Retail’s new strategy is a major gamble, but it may hold a valuable key to increasing sales now and in the future. 

The strategy: Several of today’s top retailers are literally buying customer loyalty. It’s a short-term strategy aimed at winning sales now, then keeping customers in the fold once the recession lifts (assuming the strategy pays off in the short term).

Some key examples:

• Sam’s Club is offering to back loans to customers for up to $25,000, based on them meeting standards approved by the Small Business Administration.
• Target is offering 5% discounts on most products to club card members, as a way to attract and lock in members now, so they continue to shop with Target for years to come.
• Staples and Office Depot are unloading old or outdated stock by either selling it for a penny or giving it away for free (with a minimum purchase).

All three strategies are different takes on the same philosophy — do what you need to win customers’ loyalty now, so once spending goes up again, you’ll already be their go-to source.

As a lot of the government stimulus programs near their end, retailers are picking up the same torch and running with it, in the hopes their generosity will translate into long-term profits.

Large companies are in a position to gain an edge over smaller competitors by using these tactics, as high unemployment, slow spending and a lack of confidence have made small business owners leery of offering credit.

The Sam’s program, in particular, is the result of a partnership with Superior Financial Group, which will manage the loans and the application program. Because Superior believes the program will provide such a boom for Sam’s, it’s offering a $100 discount on credit application fees along with low interest rates.

The takeaway: Retail is largely a B2C industry, where the biggest obstacle is a lack of consumer confidence/spending. Every industry has a similar obstacle that most salespeople (and sales managers) need to overcome. Consider what the one thing is your customers need most, and build a promotion that speaks to that need. It won’t only help you win sales, there’s a decent chance it’ll help you boost loyalty as well.

Source: “Retailers Devise Novel Ways to Boost Sales,” by Stephanie Clifford, New York Times, 6/4/10.

Tags: B2C, boost sales, customer loyalty, loyalty, Office Depot, Recession, retail, Sam's Club, Staples, strategy, Superior Financial Group, Target