PART 1 of 2: The DOs and DON’Ts of Setting Up a Loyalty Program
Happy Twenty Fourteen, folks. And while we’re at it, Happy Year of the Horse.
The beginning of a new year is always an opportune time to recalibrate your existing loyalty program or even set your first one up if you’re just starting out. No matter what maturation stage you’re in, we know managing a rewards program can be overwhelming given all the decisions merchants need to make to set themselves up for success. We’re here to help.
Today we’d like to share some easy but effective tips to guide you on the right course. After processing over $25 million in spending data for some of the nation’s biggest brands, we’re proud to be helping our merchants win loyalty in this digital age. The thing is we’ve never thought of ourselves as creating loyalty programs, rather more as empowering them. Why? Because we recognize that human connections are at the core of what keeps businesses moving and growing. People like coming back to their favorite store because they’re greeted by their first name from the shopkeeper who remembered their last order. But a smart loyalty program definitely helps. So from one good neighbor to another sharing helpful tips, in our two-part series of the Do’s and Don’ts of your loyalty program, we present to you the smart way to approach this.
1. Establish what your key performance indicators will be.
If one of your New Year resolutions is to get healthier, we applaud you. But you probably wouldn’t start without measurable goals in place, right? How much body fat do you want to shed? How many sweaty minutes of cardio do you want to engage in everyday? These key performance indicators (KPIs) help track your progress toward your goal completion. If you don’t write out your KPIs, your goals are really…well, just wishes.
The same goes for when you’re building out a loyalty program. When you sit down to structure your program, identify your goals in order to measure success. Some basic indicators we typically advise our merchants to track are an increase of the following: visits, monthly sales, reward redemption, and user loyalty adoption. Keep in mind to customize your KPIs to what matters most for your business. Don’t try to measure everything or you’ll lose focus. Start off small if need be. For example, while some early-stage merchants are aiming to increase overall customer visits, others may be focused on increased per-check average. There is no wrong KPI. The important thing is to identify what they are right from the start.
2. Structure your program.
Encourage your customers to activate their accounts by rewarding them with bonus points. We suggest generously rewarding customers where they earn at least half the points required before reward redemption. For example, an activated account is awarded 25 points good towards a perk that requires a total of 50 points. Showing a lot of love up front for such a simple task will incentivize people towards completion. What’s more, it’s smart to push for activated accounts because this means your customers have volunteered to release their spending data that goes beyond just store purchases, but includes other valuable information like what day and time they visited, which location, frequency and recency. All this data empowers you to be a better informed, smarter marketer that will be able to promote targeted messages to the right audience at the right time.
Also, be sure to make your reward system easily trackable for customers to view where they can see their status in a quick glance on their smart phones or the web. The use of numbers always seem to be easy to grasp. A visual progress bar is also another good option.
3. Make the reward value slightly lower than the average ticket.
You’re going to reward your customer for shopping at your business. Now capitalize off that opportunity by encouraging the upsell. To do this, we suggest making the reward value slightly lower than the average ticket price. For example, if a typical meal at your restaurant costs $10, make your reward $8 off the next purchase. You’ll get your customers feeling happy and content about your brand for rewarding them adequately, but you’re now also making $2 off of a customer “freebie.”
We don’t suggest giving away the farm to every Bob and Sally who only visit your business once. It’s about appropriately rewarding your loyal customers. Be generous to those customers who frequent your business regularly and you will make a long-term customer.
4. Incentivize your staff to market programs at the point of purchase.
Your staff are the customer’s first point of contact into your business and as such, these brand ambassadors can prove to be highly effective in building loyalty from the ground floor. Train your staff early on to promote loyalty programs at the point of purchase to both first-time and repeat customers. Create simple key messaging points for your staff to get aligned on for brand consistency. “I love getting The Golden Gate sandwich from Whole Foods at least once a month,” gushes Stephanie from our communications team. “Their marketing push to me is summed up in one easy question every time I pay for my sammie. ‘Do you want to join our sandwich club for one free sandwich?’ ‘Hell yes’ is usually my response.”
Another idea is to add some healthy competition among employees whereby the individual that influences the highest number of signups or activations in a month is given a small bonus or a few extra paid days off. Don’t underestimate the oldest, most powerful and still cheapest form of marketing: word of mouth.
5. Know your customers, people.
Everybody likes to be recognized at their favorite locations. Remember Cheers? Where everybody knows your name? Ok, so maybe you don’t have to remember everybody’s name, but at least get a good handle on what they buy from you or what may trigger them to keep coming back for repeat business. As Jordan from our client relations department says “I love going to my local Asian produce store, not because they have a loyalty program [which they don’t], but because they remember my face and are always friendly.”
Ok. So the store has done a good job in capturing Jordan’s affinity because of their hospitality and apparently, low prices. “Avocados are 79 cents there!” Let’s say that the produce store was ready to start a loyalty program and leveraged Jordan’s history of buying avocados at least once a week there. On Monday, the store could send her an email or SMS informing her about a special avocado sale that week. “Two avocados for the price of one! Say what?” Guess where Jordan’s going as soon as she gets off work?
Synthesizing line-item data described above allows you to target customers one-to-one with personalized products tailored to their individual likes. If you can make customers feel unique and attended to, you make them feel special. Targeted offers and rewards is one way to bridge that meaningful relationship between you and your customer.
Look out for our second follow-up post highlighting the Don’ts in loyalty programs in this two-part series.