindset needs to include, how do we minimize human interaction. This will accelerate the decline of the use of physical currency, paper coupons and possibly the perceived value that consumers are getting from their shopping experience.

Retailers need to meet their customers where they are, and these days that’s more likely to be online, whether it be on their home computer or on their mobile device evaluating where they are going to shop. And it’s not just paper coupons that are becoming less relevant, the decline of traditional media is being accelerated. With work-from-home now being the norm, the impact of drive-time radio and billboards has been severely impacted.

According to Restaurant Dive, El Pollo Loco has tripled digital sales in 2020 by modernizing its marketing. They recently interviewed Bernard Acoca, El Pollo Loco CEO, about what they were doing differently:

"In a world where people were sequestered at home, the need for out-of-home and drive-time radio … were going to be far less relevant, and we quickly transitioned to where eyeballs were, i.e. social media, mobile and advertising around news programming," he said.

The surge in online shopping is likely to be sustained post-Covid. So now is a pivotal time where retailers need to discover how to digitally connect with new and existing customers.

A Digital Relationship Is Critical

Covid-19 has shone a bright light on the need to have a digital relationship with your customers and your target customers. Those that had have a digital relationship were able to quickly get the word out about changes to menus, store ordering practices, deals, and/or discounts and promote their new off-premise business models. Many were unable to communicate with even their most loyal customers. One major exception was Chipotle. Back in 2015, Chipotle suffered from a major E. Coli outbreak. At the time, their digital relationship with their customers was lacking and this hindered their ability to respond to the crisis. Their new CEO committed to addressing this short-coming and, as a result, were well-positioned to respond to the Covid crisis:

Chipotle may be the best example of how a robust loyalty program can help digital sales thrive amid the pandemic. In April, the chain reported that its loyalty program now boasts 11.5 million members and that signups increased almost fourfold in March. Sixty-five percent of loyalty members are new to Chipotle, compared to 51% prior to the COVID-19 outbreak. Digital sales grew 81% to $372 million for the period, the highest quarterly level for digital sales — representing 26.3% of total sales. (Source: Restaurant Dive)

The incentive to attract and retain repeat customers is incredibly compelling. Repeat customers spend 67% more in comparison to 1st-time customers (Bain & Co. data) and they are incredibly more cost effective to market to, especially if you have that digital relationship:

  • Purchases are more efficient
  • Offers and rewards can be targeted based on past behavior
  • Response to promotions can be quantified and optimized
  • Customer feedback can be efficiently gathered

The benefits of having a digital relationship are more important than ever and you may not survive the next crisis if you don’t aggressively plan and implement your strategy now.

Digital Incentives Are Key

As a result, digital incentives are going to be critical in attracting the attention of new customers, enticing repeat and incremental purchases, and rewarding your best customers. A recent study by Bottle Rocket, QSRs in the age of COVID-19, found that 80% of respondents said they would be more likely to order from a restaurant via their website or app if they’re rewarded for trying a new way to order. And don’t think because you have a website and an app that shoppers will beat a path to your door. Incentives are critical in driving sales are likely to use features that give them discounts on products similar to past purchases – more than any other feature! (Clutch 2017 E-Commerce App User Survey).

Bringing information to your target customers within their social platforms is more important than ever. According to the same Bottle Rocket survey, 47% of respondents said that social media was the preferred platform – more than any other communication platform. And as an indication of the future, 18 to 24 year-olds are twice as likely to check social media before a restaurant’s website.

Implications:

As you plot how you will bounce-back from Covid, you need to look beyond immediate challenges and issues. It’s vitally important that you engage in planning and implementing your digital strategy now to accelerate future growth:

  • Decrease reliance on paper coupons and traditional media.
  • Turn to digital offers to attract new customers and reward existing ones.
  • Invest in your digital presence, especially mobile.
  • Integrate social platforms to encourage the network effect.
  • Plan a path from collecting email addresses to engagement through apps and rewards programs.

The surge in online shopping is likely to be sustained post-Covid. So, this is a pivotal time where retailers need to discover how to digitally connect with new and existing customers. Read more about What Makes a Successful Restaurant Rewards and Loyalty Program on another of our blog posts.

Spindy sends heartfelt best wishes to all those struggling to cope in this current retail environment; retailers with no view as to when a new normal will emerge and retail workers who don’t have a paycheck or one that is significantly reduced.

Stephen Condon
@streamingguy

Contact spindy if you have questions or comments about this article.