Did you know that current customers will spend an average of 67% more on your goods and services than new customers will? That’s huge.
Take a look at your business. According to the Odonnell Company, if your business has a 60% customer retention rate, you are losing 3-4 times as many customers as a business that has an 80% retention rate. Is that business can you afford to lose?
While there are a number of different things you can do to keep customers happy, there is one simple way to ensure they always come back for more: a loyalty program.
What is a Loyalty Program?
A loyalty program is really exactly what it sounds like – A program designed to offer incentives to those customers who shop most frequently with you. Of course you want to please all of your customers – we’re not saying ignore the casual, one-time buyers or forget about trying to acquire new customers. At Direct Capital, we just want what’s best for your business, and retaining those loyal customers is crucial to future success.
So, now the question becomes: How do you implement a loyalty program that’s effective for your business? Keep reading, and we’ll tell you.
How To: Structure Your Loyalty Program
The type of business you have will determine the loyalty program that works best for you. We’ll lay out five different types of programs to give you an idea of what you can start implementing today.
- Points system: You can do this one of two ways. One option is to have points equal dollars spent. So, if a customer spends $10, they receive 10 points. Then you can offer different items based on points. For example, a soda may normally cost $2.00, but if they have 20 points, they can get the soda for free. Another way to present the point system is to offer free items after the customer spends a certain amount. Example: After a customer spends $50, they get their next item free.
- Buy X, Get Next Item Free: Though this sounds a lot like the second point system example above, there is a significant difference. Let’s use an easy scenario: If you own a coffee shop, you can offer customers a ‘Buy 10 Coffees Get Your Next One Free’ promo. We know – spending $20 to get a $2.00 coffee free doesn’t seem worth it, but remember these are your regular customers.They are going to buy from you anyway, so offering them a little something extra will keep them happy.
- Make It a Game: Making a game out of your loyalty program is fun and easy. GrubHub’s “Yummy Rummy” is a great example. After customers ordered food on GrubHub three times, they were able to play a mini card game for a chance to win a number of different prices. Shaw’s Supermarkets has similar promotions – notably their Monopoly game. Customers would receive a certain number of Monopoly tickets depending on how much they spend every shopping trip. They use those tickets on their “Game Board” and when they find all the matching pieces for the associated prize, they win. Find a type of game that would make sense for your business model and give it a try! Then, ask your customers for feedback so you know whether or not to do something like it again.
- Tier program: This is designed to offer incentives instantly upon becoming a customer, without the need to make a specific number of purchases. However, they are also designed to instill a want in the customer to purchase more because of the additional benefits they will receive when they do. Let’s look at Virgin Airlines’ Flying Club as an example. They offer first-time customers miles on flights and, as they move up the ranks, they can eventually earn double miles, priority boarding, and access to exclusive clubhouses. Why wouldn’t customers continue to fly Virgin?
- Upfront Fee for VIP Services: A program like this has worked well for Amazon, with their “Prime” service where customers pay an upfront fee to access free 2-day shipping on any purchase, among many other benefits. If you run a business that’s successful online, offering a program like this could be beneficial to you. More customers would be willing to sign up, paying an annual price, in order to have access to your additional services, giving you an increase in revenue up front.
Don’t think any of these loyalty programs would work for your business? Be creative and think of one to start. You know your customers and business the best – you know what will be successful.
Direct Capital is here to help your business by offering financing and tips on how you can grow, succeed, and prosper for years to come. For more information on who we are and how we can help you, visit our website or fill out the online form by clicking the banner below!