Customer loyalty programs come in two varieties: punchcard and points-based. The punchcard model works well for businesses that offer specialized products or services such as coffee shops, pizza parlors, bars and ice cream stores, where the average transaction value is relatively low and the goal is increase purchase frequency.
However, for hair salons, day spas and high-end retailers, their goal is less about increasing purchase frequency, as a customer will only use their services every so often, and more about encouraging customers to spend more. A points-based loyalty program rewards customers equitably to the dollars they spend.
There are many ways to customize your approach, which gives a merchant a competitive advantage and additional brand awareness.
For example, using a simple points system is the most common loyalty program method. Frequent customers earn points, which convert into some type of reward. Whether it’s a discount, a free item, or special customer treatment, customers work toward a certain amount of points to redeem their reward. If you opt for a points-based loyalty program, keep the conversions simple and intuitive.
One example of a company using a points-based loyalty program well is Boloco. They relate to their audience by measuring points in dollars, and rewards in food items. Consumers swipe their customized Boloco card at every purchase and the card tracks the amount of money spent. Every $50 spent earns the customer a free item. Whether they choose a super large burrito or an extra small smoothie – it’s free after $50. This is an example of a company simplifying points with an accessible customer reward system.
Although a points system is perhaps the most common form of loyalty programs, it isn’t applicable to all business types — this type of loyalty program is most appropriate for businesses that encourage frequent, short-term purchases.
Finding a balance between realistic and desirable rewards is a challenge for most companies designing loyalty programs. One way to overcome this is to implement a tiered system. Offer small rewards as a base offering for being a part of the program, and encourage repeat customers by increasing the value of the rewards as the customer moves up the loyalty hierarchy. This helps solve the problem of members forgetting about their points and never redeeming them because the time between purchase and gratification is too long.
Virgin Airlines’ Flying Club inducts members at the Club Red tier, then moves them up through Club Silver and Club Gold. Club Red members earn miles on flights and get discounts on rental cars and hotels. Club Silver members earn 50% more points on flights, accelerated check-in, and priority stand-by seating. Club Gold members get double miles, priority boarding, and access to exclusive clubhouses where they can grab a drink or get a massage before their flight. The key is to offer benefits in the early stages to hook the customer into coming back. Once they do, they’ll realize that “gold” status isn’t unachievable, and offers awesome benefits.
The difference between points and tiered systems is that customers extract short-term versus long-term gratification from the rewards program. You may find tiered programs work better for high commitment, more expensive point businesses like airlines, hospitality businesses, or insurance companies.
Loyalty programs are meant to bring your customers closer to your business. In some circumstances, a one-time (or annual) fee that lets customers bypass common purchase blockers is very beneficial for business and customer alike. By identifying the factors that may cause customers to leave, you can customize a fee-based loyalty program to address those specific factors.
In 2011, eCommerce shopping cart abandonment hit a whopping 72%, and is still rising. This abandonment is often caused by customer shock after tax and shipping prices have been applied. However, E-Commerce giant Amazon, found a way to overcome this issue in their loyalty program called Prime. For $79 annually, Prime users get free 2-day shipping on millions of products with no minimum purchase, among other benefits.
This program is groundbreaking because it charges loyal customers while providing enough in return for frequent shoppers to realize the benefits. Amazon actually loses about $11 annually for each Prime subscriber, but makes up for it in increased transaction frequency that would not have happened without their elite benefits.
This type of loyalty program is most applicable to businesses that prosper on regular, repeat purchases. For an upfront fee, your customers are relieved of inconveniences that could impede future purchases.
Depending on your business type, your customers may find more value in non-monetary or discounted rewards. Any company can offer promotional coupons and discounts, but businesses that can offer value to the customer in ways other than dollars have an opportunity to connect with their audience by connecting with the needs of their audience.
Patagonia, an eco-friendly outdoor attire enterprise, profited from a loyalty program that discarded the points and discounts. The company employed its Common Threads Initiative, where they partnered with eBay to help customers resell their durable Patagonia clothing online through the company website.
This program builds on their brand of sustainability and creating a high-quality product, and it blends seamlessly with the company’s customer persona by providing a value that they really care about. Before implementing a loyalty program of this kind, be sure you’ve researched and understood your customer identity.
Strategic partnerships for customer loyalty, also known as coalition programs, can also be highly effective for customer retention and company growth. Again, fully understanding your customers and their purchase process will help determine which company is a good fit as a partner.
American Express has a huge partner base with multiple companies across the country. Their recent Twitter Sync campaign rewards customers for tweeting about them by syncing discounts and deals with Twitter #hashtags. Their cardholders have redeemed over $2,000,000 in rewards. Participating companies that are benefiting from their coalition with Amex include Whole Foods, Staples, and Zappos.
Fortunately, one doesn’t have to be a multi-million dollar credit card company to apply a partnership plan. This method is applicable on a much smaller scale, as long as you understand how individual customers experience your product or service, and what is a best fit for them.
For example, if you’re a dog food company, partner with a veterinary office or pet grooming business to offer co-branded deals for mutual benefits for your company and your customer. The objective audience owns a dog, thus any services that dog requires offers added value from your company. Providing customers with value beyond even what your company can offer will show that you understand them, and will enhance your network to reach your partners’ customers, as well.
Turning your loyalty program into a game is also an entertaining way to encourage repeat customers and, depending on the type of game you choose, help solidify your brand’s image.
GrubHub, an online food ordering and delivery website, uses Yummy Rummy in this way. Once customers place three unique orders through GrubHub, regardless of price, they get to play a game for a chance of winning free items. Players choose one of four cards and have a 25% chance of winning a free dessert, drink, gift card or other unique prizes.
This type of loyalty program has potential to backfire, however, if customers feel like your company’s pulling a fast one on them to win business. Executed appropriately, this type of program/game could work for almost any type of company.
Customer loyalty programs offer unique ways to obtain and retain customers. The business can create and encourage repeat visits from customers as well as capture and maintain an important customer database. In the end, this program shows your appreciation for your customers’ continued business. Alpha Card’s Gift and Reward Card Program, which we design and produce completely in-house, offers a customized approach and gives each merchant a competitive advantage and additional brand awareness. To find unique, customized ways to attain and preserve the business of customers, get more information about our gift and reward card program at firstname.lastname@example.org today! You won’t regret it!