Use Loyalty Programs To Increase Revenue
Adding a loyalty program to your business will increase revenue if implemented properly. How effective it is, and how big your ROI is, really depends on the program you’re implementing.
All loyalty programs trade something of value for a customer’s loyalty to your business. Some businesses position this as a reward, or a thank you for the business program – but the end result is the same: you’re buying loyalty.
Coffee shops offer some of the best examples for loyalty programs, but these ideas can be used in any business.
Customer Loyalty is Cheap
Unlike the cost of acquiring a new customer, loyalty can be bought for relatively cheap. It can be as little as a free cup of coffee every now and again. If I could guarantee you a repeat customer for the next 3 years, buying a daily coffee, how much is that worth to you?
The best part about loyalty programs is that the reward is often the product you have for sale. This means you’re nailing your target audience with the exact reward they want.
Customer Data is Worth More
Loyalty programs aren’t just about creating more revenue through loyalty – but also through Depending on the type of program you’re using, your loyalty program can capture some very interesting customer habits, including what they like, when they like it, and how often they like it.
Most importantly, it helps you identify your high value customers and offer them better loyalty rewards than low value customers. Any business with moderate point-of-sale software can tell you what time of day is their best time for lattes, but it can’t tell you whether the guy at the till is a high-value customer. Your loyalty program can.
Here are several programs your business can implement fairly easily:
Stamp Card Loyalty Program
Stamp cards. It’s a card that you have printed for an extremely cheap price, and as customers purchase a product, you stamp or punch a hole in the card to indicate a purchase. When enough stamps are on the card, you get a free product, or entered into a draw, etc.
This is an easy program to start and run, but it does have it’s pitfalls. First, it’s easy to exploit. It just takes a homemade stamp or hole punch. Second, it doesn’t capture any data. It’s a very manual program. Lastly, it’s usually extremely specific to one product. For example, if it’s a coffee reward (buy 10 cups, get the 11th free), it doesn’t distinguish between a person that just buys one coffee every morning, and the guy who comes in at lunch and gets a coffee, sandwich and cookie – even though the latter customer is more valuable.
Digital Tracking Card
This credit-card style card is a more up-to-date version of the stamp card. Instead of stamping a card, the card is scanned. This is a more costly program that usually involves a monthly fee for the software (or a large up-front cost), plus the digital cards are often more expensive.
The pros of this program are that you can often capture more customer data, and you can have tiers of loyalty. For example you can run the free 11th coffee program, while also running a sandwich or muffin loyalty program. This allows you reward high-value customers more than low-value.
Mobile Phone App
This is probably the easiest and most effective method for the consumer. No cards to handle, and you get a wealth of information. Users simply bring up the app at the register to gain loyalty points / freebies. The app also allows you to present coupons or advertising materials to the user, likely increasing their spend as well.
The negatives here are that not everyone has a smartphone. A card you hand out is universal, and app is not. The other big negative is cost. This is the most expensive program to run. There can be some efficiency gained depending on the volume of sales / number of stores involved, but for a simple single small business, this may not be feasible.
Contesting for Loyalty
Contests are loyalty programs. Think about McDonalds Monopoly. You’re collecting pieces, and could instantly win. You’ll go back to collect more pieces, and possibly instantly win. Tim Hortons offers Roll Up The Rim To Win twice a year on every single coffee cup. This creates huge amounts of loyalty.
You don’t need to run a loyalty program all year round. As long as you’re strategic, you can lure new customers, and create habit from a simple contest. The downside of this method is that it does leave a gap for competitors to sweep in when you’re not contesting. It also can be expensive to provide large enough prizing to have an impact.
Re-loadable Cash Cards / Apps
Lastly, having a card or app you can reload with cash for purchases is the ultimate loyalty program. Similar to gift cards, these loyalty programs have value. You may offer a discount on products, or credits towards a future purchase, but whatever you do, you can rest assured that if someone is pre-loading an item with cash that can only be used at your business, they’ll be back.
Most major chains offer some time of re-loadable option. Nobody wants to waste money, so that’s where they loyalty comes from.
No matter what business you’re in, think about loyalty. You may have a great product, but doing a little bit of marketing to nudge loyalty along can really add to your bottom line.