Convenience stores, or C-stores, are a part of consumers’ everyday lives. People may need to stop for gas on their way home, or for a coffee before work. A hungry employee might stop by for a sandwich from the prepared foods section on their lunch break. Even students sometimes make a quick stop before class for a candy bar and a soda.
A lot of these customers give C-stores repeat business, so it only makes sense that they provide customer loyalty and rewards programs for their customers. However, such programs can be tricky to implement for businesses that offer multiple services, as the individual needs of each customer are on a grander scale.
To learn more about the evolution of customer loyalty programs in C-stores and how they are working to better provide a personalized experience for their consumers, PaymentsJournal sat down with Tom Byrnes, VP of Marketing at LedgerPay and Raymond Pucci, Director of Merchant Services at Mercator Advisory Group.
C-store changes in 2020 and beyond
During the pandemic, C-stores went through a reawakening of sorts. While restaurants and retailers closed down around them, C-stores remained open, even when COVID cases were at their highest. This solidified their status as one of the few truly essential businesses in the U.S., providing food and beverage services when people needed them most.
“80% of all the fuel in the U.S. is sold at a C-store venue,” said Byrnes. “So right there, that tells you they have a lot of traffic going through there, people coming in to gas up and stopping in the C-store for a product.” Money is certainly in the store itself, but also in gasoline sales. However, C-stores are starting to expand their retail space.
Not too long ago, the average C-store was about 2,000 square feet. Over the last few years, many stores have expanded to 4,000 to 5,000 square feet to store more food and beverage items. “At one time C-stores, for food, it was a greasy slice of pizza and stale coffee,” reminisced Byrnes. Now they offer coffee, cold drinks, and prepared fresh foods. This expansion in size and products has positioned them for continued success, and part of that success includes incorporating a customer loyalty program to increase repeat business.
The evolution of C-Store loyalty programs
Loyalty programs are nothing new to the food and retail industries. And now they can be found virtually everywhere, including C-stores around the country. “But developing a customer oriented marketing program that we thought of as ‘loyalty’ has been a phenomenon that has really evolved in the last five years,” remarked Byrnes.
Like most well-established retailers, larger C-Stores have opted out of plastic loyalty cards in favor of more tech driven options, such as QR codes. These loyalty programs encourage consumers to shop or fill-up on gas more frequently in exchange for a number of rewards.
However, 65% of shoppers stop at C-stores for gas only and don’t go into the store itself. The challenge is getting customers to enter the retail shop and make a purchase. “What’s interesting about [C-stores, and what] makes them really different than other retailers is that they’ve got a low average transaction value, but medium frequency visits are abnormally high and gross margins on the inside sales are strong enough to support customer sentence,” said Byrnes.
Consumer Packaged Goods (CPG) brands are increasingly willing to fund rewards card offers, which adds value to the program. But the question is: how do you get a customer from the pump and into the store to take advantage of that promo? This is where technology comes in.
With most stores moving to mobile apps, customers have loyalty programs right at their fingertips. But there is a lot of friction associated with this, as customers normally have to download the app, fill out a profile, and sometimes even connect a debit or credit card to their account.
“In C-stores in particular, I think what’s really challenging is that 55% of loyalty memberships go inactive if the customer realizes their points have expired,” added Byrnes. So it is important that employees are adequately trained in pushing these rewards offers and making them seem as appealing as possible to consumers.
The main reason businesses want to adopt a loyalty program is to bump their total revenue 25% to 40%, with an additional 5% increase in retention for a total revenue boost of between 25% and 90%. “For the C-store owner, the chain retention is an invaluable metric that happens to be particularly useful in terms of driving loyalty and revenue,” continued Byrnes.
Successful promotion and customer loyalty programs
Loyalty programs started out as paper punch cards and have certainly become more complex since then. With customers having an average of 13 rewards cards in their wallet, merchants have to continuously develop new and interesting ways to ensure their customers continue to interact with their loyalty platform.
“One of the big problems with many of the promotions that are pushed out there [is that] they’re often generic, and they’re not aligned with the personal preferences of any consumer at any given time,” said Byrnes. The ability to offer targeted offers when the customer is already at the C-store is where businesses will make the most impact. And when the merchant connects with a consumer in a way that makes them feel personally recognized, it further encourages customer loyalty.
When customers receive mail or e-mail promotions, it’s likely that the offer will go unnoticed or be forgotten. A loyalty app creates ample opportunity for C-store marketers to push unique and personalized promotions, and it allows developers to gather and leverage data to better target each and every customer.
“In a world where you’re deluge with marketing and brand impressions and promises,” explained Byrnes, “that’s the kind of thing that becomes more memorable in a personal way and drives loyalty in long term.”
LedgerPay addresses customer engagement and loyalty challenges for C-stores
To drive loyalty, LedgerPay and C-stores have been looking at the broader issue of how merchants can engage customers more seamlessly, on a personal basis. What they’ve learned is that C-stores face their own set of challenges, which differ from the challenges of more omnipresent businesses.
“The majority of Americans visit a C-store on a regular basis, [and] 65% of them are there for gas alone,” said Byrnes. “One of the challenges is you’ve got higher margin products inside the doors, [so] how do you get them from the pump [and] inside the door for a sale?” Additionally, with the high churn rate of apps in the first 90 days, it’s hard for C-store merchants to gather data from their customers.
LedgerPay has worked over the past few years to build solutions that address such issues. What it has developed is a program called Payments Intelligence, which gives LedgerPay the ability to securely and anonymously see the details of every transaction by each individual customer in all channels. “This enables us to extract rich, individualized purchasing data that C-stores have never been able to link together, that purchasing data with a customer, in a scientifically accurate way,” continued Byrnes.
For example, a customer may visit multiple locations for his morning coffee throughout the week, and he uses his debit card for his purchases. He is a member of the loyalty program, but forgets to use it because he’s in a rush to get to work. When this happens, the C-store loses valuable data in terms of when, where, and what he was buying.
Payments Intelligence captures all of this information through the specific debit or credit card without requiring any enrollment or app interaction. LedgerPay simply captures new cards as they come in and uploads the data to the cloud. As customers continue to use the same method of payment for their purchases, Payments Intelligence builds a profile for that consumer and their associated card.
“This transforms the commodity service of payments into a strategic competitive advantage for C-stores and other retailers,” concluded Byrnes. Over time, C-stores can use the leveraged data to deliver offers to customers, based on their preferences and behaviors, in real-time.