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    Q Mart Reward Program Pays Off

    Wisconsin chain experiences more visits, higher average transactions and more loyal customers.

    By Barbara Grondin Francella

    SHEBOYGAN, Wis. -- As customers respond to the scores of rewards offered through its loyalty program, Q Mart Marketplace, operator of 20 stores based here, is experiencing more frequent visits by regular customers, bigger average transactions, better margins and a stream of new faces drawn to attractive deals.

    Using the Outsite Networks loyalty technology, which presents audio promotional messages at the pump and in the store, Q Mart registered more than 67,000 Q Mart Rewards members in a marketplace of 500,000 people. The system is able to handle price rollbacks, stored value cards, ACH transactions and many other loyalty program features.

    "Loyalty has been the backbone of all of our marketing campaigns," said JohnWinter, Q Mart's vice president planning and development.

    Through the loyalty program, Q Mart offers Point Rewards, Club Rewards, Sweepstakes Rewards and other random rewards, such as 10 percent off a dinner at a local restaurant or an oil change. Through Point Rewards, customers earn 10 points for every gallon of fuel purchased and every $1 spent in the store (including most products).

    For 800 points, the loyalty cardholder can get a buy-one, get-one free or mix and match medium coffee, cappuccino or fountain drink; Krispy Kreme doughnut; regular size candy bar; or 20-ounce Ice Mountain water. With 2,000 points a customer gets a free large coffee, cappuccino or fountain drink, Krispy Kreme doughnut, regular size candy bar or 20-ounce Ice Mountain water. Customers accumulating 15,500 points receive a $10 Q Mart reward.

    The chain has offered a loyalty program for four years and experienced three years of double-digit sales growth. "We try to figure out an angle to include loyalty in every product we sell," Winter said.

    Its Club Rewards program offers cardholders buy-one, get-one and other offers on dozens of products at any one time, such as buy one 12-pack of Coke, get one free; buy five car washes and get $5 off a gas purchase; buy a Bic lighter, get one free; buy any eight Jack Links packaged products, get one Jack Links Extreme Stick free; and buy eight fountain drinks, get one free.

    "Eighty percent of our milk sales come from loyalty customers," Winter noted. "We offer 30 cents off a gallon of milk if they carry the Q Mart key tag. We also offer a two-for price that has been well received."

    One random promotion was a "Buy 4, Get 4," where loyalty customers received $4 worth of free gas with every four 18 pack or larger purchase of selected Miller beer products.

    Customers using the rewards tag are automatically registered in a number of sweepstakes for concert tickets, sporting events and a $25,000 gasoline giveaway.

    The cumulative effect of these programs has been substantial. Q Mart grew sales from one novelty vendor by $200,000, by putting a random reward in the system where customers get a tiered discount coupon. "It allowed us to market to customers who never looked around the store to see what we have to offer in the way of novelties in the past," Winter said.

    The chain also saw a 200-percent jump in Nesquik product sales over one year, as the items were included in random loyalty campaigns and promotions. Q Mart saw a 35-percent increase in ice sales, thanks to its Ice Club deal: buy five bags of ice, get one free.

    Through the data generated by loyalty cardholders, Q Mart discovered 36 percent of consumers give the chain 86 percent of its business. "The rewards program has been very successful at creating an incredibly loyal consumer—and allows us to margin up," Winter said.

    On average, Q Mart's loyalty members make more than five store visits per month and nearly three fuel purchases per month. The average loyalty consumer spends $50 in the store every month, for an average transaction size of approximately $9. "The overall loyalty program has allowed us to grow our market basket significantly," Winter said.

    Loyalty gives retailers more bargaining power with vendors, as product sell-through increases, noted Bo Sasnett, vice president of sales for Norfolk, Va.-based Outsite Networks, which has 100 c-store clients with its loyalty technology in approximately 1,500 locations nationwide.

    Q Marts created 75 major loyalty reward partnerships with its vendors. "We've only lost two vendors and that was due to their inability to fund the program. They would have loved to stay in it, but it didn't work out for them," Winter noted.

    The loyalty program has a part in each of the chain's marketing efforts, whether radio, cable television or print ads.

    "Every aspect of the loyalty program is focused on," Winter said. "We live it, breathe it and make sure consumers know the opportunities they have when they are in our stores. "

    Each member of the management team went to the stores to learn how to sell the loyalty program and what to avoid. "We learned what consumers wanted to hear about, what they were interested in, and that they wanted to get in and out of the store fast," Winter said. "There were challenges in that regard."

    Q Mart management made the loyalty program part of the chain's secret shopper program, giving employees an extra reward—up to $75 per shop—for plus-selling Q Mart Rewards items.

    "We have so many club offers, the only way we will be successful is if the folks working in the stores are interested and work the program," Winter said.

    Retailers using Outsite Networks' loyalty programs see average monthly gains in store spending of $12 to $32, based on Outsite Networks' 4.2 million consumer loyalty members and 1.5 billion transactions. They see increased monthly fuel sales of 10.5 gallons on the low end, to $34 gallons on the higher-end of the scale.

    "The typical non-loyal consumer only makes combination purchases [both in the store and at the pump] 20 percent of the time. The loyalty customer makes combo purchases 54 percent of the time," Sasnett noted.

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