4 Ways to Build and Optimize a Customer Loyalty Program

It has become a necessity to capture your best customers and make them feel special in this competitive market.  That is how you will keep them coming back.

What do you think of when you hear “customer loyalty program”?  For the past 10 years, franchises and small to medium-sized restaurants and retailers have been plagued by the limitations of basic punch cards and loyalty cards.  A loyalty program must have a purpose beyond simple reward redemption: a loyalty program must capture customer information, offer redemption security, and drive positive customer behavior to prove ROI.

In 1981, American Airlines started the first frequent flyer program for its best customers.  Now, every airline you can think of has their own version of the frequent flyer program – it has become a standard for what customers expect from an airlines and a rewards program.

Today, retailers and restaurants have a multitude of options available to create a rewards program:

  • Loyalty cards
  • Email marketing campaigns
  • Text message programs
  • Facebook, Twitter, and Foursquare

Companies spend more than $2 billion a year on loyalty programs.  Statistics show that the average American household belongs to 14 rewards programs, but is only actively using 6 of them.

How will you make sure that your loyalty dollars are used effectively?

The following are the crucial elements of building and optimizing your customer rewards program.

1. Determine the type of loyalty program

The following types of businesses require a frequency or point-based loyalty program to stay competitive and to retain their best customers:

  1. Retail stores
  2. Restaurants
  3. Travel companies
  4. Salons or spas

In contrast, service-based businesses with customers that visit on an infrequent basis such as mechanics, lawyers, or accountants will benefit from a variation of the standard loyalty program.  These service-based businesses will benefit from a rewards program that drives customer referrals via word-of-mouth and word-of-click marketing.

Answer the following questions before you build your loyalty program:

  1. What is the average order value of your best customers?
  2. How often do your best customers return?

In general, your best customers compose the top 10% of your business.  These top customers are worth an estimated 5 – 6 times more than the other 90% of your customers.

Therefore, when building your loyalty program, design it for your best customers.

2. Create rewards that drive the best behavior

Rewards must drive a positive action.  For example, if you want to increase average order value, then offer a complimentary cookie with the purchase of any full meal combo.  If you want to drive signups to your email list, then offer a free upgrade on a drink today for joining your email list program.

Here are the three universal principles that you should follow when creating rewards:

Expand beyond discounting

Discounts lower the quality of the brand and also teach the customer that the item they’re purchasing is worth less than full price.  Instead of discounting, add a bonus to a purchase.  For example, “Spend $10 and upgrade your smoothie to a large for free.”

Small, quick rewards rule

Too often, franchises and small business owners limit themselves to punch cards that offer the “Buy 9 get 1 free” reward”.  These types of rewards are proven to NOT drive customer action because the rewards take too long to get redeemed.  What has proven to drive customer and user action are small, quick rewards that can be redeemed by the 2nd or 3rd visit.  Therefore, instead of offering a free burger after 9 visits, offer a free small french fries after 2 visits.

Generosity and recognition are key

Your best customers not only spend the most at your business, but they also tell their friends and family to shop at your business.  It is therefore in your best interest to make your best customers feel special and recognized.  A great way to do this is to encourage and support their word-of-mouth efforts.  A great example is the creation of a referral program: invite 5 friends and get a free smoothie.  You’ll see an increase in new clientele because customers will be motivated to tell everyone about your business.

3. Maximize customer acquisition

Your employees are by far the most effective part of getting customers to join your rewards program.  Unfortunately, employees are very forgetful and will NOT tell every single customer to join your rewards program.  It is therefore of vital importance that the opt-in process of your loyalty program is cashier independent.

At a high-traffic store, fast line speed is critical, and your rewards program needs to be fast and efficient to accommodate the needs of your customers.

The following are essentials to optimize customer acquisition:

Fast sign-up process

Punch cards are fast, but insecure and easily cheated.  Loyalty cards capture customer information, but take the customer 2 minutes to sign up.  A customer will not fill out a form when there is a long line of customers waiting to get in their order.

Solution: Customer-autonomous sign-up tied to the customer’s mobile number.  It takes a couple seconds for a customer to type in their phone number while in line to join your rewards program.  RewardMe utilizes an iPad tablet at the point of sale to capture the customer’s mobile number and ensure line speed remains fast.

Easy management for rewards

Loyalty cards allow the customer to earn points; however, it does not offer an easy to use platform for customers to manage their rewards and find out how close they are to a reward.  After all, the closer you are to a reward, the harder you’ll work to achieve it.

Solution: Utilize a universal platform that allows customers to manage their points and rewards online on a mobile device.  RewardMe acts as a universal shopping identity, so customers can manage all of their points and rewards from a single location.

Sign up reward

The majority of your customers are lazy; they don’t want to fill out a form, they don’t want to give out their information – all they want to do is move on and eat their food.  It is difficult to acquire these people into your rewards program because they don’t feel an immediate need.

Solution: Create a 1-time immediate reward that customers receive for joining your rewards program.  If you’re a pizza spot, then the immediate reward can be a 3-topping pizza for the price of a 1-topping pizza.  If you’re a retail store, the immediate reward can be 10% off your entire purchase today.  RewardMe has a robust rewards tool that allows you to customize rewards to suit your needs.

4. Drive customer behavior through data personalization

The most important part of a loyalty program is the ability to capture vital customer data and assign the data to an individual.  You need to know which of your customers come in during lunch, which of your customers have spent more than $200 in the past month, and which of your customers absolutely love your salads.  Without this important data, you won’t know how to drive customer behavior.

Personalization of messages

By collecting a customer’s email and phone number, you can set them up for email or text-message marketing campaigns.  Furthermore, if you couple this with the information you gather about the customer through a rewards program – information such as purchase patterns and behavior – then you can send targeted messages specifically tailored to the customer.

For example, if a customer has bought 5 sandwiches at your business, then you can send them a text message on Wednesday afternoon that says, “Invite a friend! Buy 1 sandwich and get 1 free!”  The goal here is to drive a loyal customer to invite a friend and get them to love your business as well.

Cross-promote and up-sell

You can take this to the next level by offering cross-promotions and up-sells through the data you collect.  For example, if a customer is purchasing a pair of shoes, then immediately offer them a pair of socks or jeans that compliment the shoes.  The RewardMe tablet is an excellent way to visually up-sell at the point of sale and get a customer’s average order value higher, or make sure that he returns soon to buy the complimentary items.

You can even sweeten the deal and make your best customers feel extra special – offer a time-sensitive deal on the purchase of a package of items:

These shoes would go great with a pair of jeans from our boot-cut section. Purchase any pair of jeans now with your shoes and get 5$ of your purchase today.

These techniques are your guide to help you get started with your rewards program.  If you have any questions, make sure to ask us in the comments section below.

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