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Customer Loyalty

Does your business need a customer Loyalty program?


Loyalty is a broad term commonly used for any incentive or marketing program that a merchant might use to increase customer visit frequency, increase average spend per visit, generate consumer endorsements and attract new customers.  They are extremely popular these days with the average American household participating in 22 different loyalty programs. Recently, with the rise of the smart phone, text messages, and email marketing, a number of technology based consumer loyalty programs have been launched.  While every business owner wants the intended results of a loyalty program, not everyone has the time or money to invest in a program that delivers desired and measurable results.  Below are descriptions of a few different types of Loyalty programs.  Hopefully this will help guide your thinking as you decide what type of customer loyalty program is best for your business.


Paper punch card

This is by far the simplest of all Loyalty programs.  A typical punch card program offers the consumer a free item after purchase of 8 or 10 of the same types of items.  For example, buy 10 cups of coffee and the next one is free.  Advantages are that it is very easy to start up and administer.  Simply design a business card with 10 spots to punch (10 tiny coffee cups) and have them printed on decent paper stock.  Train your cashiers to offer the cards at checkout and punch them when customers come back.  Disadvantages are many.  Employees can easily scam the system and fill their friends up with multiple punches.  There really is no way to track the legitimacy of a full punch card when it is redeemed.  Additionally, consumers need to remember to bring the card with them or keep it in their wallet at all times.  Most consumers don’t want to carry around the multiple punch cards offered to them by businesses they frequent.  Lastly, there is no data gained about your customers with a punch card program.  You don’t get their name, email, demographics or any other relevant and powerful information when a customer joins your punch card program.



Credit Card Program

Typically reserved for big box retailers, this program simply provides a discount to the consumer at the time of purchase if they use their retailer branded credit card.  The card is still issued by MasterCard, Visa or Discover, but it is tied to a specific retailer.  A great example of this is the Target REDcard*.  By using this credit card for purchases, consumers receive a 5% discount at the time of purchase.  Downside is that these cards typically charge a high interest rate to the cardholder and there is not an alternative discount program for a consumer that prefers another form of payment.


Plastic Rewards Card

This kind of program incorporates a plastic card with a magnetic stripe encoded with a unique customer identifier.  A human readable number is also printed on the card so it can still be redeemed should the magnetic stripe become damaged or erased.  Upside is a great amount of detail about the customer’s purchases can be tracked and used to generate rewards and offers to encourage future visits.  With the right incentives, consumers will register their card online, giving you their email address and other information that can be used for future marketing efforts.  Downside is that the customer has to have the card ready to present at the time of purchase.  As noted earlier, most consumers are enrolled in 20 or more loyalty programs and likely are not going to happily carry 20 plus plastic rewards cards on them at all times.


Smart phone Applications

Several steps above a paper punch card is a smart phone application that tracks the number of visits or purchases a consumer makes at your store.  It works the same as the paper card but has several advantages, the biggest of which is that it makes it easy for the consumer to keep on hand and available.  It’s also much more accurate then punching holes in a card and can track the exact amount of spend per customer.  A good smart phone loyalty program can also allow your customer to register their membership online, giving you the opportunity to reward them for giving you additional personal information.  Rewards are delivered through email or text based messages that your customers opt in to receive.   This gives you the ability to send a coupon or voucher when certain spend levels are achieved, when milestones such as birthdays or anniversaries are surpassed, or when your business is a bit slow and needs a boost from an electronic coupon.  You may also add rewards for social media activities such as your customers “liking” you on Facebook.  Social media is becoming more important each day and a good loyalty program applied the right way can help your business gain relevance within your best customers community of friends.



Cell Phone and Text based programs

This type of program utilizes a consumers phone number as the primary means of identification and purchase tracking.  When a purchase is made, the cashier simply enters the customers phone number into their POS system or a stand beside terminal or tablet, along with the purchase amount.  The customer gets an email or text message after their visit that tells them how far along they are to receiving their reward, as well as any other messages the business might want to relay.  Another value is the merchant can send bulk text messages to their customers with time bound offers to generate business during typically slower times of day.  For instance, a coffee shop could send a text message with a coupon attached offering buy one get one free coffee from 2 to 5 pm today only.  These programs are great for consumers that don’t want to bother carrying a stack of plastic or paper cards and are agreeable to the occasional text message from their favorite stores and restaurants.  One downside can be cost.  Since text messages must travel over the wireless cell phone carriers, there is a cost involved with each message.  Email has a cost as well, but that is typically much less costly than text.


A great deal of segmentation and analysis of your customer base is enabled with an electronic rewards program, especially those that include online registration.  If you don’t know who is buying from you, what they like and how much and how often they spend, it’s much harder to drive loyalty.


So, what kind of program is best for your business?  Obviously, we all want repeat customers that return again and again and tell their friends about us, but at what cost?  There are a few questions you should ask yourself before launching your program:

How much time to you have to devote to your program?

Does your Point of Sale support a customer rewards program or will you need a stand beside program outside of the system you use to make sales?

What is your monthly marketing budget and where do you plan on investing?

Are your customers technically savvy and heavy smart phone users or would they prefer something simple, like a punch card?


There are many questions to answer and a wide variety of solutions to consider when starting a customer loyalty program.  Ultimately, I recommend soliciting the services of a small business expert like Honor Business Solutions to help guide you through the decision-making process, technology implementation, and ongoing operation of a successful customer loyalty program.


Cheers to good business,

Mark Miller



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