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Rules for Profitable Customer Loyalty
The only way that loyalty programs become revenue generators, not cost centers, is when you create a multi-faceted program built from these key components.
Traditional customer loyalty programs are built on a basic principle. A customer makes purchases, and a retailer offers rewards for those purchases. Buy 10 coffees, get the 11th for free. Spend $100, get $5 off your next purchase. There are of course variations on these models, where rewards go to charitable organizations, or members get special pricing, but most of the time, you’ll find that loyalty programs operate on these basic principles.
This is true whether you have a punch card program or functionality built into your point-of-sale system that tracks purchases and generates rewards automatically. The reason that most loyalty technology is fairly simple is because loyalty can’t be created through programming. True customer loyalty is created through service and value. Through marketing and communication. And then through rewards that help encourage repeat business and afford the opportunity to continue nurturing customer relationships.
The only way that loyalty programs become revenue generators instead of cost centers is when you create a multi-faceted program built from some of these key components.
If the only time a customer remembers you have a loyalty program is when your clerk asks for the card at the register, it’s likely you haven’t done enough to spread the word and create enthusiasm. Marketing for loyalty can encompass in store signage, information on your website, promotions on social media, shout outs and specials in your advertisements, information on the bottom of your receipts. you get the picture. Anywhere you can draw attention to your program and the benefits, you should. Otherwise, you’re just one of 25 loyalty key tags gathering dust in someone’s junk drawer.
People like to feel that they are a part of something special. That they are in on a secret not everyone gets to know. While your loyalty program certainly shouldn’t be a secret (IE our marketing tip above) you can do things to make it feel exclusive, and therefore, more valuable. One way is to create loyalty levels. The more someone shops, the higher their loyalty level. You can assign exclusive benefits to each level, like special sale days, an extra % off on Tuesdays, earlier or later shopping hours, early sign up for classes, first pick on new products The sky’s the limit here so get creative to bring extra value.
Communication should be part of your marketing strategy, but it also needs to be part of your maintenance strategy. Make sure you are regularly communicating member benefits, and keeping customers posted on loyalty standing, available rewards, etc. Our suggestion is to print loyalty info on the bottom of receipts, so people know what loyalty level they are and how far they have to go until the next reward.
You need to be intentional about the rewards you offer. We offered a bunch of different member benefit ideas above that can be tied to rewards, but when it comes to coupons, we have one major tip. Don’t provide money off in the moment. We call these at the register rewards and it’s where a clerk goes, “you qualify for $5 off today, would you like to use it?” Convenient yes. Strategic, not at all. Instead, print coupons for a future purchase to encourage repeat and future business.
Bringing it all together
While technology can’t make your loyalty program successful on its own, it does make your program much easier to manage. A point-of-sale based loyalty solution can help you easily set loyalty levels, track points accrual and get creative with rewards beyond the basic coupon.