Bright Ideas from the Idea Lady

Rewarding Loyalty

Copyright by Cathy Stucker, The Idea Lady(tm)

Airlines offer frequent flyer miles, grocery stores have customer loyalty cards, and the local sub shop gives you a free sandwich after you buy ten. Each of these programs rewards customers for patronizing a business on a continuing basis. Although the most sophisticated of these programs are costly to administer, you can start a loyalty program that is inexpensive and simple to run. 

How you run the program depends on your business. Do customers buy from you at your retail store? At the most basic level, have some business cards printed with areas to punch, stamp or initial each time a customer makes a purchase. This may be based on simply making a purchase, or it could vary based on the number or type of items purchased or the amount spent. When the card is full, the customer gets a discount or free item. If customers buy from you online or via mail order, you may track purchases through an automated system and offer rewards when cumulative purchases reach certain levels.

In addition to encouraging customers to buy from you regularly, loyalty programs can also be a source of information about your customers. Ask customers to sign up and give you their contact information (e.g., name, address, phone, email) and perhaps fill out a brief survey. In return, you might offer a free gift or a discount on a purchase. Use this information to keep in touch with customers and let them know about new products, 
sales and other promotions.

When you design the rewards, consider what you want your customers to do and what rewards they value. The reward may be a discount, a specified free item, or an item of their choice (within certain limits). Although you don’t want the program to be so complicated that no one understands it, you may offer “bonus points” for purchasing certain items, for purchases over a certain amount, or to reward other customer behaviors you want to encourage.

A related idea is offering a membership or fee-based program. Customers pay to belong, and in return qualify for discounts and other special promotions. For example, Barnes & Noble sells a card that gets holders 10% off most purchases. These cards not only encourage customers to buy from them instead of another store, they may also generate larger sales. After all, the more you spend, the more you save!

Your loyalty program should result in more sales, while keeping administrative and other costs to a minimum.

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