There are three levels of loyalty programs that you can implement:
Let’s look at each of them individually.
As simple as it seems for both the company and the customers. A basic program is ideal for places that want to promote one or two main products or services. All you need is some kind of record for purchases, like a small card. The point here is to drive repeat business, get customers used to buying from you. You just need to train the people who interact with these customers to offer upsells and additional products.
These types of programs work very well for stores that sell items such as coffee, donuts, hamburgers, and hot dogs. If you have a business that provides a simple service, such as carpet cleaning, lawn mowing, or pet sitting, anything that a customer can use your service for fairly regularly, you can also set up a basic loyalty program.
The program is a simple equation: pay X amount of products / services, get the next one for free. The seller only has to ask if the customer has a membership card. If not, they provide them with one and mark the card to show a purchase. When the customer’s card is fully marked, the vendor takes the card and gives the customer the free donut / cleaning / whatever, along with a new, unmarked card.
Instead of a physical card, you could also invest in producing an application that people can download on their smartphone. Obviously, this is more of an upfront expense for most businesses, but depending on how quickly you check the cards, it could be more profitable over time.
Pros: Low cost, ease of setup, and immediacy are the top three benefits to starting a basic loyalty program. If you assemble it yourself, you could start a basic program for about $ 20 (500 cards and a small ink stamp). Spend more money to print overnight and you can start your basic program tomorrow.
Cons: You will depend almost entirely on the sellers of your point of contact for everything: promoting the program and generating additional sales. You also get absolutely no information about the people in your show, so you can’t make personalized offers. You have no contact information for your customers, so there is no way to get in touch with them and ask them questions (“What else can we offer you?”) Or give them information (“We will be bringing red widgets starting next week.”) .
These take a bit of effort and cost to set up, but they aren’t that difficult. Most of the loyalty programs I have seen fall into this category. The main tools used here are:
1) A list with personal information (name and email address, at least) of each client.
2) A contact mechanism, such as an automated email response or a text message delivery system (SMS)
3) A series of automated messages
4) Deals: discounts, buy X get more free, etc.
These programs require a little more planning, a little more time, and a little more money. Your costs in time and money will depend on how complex you want to make of your program and what you want to get out of it. You can have people sign up for the program themselves, and then have the program make offers to members and distribute rewards (such as discount coupons, etc.) automatically. Or you can make the system behind the program more complex and segment your members into groups and subgroups, providing each segment with different offers and rewards. If you reward people for their loyalty, they are more likely to reward you with detailed information, such as important dates (date of birth, anniversary, etc.), physical addresses, and purchasing preferences.
Intermediate loyalty programs can help you expand member purchasing decisions by allowing you to suggest related products and services. If they know, like, and trust you, they are much more likely to buy additional products and services from you than to look elsewhere.
Pros: Most intermediate programs can be highly automated. With just a few minutes each week, a single person can examine the statistics generated by the program and make small adjustments to improve the process. Most of the cost in labor and money comes up-front and allows you to almost “set it and forget it”. The person managing the system only has to spend a lot of time when parts of the system change or when new complexities are added such as additional products, services or list segments. Due to the moderate amount of personal information you can acquire, you can offer higher profitable products and services at the right time to members of the right list.
Cons: Someone has to understand the show and be in charge of running it behind the scenes. They are in charge of training contact persons on what to expect from program members such as coupons etc. They also need to regularly read the data generated by the system, interpret it, and make decisions based on that information. Learning all of this can take considerable time and effort at first. While intermediate programs don’t have to be very expensive, a decent system is far from free.
By their nature, advanced loyalty programs are much more complex, much more expensive, and require a recurring investment of time by a team of people. However, most advanced systems track an enormous amount of information, and the data provided by these programs can help you almost micro-promote each member. Many membership programs run by major corporations are advanced systems. Wegman, a major grocery chain on the US East Coast, knows what its members buy down to individual SKUs, and its automated system can offer coupons for items the customer has purchased in the past. I regularly get the same type of coupons from BJ’s Wholesale Club. Advanced systems can offer promotions through printed coupons sent by mail, through SMS messages sent to a member’s phone, or even through custom applications that members use to shop. A truly advanced system will know how often you make purchases, the quality of products and services you prefer, the brands, the individual items. It may offer you incentives based on important dates such as holidays and birthdays. They can tell how much time you spend shopping and ask you to come over when they haven’t seen you in a while. The more information your membership program tracks, the more you can do with that information, including adding it and selling it to third parties. But that’s another argument!
Pros: Large amount of information, depending on the amount of information you collect and the complexity of the collection system. The more information you collect, the more granular you can run your promotions. Offer a discount not only on widgets, but also on yellow left-handed widgets; or to people in a certain ZIP code who have their lawn mowed only on Thursdays. Track your costs, schedule needed supplies by the hour, plan for higher profits.
Cons: Expensive investment. Installation costs in time and human resources are much higher than any of the other categories. Monitoring the system, as well as interpreting and using the generated data, generally requires a team of people and is an ongoing investment. The more data points you track, the more parts of the program will need to be modified.