Ideas to Implement Your Customer Loyalty Program

how to choose a customer loyalty program

Baskin-Robbins was founded in 1945 and its first customer loyalty program offered children one free scoop of ice cream on their birthday. Nearly 70 years later, the Baskin Robbins Birthday Club still exists and it’s still a customer loyalty program, but the free scoop is gone. Current members get an ice cream-themed birthday email, a discount on ice cream cake and a buy one, get one free (BOGO) deal on scoops, plus additional discounts during the year with offers sent by text message.

The COLLOQUY Loyalty Census estimates that there were over 2 billion memberships in various customer loyalty programs in 2010 and the number keeps growing. The same report found that the average US household belongs to 18 different programs, although is only active in about 8 of them. Interestingly, ACI Worldwide, a company that specializes in payment systems, found in a 2011 survey that, “85% of members report that they haven’t heard a single word from a loyalty program since the day they signed up. Likewise, 81% say they don’t even know the benefits of the program or how/when they will receive rewards.”

Get Familiar With Customer Loyalty

The most familiar customer loyalty programs may also be the most complicated. Airline frequent flyer programs reward repeat customers with points to be used toward merchandise and/or free flights. Ed Hadley, Senior Marketing Manager of Neolan also quotes the 2011 COLLOQUY Loyalty Census: “Of the roughly $48 billion in reward points and miles issued annually, at least one-third ($16 billion) goes unredeemed by consumers.”

Other familiar customer loyalty programs include supermarket and pharmacy customer loyalty cards that offer sale prices to customers who participate in their programs. Managing customer loyalty programs on this scale requires maintaining a sizable database. That database can be a goldmine of information about consumer shopping behaviors, but it also requires employees who are skilled in using its aggregated data to conduct market research.

If you’re a small business owner, you don’t have these kinds of resources. So what kind of customer loyalty program can you implement to keep your best customers coming back?

Bringing Customers Back

While Rita’s Rewards loyalty program and many others have transitioned to smartphone mobile apps to keep track of frequent purchaser rewards, the punch card model still works well and is ideal for small businesses. Responsibility for retaining and presenting the customer loyalty card rests with the individual customer. The small business owner trades access to a database of consumer behavior in exchange for a manageable program that rewards loyal customers and encourages them to return.

The idea is simple. Customers sign up for your loyalty program and receive a paper card. Each time they make a purchase, the card is stamped or punched by an employee. You set the terms, for example – buy 9 and get the 10th free. This simple system works for nail and hair salons, coffee shops, even acupuncturists and chiropractors. Buy 9 and get the 10th free can work for any kind of business that thrives on repeat customers making essentially the same purchase over and over.

Other businesses owners who sell a range of merchandise can set up a customer loyalty program based on dollars spent. For example, every $200 spent entitles the returning customer to a 20% discount off their next purchase. A running total could be kept on a similar paper card and validated with the business owner’s initials or a unique stamp.

Doing Loyalty Different

Digital loyalty programs that enable customers of small businesses to swipe a plastic card or use a mobile app are beginning to emerge with the help of companies like FlockTag and Perka. They require a greater investment than printing a set of paper rewards cards, but they offer small business owners a new compromise between collecting zero customer information and maintaining the mammoth database of, say, Safeway Rewards.

One computer technician offers her customers a distinctive customer loyalty program that doesn’t even require a paper card. For every new customer who books her service through a referral from an existing customer, she gives her referring customer a free hour of service time. There’s a lifetime limit of three free hours, but you can bet that rewarding her customers with free service hours earns their loyalty. She’s not only keeps her loyal customers happy, but she’s cleverly drafted them to be part of her marketing team.

Sam Brandes is a FastUpFront Blog contributor and business author.

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