One simple, irrevocable fact of human psyche is that we love a bargain and a saving. This is why loyalty programs and discount systems are so popular – but not all are equally profitable for a business.
To independent shop owners, restaurant managers or anyone else with their own business, the word ‘bargain’ doesn’t come with the best associations. A bargain is thought of as selling something for cheap, giving away more value than indicated by the price, and going at a loss.
In consumers minds though, the definition of bargain is quite different. A bargain, put simply, is a saving. The size of the saving doesn’t count for much, as long as it takes a little something off the original price. This is why loyalty cards and programs are so successful and why an increasing number of shops and restaurants everywhere are getting involved.
Research done by TechnologyAdvice in the US show that an astonishing 82.4% of customers say they are more likely to shop in a store which offers a loyalty program. If your shop has a competitor in the vicinity – introducing a loyalty program for your customers can be the best thing to do, to make sure yours is the more popular one.
We touched on it before – what the customer perceives as a saving or a bargain, doesn’t have to be big. It doesn’t have to negatively affect business. As a matter of fact – if you consistently offer great discounts and offers to your customers, they’ll learn not to shop at full price, because they can count on a great offer coming up soon. It might not seem so at first thought – but a loyalty program is the perfect compromise. By offering your customers loyalty program, you tell them two things; 1. we value you highly as a customer, 2. we want to give something back.
In return, the customer feels a.) valued and special and b.) that you are being generous.
The loyalty program you offer can be as simple as buy 5 get 1 free, or ‘get 1 point per £5 spent, free main course at £60 points’. This is a minor discount overall, but it works magic on the human psyche. Because we are all wired to want free stuff, this method of rewards works. Logical or not ,this is what happens in the human brain: Oh great, they’ve got a loyalty program! Buy 5 get 1 free. That’s awesome! I get coffee every day anyway, this means I get one free per week!
This is minor discount for the shop, which is gained back by tenfold over that customer’s lifetime. Another fact to add to the equation is the value of loyal customers. Not only do they come in regularly, offering you a trusted income, they are also less sensitive to price changes or weather conditions. In addition to this they are the best source of marketing you can get – and it’s all free. Look after your customers, offer them a loyalty program to incentivise their repeat business, and they’ll reward you not only by shopping with you, but also by bringing friends or family as well as giving you a good recommendation. Word-of-mouth marketing is by far the most efficient there is, so make sure you utilise it for what it’s worth. It doesn’t cost a penny, all it takes is good service, good products and good value. You probably have these in order already – now add a loyalty program on top, to really boost your growth.
Did you know that by increasing your loyal customer by 5% you can boost revenue by up to 95%? These numbers might sound high, but it is all based on the well known Pareto principle, or the 80/20 rule. This rule states that 80% of income is generated by 20% of your customers. By increasing the size of your 20%, you automatically increase revenue. If you have 20 regulars today, introduce a loyalty program and sign all of these up. Then ask every customer who comes in to do the same. Most people don’t want to miss out on an opportunity to make saving, so these are low-hanging fruit, ripe for picking. Chances are, because they are now involved in your loyalty program, that they will start becoming more frequent visitors, and by natural cause and effect leave more money, give more recommendations and contribute to growing your business.