Sep 7, 2006

Critical mistake #4: Require merchants to change how they operate the POS

(This post is part of the series on key success factors and common mistakes.)

Sounds obvious, but actually, it’s pretty easy to fall into this problem. Want to redeem points at the POS? Redeem electronic coupons stored on the card? Reload money on a prepaid card? See what’s on the customer’s card? Clerks have to be trained to do these things and the redemption process can become complicated and messy. The features work in some merchant segments where clerk turnover is not very high and where the interaction between clerks and their customers is already rich. It’s a whole other matter for most other retail segments.

Rather than requiring all participating merchants to be able to redeem points and e-coupons, we have found that it is simpler to provide merchants various options. Why not let fast food merchants simply provide targeted paper coupons, printed at the bottom of the customer’s receipt? The clerk inserts the card and enters the amount on the POS terminal, without needing to learn anything new. When the customer decides to redeem the coupon, they simply present it just like any other paper coupon. Clerks already accept lots of paper coupons, so a few more won’t make any operational difference. There is no extra training and no extra processing. The coupons flow through into the merchant’s existing procedures. Other merchants, typically in higher transaction value segments, could be interested in redeeming points or cash back. But the choice is the merchant’s.

Part of the problem comes from focusing too much on loyalty and not enough on other promotional marketing techniques which are bigger and often more effective than loyalty. See this prior post on how loyalty is a tiny subcategory of the promotional marketing industry.

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