Loyalty cards are everywhere nowadays and can take many different forms. You probably have a few yourself; the paper card that you get your coffee stamps on, or maybe the key fob for the local grocery store. In relation to your business though; what are the advantages of implementing a rewards scheme? What are the pros and cons? The main reason you would implement a reward scheme is for customer retention. Maintaining customer relationships is very important for the success of most businesses. For a general overview of the topic check out our article on 'Customer Retention and Loyalty'. Without good relationships with your customers your business is unlikely to last very long (check out our article on 'Why Keeping Customers is Important'). But what are the actual effects of introducing a loyalty card? How can a reward scheme help your business?
Firstly, branded cards keep your business in the mind of the customer every time they open their purse or wallet. Keep it simple – reflect your brand on the card without overwhelming your customer.
Loyalty cards are a great way of showing customers that you value their custom, but you want your customers to be proud to display their card not think it is an eyesore.
Loyalty reward programmes can be a great driver of sales, as your reward program can focus on driving further sales in order to gain a reward.
A good example would be a coffee shop offering a free coffee after you’ve bought ten; you may not have bought that many without the incentive but when you know you are getting something free at the end it is easy to rationalise an extra cup here and there. However, there is a delicate balance between encouraging repeat sales or further sales and giving for free what would’ve been bought anyway.
Be strategic in your reward scheme. Another good tactic is to send personalised offers to dormant users encouraging them to become repeat customers.
Increase Sale Value
Loyal customers buy more frequently and spend more. You can also encourage customers to spend even more by offering rewards that give customers a certain amount of money off once they spend over a certain amount; like €5 off when you spend €50.
Some business owners worry that by offering a loyalty card and discounts it will ultimately cut into their bottom line. However, the overall increase in sales should negate this.
Alternatively, you could consider how some of your bottom line would’ve been spent on marketing schemes to attract new customers.
By investing in retaining your current customers you are ultimately making more than new customers would bring in. In fact according to Invesp, increasing customer retention rates by 5% tends to increase profits by 25% to 95%; that’s an increase that is worth investing in.
Influence Product Selection & Awareness
You can influence the actual products that your customers buy by offering higher points for certain items or a discount if they use their loyalty card. Encourage your customers to try new products by offering them as a reward for loyalty.
For example, if you are running a doughnut shop you could offer your customer a free coffee when they’ve bought 10 doughnuts. They may never have thought to purchase coffee from your shop before, so this offer not only increases their awareness of your products but gives them the opportunity to sample them and decide to buy them in the future.
Know Your Customer
The data you collect from your reward scheme gives you an opportunity to better know your customers.
You could offer points for your customers filling in their profile or encourage customers to register their loyalty card, so that if they lose it you can transfer their points.
You even have the option to make it a requirement that they register before they are able to claim their rewards. This gives you the chance to build better impressions of your customer base meaning you are able to better target and market your products to this customer base.
Also depending on how high tech your loyalty card is, you could potentially track your customer's purchases. This allows you to see emerging trends in the market; as well as seeing which products are most popular.
Better Customer Communication
By signing up for your loyalty card, your customer has probably signed up to receive some communication from you. You now have the chance to shape this communication. Maybe send out an e-mail newsletter, or text alerts for big sales.
It is important to shape this communication in a way that promotes your business but also gives value to your customer. After all you don’t want your customer to block you for spam.
Customers like to feel valued. If your competition has a reward system in place and you don’t; what message does this send to your customers?
You need to at least be on par with your competition, however, your reward scheme also gives you an opportunity to outdo them. There are so many loyalty cards on the market nowadays that just repeating what your competitors are doing isn’t good enough. If you can offer better, more customer focused, or perhaps simply more innovative rewards than them, it might encourage more business your way.
The market is saturated with loyalty cards and reward schemes; this doesn’t mean you shouldn’t have them, but it does mean that if you can offer something different you are sure to be noticed.
Customer Happiness & Love for Brand
At the end of the day a rewards scheme makes your customers happy and deepens their love for your brand. Not only do customers appreciate that you are showing a commitment to their happiness, but you also want loyal customers for your business.
A reward scheme motivates customers to engage with your brand. If your customers are happy and satisfied with the service or products you supply, and your engagement with them, they are more likely to become advocates. If your loyalty programme makes them feel valued and ultimately happy; they are more likely to promote you to their friends and consequently you will soon be seeing new customers.
Give It A Try.
Overall the advantages of offering a loyalty card to your customers far outweigh the negatives. Once in place a reward scheme is easy to maintain, and you just need to update the rewards to keep them fresh and customer focused. Introducing a loyalty card and implementing a reward scheme might not be as expensive as you think, especially compared to the money you’d spend attempting to attract new customers. All in all, loyalty schemes appear to be worth investing in.
If, however, you do need help with financing the initial roll-out of your reward scheme, GRID's Cash Advance could help. GRID’s cash advance service is a great short-term finance solution. It is repaid as a portion of your daily card sales, so it works with the ebb and flow of your business.