By  on September 7, 2007

NEW YORK — Conventional wisdom is that loyalty programs can help lure shoppers not currently frequenting their respective stores.

But that's not the most effective use of money, according to Larry Aronson, a former Revlon executive who has cofounded Cartwheel LLC, a company specializing in loyalty programs. His take sounds confusing, but actually makes sense.

"If you have 10 percent of your shoppers doing 51 percent of your business and spending $750 on the front end and 30 percent producing 37 percent of the business spending $190 with 60 percent doing the remaining 12 percent and only spending $30 a year, you might think you need to go after the bottom group," said Aronson. "But that group spending $750 in your stores are your shoppers who have made your store their primary store. We would make the case they are already shopping your stores so you can get more of their business."

It is harder to change shopping behavior, he suggested, than it is to encourage customers to increase the number of times they frequent a store they already like and support. "It is time to start thinking about spending against your best shoppers and reward them," he added.

Aronson's work with chains and loyalty programs reveals customers really like rewards — especially easy-to-use cash deals. An example is a newly created program for Drug Fair Group Inc., based in Somerset, N.J., called WE CARE. This program rewards shoppers every time they use their card to make a purchase. They get one reward point for each dollar spent at Drug Fair or Cost Cutters. When $150 is tallied a $5 coupon is printed on the receipt to be used on the next visit.

Duane Reade has had a loyalty program in effect for some time and former senior vice president of marketing and merchandising for the chain, Gary Charboneau, said there was "immediate" response to the coupon. In particular, persons who were pretty loyal already to Duane Reade as much as doubled their visits.

Charboneau was named earlier this week to the advisory board at Cartwheel and will use his vast retail experience to help Cartwheel serve its partners. "I believe there is great untapped potential for retailers across channels to more effectively use the shopper information generated by loyalty programs to build their business," said Charboneau.

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