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With the popularity of Amazon Prime increasing, striving small businesses are trying to compete by running paid membership programs, which create a new type of loyalty. So what is a loyalty program and how can running a “Prime-style” loyalty program benefit your business?
There are many types of loyalty programs on the market but in a traditional sense, the basis for a loyalty program is a customer earns points for spending and redeems a reward when a point target is reached. Therefore encouraging the customer to visit more regularly or increase their spending habits.
Historically these loyalty programs have been executed by paper or plastic cards due to ease of use. With the increasing use of technology and smartphones, today’s version of a loyalty program can include features like points being viewed in-app or marketing messages being sent via SMS. Typically these are the types of features you should find in a good quality digital loyalty platform:
- Point balances sent in digital format (SMS, email or push)
- Integrated into your businesses point-of-sale
- The ability to send marketing messages via the platform
- Auto-promotions for customer segments
Point-based loyalty points programs work well for cafes and quick service restaurants – venues where customers generally shop at a variety of places yet you still want to be at the top of their list of choices.
Digital Loyalty has evolved very quickly due to the advancements in the way customers consume digital content. Now we look at smartphones as a digital wallet or even our own shopping mall. Online shopping, Apple Pay, Amazon’s “one-click” purchase, and Amazon Prime have all driven us to enjoy fewer clicks, less hassle and basically doing less of anything.
So where does this leave small retailers? There’s still a place for independents as there are 22 million small businesses in the US, it’s just there is more pressure for business owners to add digital to their in-store experience. The combination of consumers going wallet-less along with the popularity of Amazon Prime is what has led businesses to use a “Prime-style” loyalty platform. In essence, a customer is charged a recurring fee and the business offers special rewards or benefits in return. Some features can include:
- Setting up memberships and recurring payments directly from your point-of-sale
- Tracking abilities for used rewards/benefits
- Send promotions to VIP members to make them feel valued
- Declined cards management
The icing on the cake is that all of this drives recurring revenues and leaves little up to chance when trying to strive for growth in a business. Membership programs work particularly well where there is a great deal of competition and the customer should be regularly purchasing your product/service.
The best vertical example using this type of software is car washes, for example charging $30/month for unlimited car washes. Membership programs can be used for unlimited rewards or a set amount of benefits within a billing period. Wine clubs, golf clubs, coffee shops, nail, tanning, hair and beauty salons, in particular, are also using membership platforms to run their Prime loyalty programs. Great membership examples in these verticals are:
- $39.95/month for two premium bottles of wine a month
- $119/month for 4 Deluxe facials per month and 15% off all products all of the time
- $70/month for unlimited blow-outs or men’s shaving
- $45/month for nail paint with shellac on toes and hands per month. As many touch-ups as required.
As far as small businesses go in surviving long-term, a digital loyalty strategy is a must – it’s just investing in an affordable product that can execute steady growth for the business and be so downright easy you would be lost without it.
So maybe these aren’t accurate statistics but it’s a fairly good assumption to say that every customer loves freebies. The definition of a “freebie” is something given or received without charge and we’re telling you that your business should give more of them away. These types of giveaways are important in a business’ marketing and sales strategy, but it needs to be executed effectively and with the right objective.
You might be surprised as to the insights behind giving away free goods. Logically the expectation is that customers will walk in, take their free stuff and run, but in fact the opposite occurs. Take 7-Eleven’s Free Slurpee Day for example; Slurpee sales were boosted by 38% when they offered free small Slurpees to every customer for one day of the year. Surprisingly, attendees of the Free Slurpee Day were sampling the free size and then upgrading to a larger size. Offering a freebie simulates a “try before you buy” selling technique but without any rules or obligation. This alternative method makes customers feel relaxed about making their own choices to purchase more.
Great times to offer freebies are when you are releasing a new product, when you need an aid in up-selling/cross-selling or simply looking for a new way to market your business. Right now you are probably looking at your income and wondering how much you can afford to give away for this kind of campaigns. In reality giving away free items is a great PR stunt for large companies and they can reach far more consumers than any SMB can. So how do you run a freebie campaign without losing out?
Here’s some alternatives:
- Give away free smaller items with the purchase of larger items
- Run a contest where customers must make a purchase to enter the competition
- Implement a loyalty program, remembering to promote and celebrate your first day of launch in-store
- Market a “freebie” hour, rather than an entire day
Effectively, you want either new customers coming in and becoming regulars or enticing current customers to come in and spend more with you by trying something different. Today’s consumers have a world of choice at their fingertips, so empower your customers to make the right decision by choosing you each time.
There are so many different types of loyalty platforms on the market that it can become confusing as a business owner when implementing the right program. Everyone is so conditioned to seeing what works for big retailers as well, that it is easy to assume that what works for them will work in the SMB world…wrong. Let’s have a look at some of the misconceptions happening in the SMB loyalty space.
Customers love marketing emails
No…they really don’t, do you love receiving hundreds of emails every day? It takes a very special kind of email to blow email open rates out of the water. Mailchimp says, on average SMB email campaigns average an open rate of 21.53% and that’s by creating outstanding email campaigns, but that’s just an open rate. For a customer to actually take action on this email is far less. Think before you implement a loyalty program that focuses purely on email and email marketing campaigns, as you may not see the return on investment you are looking for.
Customers will do anything you tell them to do
Wrong again, it’s incredibly hard to get a customer to behave in a certain way, so don’t leave it up to them. There are plenty of loyalty programs that require a customer to take action in signing up to a loyalty program. They may have to go to a website and sign up or keep a paper or plastic card in their wallet or it may even be scanning a QR code when they arrive in-store. Think about the customer and how much of an inconvenience this is for them. The best advice is removing the friction from the sign-up process and doing it for them, that way you stay in control & don’t leave it up to them to decide.
Birthday offers will generate a tonne of revenue
Totally false again! We’re not saying it’s going to be a total flop but think about what you personally do on your Birthday. You either celebrate with your loved ones maybe have a party at home and in most cases, your friends will take you out for dinner to a place that they think is nice or to your favourite restaurant. In any of these cases, your small business will probably lose out. Now think about it again, is it really worth running Birthday offers in-store?
Reminder: Focus your energies on the things you can control & don’t leave the rest up to chance
SMS marketing works!
This is only half true, it certainly works but remember the saying “too much of a good thing is bad.” SMS campaigns work because they are short, snappy and grab a customer’s attention immediately but if you bug a customer with predictable and constant SMS messages, all you are going to do is make them “opt out.” Make it exciting and keep promotional campaigns between 2 – 4 times a month.
Starbucks has been getting a lot of attention in regards to their newly rolled out loyalty program. Mainly because of the sudden changes that caused an uproar in the Starbucks loving community. The controversy around their “improvements” is teaching business owners that it’s important to know how to launch a successful loyalty program. It should be strategically planned for growth and revenue building. Let’s look at Starbucks and take away some pointers from their new program.
Points or stamps?
Starbucks started out with a stamps based program, awarding one stamp per visit and then switched their program to points based. Now people are being rewarded for spending more, rather than visiting more. It is a tactical plan to switch from stamps to points, forcing customers to hand over those extra dollars. If you’re a business with a large variety of products, it’s advisable to start with a points based program. Awarding your customers for spending larger amounts with you, rather than forcing them to head to a competitor for the extras.
Let’s get personal
Allowing customers flexibility is one way to make them feel like they are really part of a loyalty program. 
Starbucks is now driving personalised offers to customers based on their prior behaviours. This is a complex feature of a loyalty program but can be simulated by offering accumulative rewards. Meaning the more points the customer accumulates, the better the rewards. Consumers can then choose to redeem the smaller offers or keep building more points for something of better value. Once again pushing customers to spend more with you, which at the end of the day is what you want out of a good loyalty program.
Promotions, promotions, promotions
Don’t fall into the trap of sending marketing emails to your loyal customers. In fact this is the wrong way to
go about signing up customers to your loyalty program. There is a lot of stigma around signing up to a loyalty program and then only receiving uninteresting updates about a business. Give your customers something to get excited about! Plan promotions a couple of times a month and send them out via SMS or push. This will really get your customers going and get them to take action instantaneously. Starbucks do this really well by providing promotions by push notification in their app.
Is Starbucks running a successful loyalty program?
So maybe the critics have it all wrong? After the storm of its new release, Starbucks new loyalty program is still proving to be a hit but it has taught us a valuable lesson. Plan a successful loyalty program and not only will your customers thank you for it but you will be thanking yourself for a nice revenue boost!