What We Can Learn From the Big Guys About Loyalty Programs

Traditional loyalty programs place hurdles throughout the process. Forgot your card? Oops, wait until next time. Didn’t print out your coupon? Sorry, non-redeemable. No wonder loyalty programs are barely worth it for customers and companies alike – only 44% of restaurant loyalty or rewards members are even active. The same customers may have been spending money with you, but you wouldn’t know it because there is no reliable way to track it. Or worse, maybe they really did stop coming altogether.

Today, small business can finally capitalize on information that big business already knows – sources estimate that bringing in new customers is 30% more expensive than holding onto your old ones and consumers are over 80% more inclined to shop at stores that offer loyalty incentives. Thanks to the rapid adoption of mPOS systems in small- and medium-sized retail stores and restaurants, everyone is able to collect valuable data that tells them when people shop, what they buy, what their favorite items are, and tie specific offers and marketing campaigns directly to results.

With an effective customer tracking system, you know your customers’ buying preferences and the types of shopping experiences they expect, so their loyalty reward should be a focused effort to leverage that knowledge.

Here’s what we can learn about loyalty programs from the big guys

Brand Awareness – Make sure your loyal customers get the skinny on a new product, menu item, or offering before advertising to anyone else. Furthermore, you know what they like, so if there are any changes or additions to the reason they are returning to your shop or restaurant, make sure they know about it before the changes happen — no one likes surprises. Always ask, “How do I create a partnership with the consumer?” 

Applebee’s totes itself as a “Neighborhood Bar & Grill”, and as such works to appeal to its neighborhood with their Perks loyalty program. Members enjoy special new-item previews, cooking and bartending tips, invitations to special restaurant events and fundraisers, recipe books, and local entertainment advice, as well as discounts. The restaurant tracks loyal customer visits when their guests “check-in” via Applebee’s custom app. The results? Applebees has remained #1 in casual dining for seven consecutive years, and topped every restaurant in the country for the first time to rank #1 in brand engagement for 2014. Revenue also increased by 9.7% last year.

Understand your customer’s values – Truly understanding your customer means understanding their values and sense of worth. Depending on your industry, your customers may find more value in non-monetary or discounted rewards. While any company can offer promotional coupons and discount codes if they want to, businesses that can provide value to the customer in ways other than dollars and cents have a unique opportunity to connect with their audience.

REI knows their people. This outdoor gear retailer understands that their customer base isn’t looking for deals as much as they are looking for experiences. While loyalty members do receive in store discounts, they also receive a 10% annual member dividend and the inside scoop on outdoor adventure travel opportunities, lift tickets, and premium access to REI Outdoor School. Regular REI shoppers are made to feel part of this grand outdoor adventure community, and their co-op style of retail is working. Most recent reports have REI’s revenue up 10% since last year.

Earn points – On its face, a customer discount program can seem like a good idea. It seems like you’re telling customers that their loyalty has earned them a little extra money in their pockets. However, this message can be confusing for customers. Is your markup so high that these discounts represent the real value of your product? Are they getting scammed when they pay regular rates? Flip that psychology upside down by letting your customers “earn” deals with regular-priced purchases.

Starbucks has this down. Coffee addicts earn Stars by paying with their registered Starbucks, Teavana, or La Boulange Card or by using the mobile app. Those Stars turn into comped drinks and food, custom offers on items, and early peeks at new products.

Multiple tiers give members something to strive for. Rewards programs with multiple tiers keep customers coming back to earn the prestige of higher reward levels. It’s important that the rewards at each level are unique and meaningful. Tiers that are designed to reward the most profitable customers let you align your reward program to your profit goals.

Consider the Neiman Marcus model. InCircle is a seven-tiered program that offers rewards that increase as the amount spent goes up. All InCircle members earn two points for every dollar charged on purchases made at Neiman Marcus; eventually earning them a $100 Point Card. Higher-tiered rewards members can also receive complimentary gift packaging, double points, an InCircle concierge and a $25 perk card.

Take It, Run With It, And Test It

Once you have your mPOS system and newly revamped loyalty program in place, run an A/B test against program members and non-program customers to determine the overall effectiveness of the loyalty initiative. According to Fred Reichheld, author of the Loyalty Effect, a 5% increase in customer retention can lead to a 25-100% increase in profit for your company. Now that you have the tools to discover and analyze the data, collect it, implement it, and track it. Don’t leave money on the table.

Image Credit: torbakhoper by CC BY 2.0

Learn MoreSchedule a Demo