What makes a Good Loyalty Program?
So you’ve bought a Loyalty System and set it up, is it bringing in more business?
The whole point of Loyalty Programs is to incentivize customers to take certain action that is beneficial to your business. Such as purchasing more each time, coming back more often, referring friends, etc.
If you ever hear customers saying: “By the way, do I have enough points for anything?”
Then your program might not really be achieving its full potential. Your customers might still be buying just what they need and coming whenever they feel like it. No change in behavior, only difference now is they get discounts and freebies for doing what they have been doing.
Is this what you hope to get out of your Loyalty Program?
Well if your objective is just to give back to customers, then it’s fine.
If not, this article is written just for you to inspire some ideas to improve your Loyalty Program.
1. What’s your Rewards Strategy
Your rewards strategy determines the outcome of your Loyalty Program. If you have no idea what you want out of your Loyalty Program, then you might be achieving the potential of what a Loyalty Program can do.
Firstly, you will need to determine what actions you like your customers to take and then build your Loyalty Program to encourage those actions. Here we will cover your most basic behaviors you’ll want from your customers: Spend more, Visit more & Refer more.
For a typical Loyalty Program, the points are usually pre-determined e.g. $1 spent = 5 points. So to incentivize more spending per transaction, you can implement tiers for bonus points.
- $100 spent extra 100 points
- $500 spent extra 1,000 points
So if a customers spends $75, you can ask: “Would you like to get $25 more to get extra 100 points?”. Some customers love to buy more, so give them a reason or carrot to purchase more.
Some of you may be thinking of awarding bonus points for visits e.g. 50 points for every subsequent visit within a week. But if a customer spends $1 every visit, does he deserve the bonus points? How about 30% extra points on your 3rd visit, if a customer spends $1, $1, $200, does he deserve the bonus points?
You can’t help it if customers try to game your system, so this is where your terms and conditions come into play to implement a minimum spending and cap on the bonus points.
Sometimes tangible items works better than points too. E.g. Clock 3 transactions within a week to get a free ice cream. Just because you bought a Loyalty System doesn’t mean you have to award points for everything.
Simply offer a reward for every referral. Ever seen Grab or Uber’s referral program?
Refer a Friend! You and your friend both get $10 credits each
But of course for small businesses you do not have the budget to give everyone $10. So we will recommend to design a New Customer Promotion for your customers to share with their friends. If any of their friends redeems the promotion, you will reward your customer for his/her referral with either points or something tangible like a free yoga class or ice cream.
2. What’s your Engagement Strategy
Your Loyalty Program should not just stop at the points and rewards for customers. You should also consider the greetings & promotions you can send on their birthdays, Mother’s Day, Father’s Day, Christmas, etc, reminders about their packages, bookings, etc.
Your Loyalty Program is a customer engagement strategy to keep you at the top of your customer’s mind. So use every opportunity you have to engage them. Even if a customer didn’t redeem your promotion, it still serves as a reminder to them about your business. It shows that you’re still in business and doing well, so maybe it’s time to visit again?
You won’t know when customers feel like buying your products or want your services, so occasional prompts can help trigger these desires in them. That said you will also need to switch up your campaigns and promotions frequently to keep customers interested. Imagine seeing the same promotion every single time? Use the chance to promote a new product, class or dish if you’re going to launch a promotion.
3. What’s your Engagement Frequency
Most small businesses do not have a communications strategy at all, so your first goal is to get it up from 0. Plan ahead and try to schedule a calendar for your greeting & promotions. The key is to be consistent with it without spamming your customers.
Try to pick meaningful occasions for your greetings & promotions e.g. Anniversary Sale, Black Friday Sale, etc. There shouldn’t be too many ad-hoc promotions going on for no reason because it will seem in sincere and fake. Ever seen shops that are on sale all year round? Is there really a Sale?
As to how many times should you communicate with you customers per month really depends on the type of business you have. For fast paced businesses like F&B you can afford to have more frequent communication intervals. As for slower paced businesses like Spas & Salons, you can have longer intervals between your greetings & promotions.
Lastly to conclude, a good Loyalty Program should achieve the objectives set out by the one that designed it. You shouldn’t be doing it for the sake of doing it or worst simply copying competitors without understanding what their real objectives are.
There are many other crucial factors that can severely affect the success of your Loyalty Program. Such as your Communication Channel, Business Margins, Reward Tiers, Promotion Psychology, etc.
We are not able to cover all in this article, but at least you get a basic idea of how a good Loyalty Program should be – Objective Driven. So go review your business objectives to see if your Loyalty Program is really helping you achieve those objectives.
Do read this article Which Channel is better for your Loyalty Program? to find out more about the PROs & CONs of the different channels.
Our Loyalty System’s is specially designed for Small Brick & Mortar (Offline) Retail Businesses. We have stripped off the complex features to ensure that you and your customers have pleasant experience with our Loyalty Program.
Everything expressed in this article is my personal opinion and might not be applicable for all businesses. Please share with us your ideas and thoughts too so we can grow & learn together!
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