So you want to set up a loyalty program for your business. What are the do’s and don’ts?
1. Use Artificial Advancement to motivate customers to keep coming back
As HelpScout pointed out in their blogpost about loyalty programs, studies have shown that artificial advancement encourage people to participate more:
In other words, starting your loyalty program with “3 stickers, 7 to go” is more effective than “1 sticker, 7 to go”.
2. Keep it simple – avoid tedious terms and conditions
One o the most frustrating experiences is to have a loyalty card of some kind, hang on to it for months, and then find out that you can’t use it anymore because of some small-print (or worse, not-in-print) expiry date.
Forte Consultancy pointed out in their blogpost that JetBlue’s TrueBlue program had frequent flier miles that expired within a calendar year – meaning that most program members could never redeem their miles.
You never want your loyalty program to frustrate your customers.
3. Make it as easy as possible to use
This is where modern apps like CandyBar can make a big difference.
Nobody wants to have to scrounge through their bags and wallets looking for physical punchcards, and nobody wants to remember a bunch of extraneous logins and passwords.
With CandyBar, all your customers need to remember is their own phone numbers – and they can get loyalty stickers instantly!
What does this mean for small business owners and marketers?
1. Even if you’re only selling your products and services offline, you have to think about having digital channels.
“The early days of ecommerce were about getting stuff online. Now it’s building brands. We’re seeing things like pop-up stores to capture specific markets, or concept flagship stores merging into the offline. There’s a move from plain ecommerce to brand building.” – Michiel Kotting, Accel VC
People are going to look for your business on Google, Facebook and Instagram before heading down to your retail venue.
2. It’s better to get the basics right across the major channels, rather than spend tonnes of resources over-optimizing a single channel.
If somebody offers to build an elaborate website for your little shop for thousands of dollars, run away!
3. Don’t overextend yourself though – it does make sense to still have one primary channel.
You want to go to where your customers are.
If you’re selling food, you’re going to do well on Facebook and Instagram. If you’re selling fashion, Instagram and Pinterest will likely be your mainstays. If you’re a roving food truck, Twitter can come in handy.
So focus on getting reviews from your customers. Share your menu, your opening hours, and all of the details that your customers want.
“As consumers become increasingly channel agnostic, retailers need to ensure content seamlessly follows consumers on their cross-channel journey – providing the right information and incentives to maximize the purchase decision-making process at each and every point.” – Crsten Thoma, Hybris COO
Of course, at the end of the day, your business fundamentals are what matters most.
You don’t need an elaborate Instagram strategy, but it makes sense to have a hashtag so that your customers can tag themselves enjoying your product.
You don’t need to post on Facebook everyday. but it makes sense to post your opening hours and some basic information on a Facebook page. (And login to that page on your phone so that you can reply to any customers who might message you!)
Entrepreneurs are fundamentally optimistic people who believe that they can succeed where others have failed. This is a useful trait to have when building a business. But it can also be a liability if you’re not careful.
The challenge is to ground your optimism in reality.
Lesson: Do your market research before your take the leap. Before you put down the payment for rent, make sure that ordinary people are eager and willing to pay for the product that you’re selling.
2. Mismanaging finances: running out of money = death
Kongō Gumi, a Japanese construction company, was once the oldest business of all time, dating back to the year 578. It had a good run for over 1,400 years, but ultimately failed because… it ran out of money.
Finances are the lifeblood of every business, both big and small. If you have money, you’re still in the game and you can play another round. If you don’t, you’re out.
Lesson: Never let yourself get sloppy about money. You want to make sure that you’re always able to make payroll for your team.
3. Lack of marketing – a great product that nobody knows or cares about
Sometimes professional craftsmen start up small businesses because they know they’re really good at making what they make – whether it’s a great meal or a beautiful product.
But when opening day comes, hardly anybody knows about the store. There’s barely any walk-in traffic. Nobody knows about the business, and so it flounders.
Have you ever heard of Contour? It was a strong competitor of GoPro’s, even getting better reviews from serious enthusiasts.
Lesson: No matter how good you are, you want to make sure that you’re telling people about your business. Build up some hype before you even launch your business. Talk to the press. Talk to influencers.
4. An underwhelming customer experience – if your customers aren’t happy, your bottom line won’t be either
Lots of things have been digitized and automated, making it easier than ever to run many different parts of a small business out of your phone.
But if there’s one thing that’s still unchanged for thousands of years, it’s the fundamental nature of customer service.
The absolute best of the best might be able to get away with being gruff and unpleasant towards their customers (think Seinfeld’s No Soup For You!), but normal people are going to have to make good service a part of their business offering.
Nobody really thinks that Starbucks serves incredible coffee. They go there because they have an expectation of a reliable threshold of service and consistency.
Seth Godin runs one of the longest running and most popular marketing blogs online. He’s been writing for over a decade now, and constantly presents thoughts that are interesting and challenging. Lots of thought experiments, sometimes outright philosophical.
What makes their loyalty program so compelling? And what can businesses learn from them?
1. Great mobile app
It’s probably not a good idea for most retailers to build mobile apps just for their store – most people aren’t going to want to have a different mobile app for every single store that they happen to visit. Starbucks gets a “law of large numbers” advantage here.
In a way, people have come to expect Starbucks on every corner in major cities – like a reliable utility.
2. Online signup
Starbucks is one of those brands where fans actually might spend time thinking about the brand even when you’re not actually at the store or feeling the need for coffee. You can signup for Starbucks’ loyalty program online:
3. Special Gold card for extra-loyal customers
Having tiered levels of loyalty gives customers something to work towards.
Of course, few people are going to wake up in the morning thinking “Gosh, I really need that Starbucks Gold”, but it can tip people over when deciding whether or not to order that slice of molten chocolate cake with their cappuccino.
Starbucks’ loyalty program is a bit of an outlier.
Generally, Starbucks’ loyalty program is an example of what you can only really do when you have the massive scale they have.
Smaller businesses typically can’t afford to come up with such a complex, complicated solution, and they can’t expect their customers to invest so much time and energy into figuring out how the loyalty program works, either.
For most small retailers, you’re going to want to keep your loyalty programs as simple and easy to use as possible.
When we talk to our retailers, we find that practically all of them are in their line of work for more than just financial reasons. Several of them even quit high-paying jobs to do what they’re doing.
They want to make a difference to the lives of their customers, however small.
So let’s spend a few moments to think about how you could be more rigorous about that.
What do you need to do to make your customers happy?
1. Put together reasonably good product to begin with
While it would be good to have, you don’t actually need an insanely great product. As one of our retailers told us about his cold-pressed juices, “It’s not rocket science, anybody can do it.” Your product just needs to be reliably good enough for your customers.
Starbucks doesn’t make the best coffee in the world, and they don’t have to. They don’t sell “the best coffee”, they sell “pretty good coffee that’s reliable and familiar, in an environment that you enjoy.” That’s the ‘job’ that the product is hired to do.
Be very, very clear about your value proposition. About what makes you different from your competitors. About why your customers want to buy from you. When you make that clear to yourself, and to your customers, then your customers will find it easier to enjoy their experience around your business and product.
2. Have a pleasant ambience for your customers to enjoy
Which just goes to show that ambience and atmosphere can make a big difference when it comes to how your customers feel about your store. You don’t necessarily need to pull out all the stops – you just need to make it feel welcoming and ‘positive’ for your customers.
This post from InsideRetail explores how you can use all 5 senses to really create a great, memorable environment for your customers – one that they’ll want to return to.
3. Quality service from your staff
This is one of the harder parts. First, you want to make sure that you hire staff who have the right sort of personality and mindset.
Then you want to make sure that you treat them really well, so that they feel good about coming to work and feel good about giving your customers a great experience.
You also want to give your employees some autonomy to make decisions that will delight customers – few things are as frustrating for a customer as having to deal with unreasonably complicated return policies, and so on.
4. Provide a loyalty program
According to a Bond Brand Loyalty report, which surveyed over 11,000 consumers, loyalty programs actually have more influence on brand satisfaction than price or perception of value.
It’s sometimes debated that loyalty programs aren’t nearly as profitable as retailers would prefer. But in our experience, the main reason that retailers provide loyalty programs is that their customers ask for it.
Customers have grown to expect to be rewarded for their loyalty, and retailers (especially SMBs) want to do whatever it takes to make their customers happy.
Try CandyBar, a digital loyalty punchcard that gives your store a modern feel.
But you don’t need to be a massive hotel chain in order to surprise your customers with something a little extra. If you notice your customer looking a little down or frazzled, give them something ‘on the house’.
Not every single customer will appreciate it, but some of them definitely will – and they’ll be talking about it with their friends.
6. Respond well to negative feedback
Every so often you’re going to upset a customer, despite your good intentions and best efforts. This is unavoidable. How you respond to it, however, makes all the difference.
There have been many examples of this over the years on Facebook. Some business owners have very publicly dug themselves into a PR disaster by being mean or catty towards unhappy customers. Definitely avoid doing this.
Learn about what digital loyalty marketing is, how it works, why it’s so effective, and why we think you should get some digital loyalty punch cards setup for your small business.
Want a digital loyalty program for your store? Check out CandyBar.co!
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Text: Why you should have a digital loyalty program
In a milkshake bar not so far away…
Alice the customer: Awesome milkshake and great service! Love it!
Bob the bar owner: Thank you!
3 days later…
(Bob sees Alice buying milkshare from another shop)
Bob thinks to himself, “If people love my milkshake and service, why don’t they come back more often?”
Well, the truth is…
Customer satisfaction ≠ Customer loyalty
“There is a big difference between a satisfied customer and a loyal customer. Never settle for ‘Satisfied’.” – Shep Hyken, Customer Service Expert [source]
Customer loyalty doesn’t come by chance.
You have to actively build it!
Here’s an example:
Alice: Awesome milkshake and great service! Love it!
Bob: Thanks! Fancy getting a free milkshake on your third visit?
Here’s one way you can incentivize customers to be loyal. This is known as ‘Loyalty Marketing’
Loyalty Marketing is actively engaging and incentivizing customers to come back often.
Bob: Hmm… Is Loyalty Marketing really worth the effort?
Yes! Here’s some data and examples to prove it:
Starbucks’ loyalty program drove significant revenue and loyalty for the brand
“(My Starbucks Rewards) continues to be our most important business driver as new members contribute not only short-term increases in revenue and profit, but also to long-term loyalty for years to come.” – Howard Schultz, Starbucks CEO [source]
Loyalty program members buy 20% more frequently [Source]
Amazon Prime members spend more than non-members on average [Source]
73% of loyalty program members are more likely to recommend brands with good loyalty programs [source]
Loyalty Marketing works. It rewards your customers and drives more revenue and referrals for you.
Bob: If Loyalty Marketing is so good, why don’t all businesses already have it or do it well?
Good question! Here’s why:
It may not work well for some industries. (Such as: Automotive sales, Construction, Appliance repair, etc) One-time purchase industries are better off focusing improving their products and services and encouraging referrals.
A physical punch card loyalty program can be costly and labor intensive. From designing, printing, promoting to manually stamping them during every transaction, every step can add up to a huge amount of work.
Customers aren’t always fully engaged. Sometimes they forget to bring their punch cards, sometimes they lose their punch cards It is hard to track and measure impact. It’s a challenge to determine how many percent of the overall revenue can be attributed to loyalty program
Bob: Sounds daunting! Are you sure I can do Loyalty Marketing? I’m just a small business owner…
A digital loyalty program app would be ideal for you:
It’s easier and faster to set up and run
Customers can access their punch cards on their smartphones any time
Everything is tracked and measured automatically
More time for you to engage your customers and understand them better
A digital loyalty program app is a smart and easy way to incentivize your customers to come back often.
And this is why you should have a digital loyalty program.
Bob: Sounds good. Let’s do this!
Want a digital loyalty program for your store? Check out CandyBar.co!
As skewed as Dwight’s logic is, he did get one thing correct—that is, loyalty should be valued and pursued after. Certainly, the idea that customer acquisition is far more important than customer retention appears to be on the way out.
Numerous studies, polls, and industry experts have consistently demonstrated that cultivating a faithful repeating customer base is not only cost-effective, but highly lucrative.
And key to achieving such results comes in the form of loyalty programs, which may reward frequent customers with discounts, new products, free merchandise, gifts, and even company stock.
Here are five important statistics to further show you that romancing your existing customers is simply the right (and profitable) thing to do.
1) The 80/20 Rule – 20% of a company’s existing customers will generate 80% of its future revenue (Garnet)
In other words, you don’t have to search far for greener pastures, when all you have to do is tend to the one you’re standing on now.
2) It’s all in the Family – 63% of millennials share similar brand loyalties as their parents (Adroit)
According to a comprehensive Adroit Digital survey, around 63% of the millennials polled were loyal users of the same brands their parents follow. This discovery has some important implications.
For one, we see how brand loyalty can be passed down from generation to generation, with each tier strengthening that bond.
Second, the idea that young individuals display similar consuming patterns as their parents further dispels the false dichotomy between customer retention and customer acquisition. The two aren’t mutually exclusive.
Creating loyal customers out of parents means setting up their kids to be loyal customers too.
3) The Other 98% – Loyalty programs tend to over-reward the top 2% of customers (HBR)
The author’s point here then is that loyalty programs can alienate customers if they’re not careful. A good should be cater to the varying profitabilities of different customers, while never making them feel second-class.
4) Repeating customers spend 70% more in their 31st month than in their first six months with their preferred retailers (Bain)
“Patience, you must have,” said Master Jedi Yoda. Indeed, in a study published by Bain & Company, repeating customers were discovered to spent almost 70% more in their 31st month with retailers than in their initial six months.
As we’ve said before, it’s a marathon, and never a sprint.
5) Love Your Other Half – More than 50% of customers have switched brands due to poor customer service (Accenture)
In today’s digital, faceless age, you’d be forgiven for thinking customers don’t prioritise human contact. But apparently, they do. Market research by Accenture Strategy showed that 83% of American consumers prefer interacting with ‘human’ customer services.
Alarmingly, 52% have switched brands and service providers due to poor customer service, costing companies a loss of $1.6 trillion dollars.
What this shows is that human interaction remains a vital component in inducing customer loyalty. A well-designed loyalty program means little if customers feel like they’re interacting with robots, or worse, actual human beings who couldn’t care less.
20% of your existing customers will form the backbone of future profits and revenue
Customer retention and customer acquisition are not mutually exclusive
Be mindful if you’re privileging your ‘best’ customers at the expense of the majority
Long, meaningful company-customer relationships do pay off