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Oct 11, 2002
Case Study

How a New Loyalty Program Raised Sales 30% for a Florida Retail and Restaurant Group (in August!)

SUMMARY: It is August 2002. It is Florida. The economy stinks. Nobody's
sales go up except for the guy selling air conditioning, and
Michael's Gourmet Group.

How did he do it? A new customer loyalty program, complete with
email newsletter takes the credit. Best of all, Michael Klauber
says his admin and marketing staff workload went down as a result.
CHALLENGE

Michael Klauber was one of the very first
restaurateurs to launch a Web site (in 1994), accept reservations
online (1995), and to start an email newsletter for patrons (in
1998).

These initiatives were so successful that he persuaded the other
entrepreneurs in his family (his father owns a resort, his
brother a wine shop, and his sister a clothing store all located
in Sarasota Florida) to combine their marketing efforts.

The various businesses (named Michael's Gourmet Group) started
growing a marketing database together.

The database soon became unwieldy. “The list of names grew
and grew, addresses kept changing, and it became a nightmare to
manage,” explains Klauber.

That did not mean he was ready to give up. “One thing I’ve
learned is that it’s very expensive to get a new customer, but
it’s less expensive to manage the ones you have,” explains
Klauber. Relationship marketing via the database could make a
huge difference in the Group's bottom lines.

Klauber needed a way to run the database without so much extra
work or expense.

CAMPAIGN

First, Klauber researched and found a software vendor
who could house the Group's data from all sources and tie it into
both the Group's existing point of sale technology and into their
email system.

Then he invented a new relationship marketing campaign, The
Gulf Coast Connoisseur Club. Membership benefits included
special events and offers, as well as a $25 bonus credit for
every $250 spent at a Club location.

To get the Club started, all of the Group's locations began
offering customers (who they call "guests") a complimentary
membership card. Employees prompted customers to use printed
sign-up forms near cash registers. Forms were also included in
restaurant bill folders.

In addition, the Group promoted the membership card in its
printed 'Gulf Connoisseur Club Magazine', a semi-annual that is
tipped into Sarasota Magazine (15,000 subscribers).

Plus the Group's HTML email newsletter was repositioned to become
a 'Members' Newsletter.' Each month's issue promotes members-
only theme dinners, wine tastings, trips, and special offers.
Titles are inviting, “The Perfect Summer Soiree,” and “Wine
Lover’s Nights,” include festive pictures and notices for special
savings and “Double Point Days.” (Link to sample below.)

“It’s a great way to add value to their membership,” says
Klauber. “And, members love the club atmosphere.”

The registration form to join asks for customers with their
email, address, birthday, and anniversary dates. After entering
the new data into the main database, the Group's marketing
department sends cards to new members via postal mail.

When members present the cards when they pay for purchases at
Group locations, employees swipe them through the special
terminal near the cash register, and the transaction goes into
the database.

Klauber says, “Because the points are awarded immediately, in-
store we don’t have to develop a mail out system or spend a small
fortune in direct mail efforts to market to the entire customer
base.”

The database provides invaluable transaction details for each
business, including:
--Sales summaries with a customer information list
--Highest frequency guest by location,
--Top spender by location,
--and the number of gift certificates redeemed.

Michael’s Gourmet also tracks members who have not visited in a
while. Then, rather than send out postcards to the 7000
customers, Klauber sends targeted “miss you” printed postcards to
select members.

These postcard messages are playful, “You don’t call. You don’t
write. Don’t you love us anymore?” They invite members to visit
with an incentive, “We’ll celebrate your return with 100 points
added to your Connoisseur Club account.” (See sample below.)

Printed cards are also sent on members' birthdays and
anniversaries, rewarding members 100 points for their next visit.



RESULTS

Since Klauber started the loyalty program a year ago
revenues for The Group are up 15-18% (depending on location).
For August (typically the Group's slowest month), sales were up
30% over last year with 1/3 of the overall revenue coming from
Club members.

Costs, on the other hand, are down. The Group has cut its print
advertising budget cut by over 50%.

The email newsletter in particular has been so successful that
Klauber has moved from “all direct mail, all the time” to sending
printed newsletters to only 3% of the customer base. A whopping
85% of members have volunteered their email addresses, and there
is a 60% average clickthrough on the newsletter.

Klauber notes: “My marketing efforts have totally shifted away
from print marketing. I’ve saved hundreds of thousands of
dollars annually in associated printing and mailing costs. And
the best part is seeing instant results.”

In fact email has been so successful that Klauber is in the
process of shifting away from printed postcards for his member
birthday and anniversary mailings. The conversion rate for the
printed birthday postcard is roughly 10% per month. (Next year
we will check in on how that rate changes once these are sent via
email instead.)

Human costs have been minimal for the changeover. Klauber
has not hired anyone to manage the database. In fact, he says, “If
anything, the process now takes less administration.”

According to Klauber, he has found the next-best thing to cloning
himself, “We’ve found a very powerful tool to individualize
service, but not in an artificial way. Our most loyal customers
already knew who they were. Now we’re able to acknowledge them
in a very positive way.”

One last note: We asked Klauber what he has learned after more
than four years of sending email newsletters. He told us, “It
seems like each one we do now is shorter. We know now to keep
the messages simple because people don't want to read lots of
copy.”

LINKS:

Samples of printed membership forms, email newsletters, etc. from
The Gulf Connoisseur Club:
http://www.marketingsherpa.com/michaels/sherpa_michaels
g.html


Ernex - the software provider the Group uses for the database:
http://www.ernexinc.com


Michael’s on East Restaurant: http://www.bestfood.com
Colony Beach Resort: http://colonybeachresort.com
Michael’s Wine Cellar: http://www.wineFlorida.com

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