Most merchants do not need to be told what a customer loyalty program is. They seem to be everywhere from frequent flier miles with airlines to the buy-5-get-1-free deals at coffee and yogurt shops. What merchants truly need to know is how valuable implementing a loyalty program is and the different ways in which they can go about starting one. According to the Access Customer Loyalty Statistics, 53% of Americans participate in a loyalty program because of ease of use. This means that merchants have a great chance at getting at least 50 percent of their customer base to sign up for a loyalty program.
Customer loyalty programs are a great way to encourage customers to return to a business and potentially attract new business. This not only increases customer loyalty but it increases sales. Beyond increased customer loyalty and increased sales, loyalty programs can provide incredibly valuable data to merchants. Every time a customer engages with a loyalty program or makes a purchase, that data can be tracked through a POS system, which helps to pair demographics with shopping habits. This pairing deepens the insight into what attracts customers to a business.
Loyalty programs reward customers for spending money instead of going to competitors and come in a number of forms. The basic structure of loyalty programs can be tailored to meet a merchants’ needs. Here are five different types of loyalty programs commonly implemented:
Point systems are a great way to reward customers with a point for every dollar they spend at your business. A merchant has the option of rewarding points for every dollar or for every five dollars, and so on and so forth. American Express utilizes a similar system to provide value to their cardholders. Their points can be used for direct purchases or be transferred for a slew of other rewards programs. Point systems also offer zero barriers as they are completely free of charge to implement. There are no commitments for a customer beyond spending their own money to earn points and they are easy to track.
Item/ Category Programs
Item-based programs are great for a merchant who is looking to promote a particular item, such as a best-seller or an item that is over-stocked. Merchants can offer future discounts or bonus points for purchasing specific items. Take a coffee shop for example – a merchant can offer reward points based on purchasing specific items off of the menu, such as an Americana earning one point or a latte earning two points. Item programs are a great way to push customers towards certain items and increase popularity for them.
It is difficult for merchants to find the balance between attainable and desirable rewards when trying to set up a loyalty program. A great way to combat that type of issue is by setting up a tiered loyalty system. Merchants can offer small rewards for simply being a part of the system, such as a number of bonus points for signing up for it, and then build up tiers based off of points beyond that. This encourages customers to move further up the loyalty ladder. This helps with the issue of customers forgetting about their points because the time between purchasing and gratifying is much longer than other loyalty programs. This is similar to the point system but ultimately different because it creates longevity. Tiered programs work to create high commitment over a longer period of time because the tiers are usually higher end items.
It is important for a merchant to understand their customers’ values and sense of worth. Creating shared values can have a huge impact on customer loyalty. Many consumers are more loyal to beliefs rather specific companies. Merchants can execute this by giving a percentage of purchases to local or global charities. Another great way of doing this is by offering to give an item for every item purchased. Non-monetary programs provide value to the customer in ways other than dollars and create a unique way to connect.
Buy X-Amount, Get X-Amount Free
Most people probably have at least one paper punch card in their wallet or purse at the moment. Most coffee shops, pizza places, yogurt shops, and sandwich spots offer punch cards and encourage consumers to bring them every time a purchase is made. Punch cards are extremely popular with small businesses because they are incredibly low cost and motivate repeat customer visits. While they can be easily faked or staff members can give extra punches to friends and family, they still do bring in repeat business. Merchants can also combat the paper punch cards by creating digital punch cards through certain payment processors. With digital punch cards, customers utilize an app on their smartphone to track and redeem those specific rewards.
Marketing the Loyalty Program
At the end of the day, a loyalty program is only truly successful when every single piece of the puzzle comes together. A large piece of that puzzle is smart marketing. The first and easiest step towards properly marketing a loyalty program is informing all employees. Merchants need to make sure that every single employee understands and promotes the program. Employees are at the front end of a business and they are the cheapest and most reliable way to explain the benefits of a loyalty program. The better trained they are, the more customers will sign up to earn rewards.
Another easy marketing tool is setting up a referral system in conjunction with a loyalty program. This encourages customers to spread the word to their friends, family, and social channels. It is also relatively cheap to pay for advertisement through Twitter, Facebook, and Instagram. These increase visibility and help foster social media engagement. Displaying signs through the store will help inform customers to ask questions about loyalty programs or encourage them further to sign up.
By implementing a reward program, merchants can drive customer loyalty and further increase the value for their customers. Returning customers are easier and cheaper to market to than new customers.