Jim Maze, an Ace dealer in Warsaw, Ind., was never much of a loyalty card user himself.
“I have one for the grocery store, and I kind of don’t like it most of the time,” he said.
But the newly revised Ace Rewards card program has softened his out look.
“It has kind of changed my mind because we have a program that is extremely successful. I do think it brings the customer back more often,” said Maze. “What has impressed me from the beginning is how the customers take pride in having their rewards cards.”
Making a personal one-on-one connection with customers is what Ace is looking to its recently revamped Ace Rewards program to do.
For most retailers, the goal behind any reward card program is to entice customers to come back and hopefully increase the average sale. Along with that is the collection of data to help design more targeted promotions. Ace first launched a card program in 1997 under the Helpful Hardware Club banner and this April reenergized its efforts by changing the name to Ace Rewards, issuing new sharp-looking black, red and white cards, and strengthening the program with a hefty corporate push.
“To refresh the brand, we set out to update the name with something that can be more easily said at the point-of-sale, leverage the Ace brand and communicate a loyalty or rewards program message to the customer,” explained Phil Bauer, customer relations manager of Ace Hardware.
The old name was “a mouthful,” acknowledged Bauer, “and many retailers elected to call the program something else.” On top of that, he said, research found that the name had low brand equity among members.
With Home Depot and Lowe’s ever looming, winning customer loyalty is key to the success of a cooperative like Ace, where the focus is on service and convenience.
In 2006, Ace’s reward card transactions represented 24.3 percent of all transactions. The corporate goal is to grow that to 60 percent by 2011. In educational materials for its dealers, the company said another goal is to “annually grow same customer sales 25 percent higher than overall same-store sales.”
New in-store counter top signage touts the Ace Rewards program. Sales associates have been urged to ask for cards during transactions. Card caddies are placed at the register, so even without being asked, customers can reach out and pick up a form. Already, 1 million new cards have been issued this year, bringing membership nationwide up to nearly 13 million. Yet, Ace still has a way to go; only about 2,500 of Ace’s 4,600 stores nationwide participate in the program.
But that number is apparently growing. Westlake Ace Hardware of Lenexa, Kan., an 88-store company, is now in the process of introducing the loyalty card. “We just rolled it out to three-fifths of our stores,” said David Patrick, the chief marketing officer, who said eventually Westlake would like to use the data collected to better market and merchandise its stores.
“For instance, if you know that your best customers really like paint, then we would want to do a paint promotion,” said Patrick. “The first step is rolling it out. The second step will be getting enough penetration in the customer base. Once we get the program to scale, the third step will be leveraging the data collected.”
The core elements of Ace’s card program have remained the same. Customers earn 10 points for each dollar spent. When they reach 2,500 points, or $250, they receive a $5 store reward. There are also in-store discounts that can only be redeemed by cardholders.
Members also receive advance notice of super sales and bonus point offers throughout the year. When signing up, the shopper gets 1,000 bonus points on their first transaction.
To kick off the new Ace Rewards, new cards were sent to existing members, and top customers received a double points offer.
The program is continually being updated “to keep it as relevant as possible to the consumer,” said Bauer.
New improvements include increased use of e-mail marketing and smoother integration with other media. Also, Ace now offers E-Rebates—online rebate submissions for Ace Rewards members. Over the Labor Day weekend, Ace Rewards members could receive rebates such as $5 on the purchase of the Black & Decker 17-piece drill bit set, $3.50 on the 32-ounce Bug Stop Home Insect Killer and $80 for the Makita 18V Drill/Driver kit.
Headquarters has several goals for its Ace Rewards program: to improve return on investment by delivering the right offers to customers; to personalize the customer relationship with his or her Ace dealer; to use data collection to improve future strategies; to integrate Ace Rewards and leverage it across all promotional decisions; to improve operational execution of the program; and lastly, to provide consistent and clear information on the program and its results to Ace retailers.
“Our experience shows that stores with a higher Ace Rewards transaction percentage are generally more profitable, which would in turn motivate a store manager to scan an Ace Rewards card with every transaction,” said Bauer. However, “providing employee incentives to ask for or scan cards is completely at the discretion of the individual retailer.”
In hard numbers, Ace revealed that top performing Ace Rewards dealers have a net profit before tax that is 51 percent higher than low performing Ace Rewards stores, and a return on net worth that is 25 percent higher.
To ensure the program is executed at store level, Ace recommends each retailer appoint an Ace Rewards coordinator.
J.C. Christian is the program point person for Paul’s Ace Hardware, a five-store operation based in Scottsdale, Ariz. He said the transition to the new program went smoothly. “We talked to the managers and cashiers, so they were prepared. We put up the signage. It was pretty easy. The new cards kept the same account numbers,” noted Christian, adding, “The Ace Rewards name is more positive and less to remember.”
“We try to have all of our cashiers sign everybody up for it. I do think it helps return people to the stores.”
Maze, the owner of Warsaw Ace, said he now has almost 7,000 customers signed up as members, although not all of them are active.
“There is no doubt that the average transaction [of card holders] is higher,” noted Maze, who operates a 24,000-square-foot store. “It is now an average 30 percent higher than non-rewards transactions.”
But while the program brings shoppers back and increases sales volume, there is a downside, he noted. The $5 reward on a purchase of $250 is actually a 2 percent discount, a slight margin reduction.
“The special offers for club members impacts our margins too,” pointed out Maze. One current promotion offers members 50 cents off a $6.99 paint-brush set. “It is the downside that I and other retailers have with the program.”
But for increased loyalty, Warsaw Ace is ramping up the program. Maze hopes to build his Reward card transactions from around 25 percent up to between 40 percent and 50 percent.
“For if each of those transactions follows what Rewards members historically spend, we will see a 20 percent to 30 percent increase in our sales,” projected Maze. “Of course, we don’t know if that would happen exactly. We do have competition coming in all the time.”