It’s the time of year again where we personally express our gratitude for the people and things that mean most to us. On the business side, it’s an opportunity to say “thanks” to our loyal customers. Though for some businesses, they take that opportunity to give thanks year-round, and it’s proven to increase customer retention and sales. Their tactic? A well-thought-out loyalty program.
It’s safe to say that many of us have been a part of a loyalty program at some point in our lives, and have seen some value in participating. Personally, I have six active loyalty programs I’m a part of, and that’s without looking at my wallet! Each adds their own unique value for me, which I’ve been able to reap some great benefits. However, does the business see as much benefit when “giving away” some of the goods?
Yes, and the stats are astounding.
- Sales increase without much additional spend.
- It costs 5-10x more for a business to attract a new customers versus a current customer, even though the current customers, on average, spend about 67% more than new ones.
- More repeat purchases from your best customers.
- Returning customers will make up around 20% of your consumer-base, but over time, will contribute to about 70% of your sales.
- Gain more customer referrals.
As you can see, when you provide some perks for your best customers, you reap some benefits as well.
Structuring a Loyalty Program
There are many ways to go about building your loyalty program, and the rewards you can offer. It all depends upon what your goals are, and who your target market is. Below is a simple list of some of the things you will need to consider, should you start your own loyalty program.
Business Conversion Goals
Identifying the specific conversion goals you have can help you structure the loyalty program to achieve those goals.
- Are you trying to entice people to try a new service you’re offering?
- Do you have extra product inventory that you want to sell to make more room on the shelves?
- Are you looking to attract new customers from referrals?
- Do you want to get more feedback or reviews from your customers?
Once you have the high priority items outlined on the results you want to achieve, now it’s time to figure out how to get your customers to act.
Creating A Points or Dollars System
Businesses can go about their systems in a points structure and a dollar structure, and sometimes a mix of both. Whichever you choose, make sure the system is easy to understand by making it clear on how people will get rewarded, and when they can redeem rewards.
Think about multiple ways they can receive rewards. Purchases are one, of course, but other ways could include leaving reviews on TripAdvisor or Yelp!, or possibly even referring their friends. When people have multiple ways to earn points, they’re likely more motivated to act. For example, Southwest offers points on purchases, online shopping with their chosen partners, as well as dining with select restaurants in the area. It’s easy to accumulate points quickly from daily activities, and be able to build up enough points to save on traveling, which many people are passionate about.
Another thing to seriously consider is branding your program. As I mentioned before, there are so many different loyalty programs to choose from, so how will you stand out from the rest? It could be as simple as the name of your program, or the name of the points, dollars, etc. that give its unique flair. Some businesses have also built programs based on a philanthropic value, by contributing some of the revenue towards causes their customers may care about. That has proven to be a great way to establish an emotional connection with the customer, and provide a “feel-good” attitude when buying from you versus your competitors.
Now that you have your business goals in mind, and a point structure that makes sense, what are you willing to offer your customers based on their earned points? This is where tapping into the minds of your ideal customers will be key in knowing what is considered “valuable” to them.
Southwest Airlines does a great job in understanding what their customers want (travel perks), and making it easy to get rewarded with their credit card program. Their customers can earn points quickly with the things they do daily (everyday purchases, online shopping, dining, etc.), and use their points towards free plane fare, and discounts on hotel and rental car partners. To sweeten the deal further (especially for new customers) they offer a promotion of 50,000 points if customers spend a certain amount of money in the first 3 billing periods. That 50,000 is approximately 2 free flights, and the level of spending needed to achieve isn’t outrageous.
Now, I know we’re not all in the business to be giving away free flights, but perhaps you can offer a free night in your hotel, or free meal at your restaurant. Perhaps the points could be used by other amenities offered at discounted rates. The opportunities are endless, and it never hurts to get creative.
Tracking the Program
One of the biggest things that will make or break your program is the technology that backs the program up. If you’re going to offer points based on spending at your destinations, you will need to have some software to track who is spending, where they’re spending, how many points they have accumulated, and if they’ve redeemed them recently.
Graydient Creative has been very successful in building these programs with various point-of-sale (POS) and property management systems (PMS). Assuming you already have these in place, our team can review its capabilities and build out the program you’ve established on top of it, making it seamless from a transaction standpoint, all the way into reporting.
If you’re interested in getting a loyalty program started, feel free to reach out to us, we can help get you started on some ideas, help build the strategy, and dive right into the implementation. We’re here to help!
One last thing – have a wonderful Thanksgiving from all of us at Graydient Creative. We’re certainly thankful for you!