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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?

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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.

membershipsDigital 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.

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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.

freebies-campaignYou 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.

freebies-campaignGreat 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:

  1. Give away free smaller items with the purchase of larger items
  2. Run a contest where customers must make a purchase to enter the competition
  3. Implement a loyalty program, remembering to promote and celebrate your first day of launch in-store
  4. Market a “freebie” hour, rather than an entire day

freebies-campaignEffectively, 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.

The big brands have deep pockets and domineering presence, and pair this with free parking and low prices it is hardly surprising that customer choose them.

But for the very reasons that make the big shops attractive, they also make themselves vulnerable to shopper-savviness. The big brands are clones of each other, meaning shoppers have little reason to choose one over the other. Brand loyalty at this scale is rare and this is why the big brands are constantly working to drive their shoppers back to them. Here is a quick look at some of the strategies employed:

Free parking – Hardly a groundbreaking strategy, but nevertheless important. The point is to make the choice as easy and effortless as possible for the customer. Looking for parking and paying for it adds friction.

Brand comparison – Price wars are raging and supermarkets spend almost as much time talking about their competitors as themselves, in a bid to show the customer that they are cheaper than so and so. Some will even print their competitor’s name on the receipt!

Time-limited discounts – Some of the big supermarkets will give you a voucher along with your receipt, often with a neat little saving on your next shop. But have you ever looked at this in detail? Notice the expiry date. This has not been chosen at random, but is carefully calculated by marketeers and analysts, and is usually set to just before a customer would ‘naturally’ do their next shop. The purpose is, of course, to drive the shopper back in sooner – increasing the frequency of their visits and therefore increasing their spend.

Complex loyalty cards – The big brands all have some sort of loyalty program where customers earn points for their spend. But have you noticed the rewards? A store voucher or discount, which is what you might expect, is sidelined by rewards at other, non-competitive businesses such as restaurant vouchers, cinema tickets and online shopping vouchers. All very tempting to consumers – who feel like they are getting a special treat just for doing their everyday shopping.

Together these strategies all work towards one goal; make the customer come back more often and spending more, each time. But you don’t have to be a big brand with deep pockets to take advantage. If you can’t offer free parking, can you be flexible with your opening hours? Be the easier option for customers. Once a customer has chosen you once, you have the opportunity to turn them into regulars by offering a competitive, enjoyable experience in store.

A recent survey* done by AXA Business Insurance have found that more than 60% of Britain’s shoppers have lasting relationships with their local stores and that they are much less loyal when it comes to their supermarket shopping.

But what makes local shops stand out? One in four answered that they like knowing the shop owners and the staff by name. They also responded that they like being able to order ‘the ususal’ in their local shops. Not all business sectors are treated equally though – the sectors we report the highest level of loyalty to are hairdressers, newsagents and butchers. It comes as no surprise that we are loyal to our hairdressers and butchers – the products and the service they provide are largely based on trust. As a bonus, shoppers appreciate the benefits independent shops bring to an area; over 70% say they think local shops adds to the character of a place, and almost 1 in 5 say the are prettier on the high street than the chains.

Another factor in our seeming preference for local shops is the nostalgia tied to high streets as they used to be – with a varied selection of specialist shops. These days high streets have a higher level of sameness; the same shops are found on every high street across the country.

An unsurprising 88% say they are not loyal to the supermarkets; price and convenience is the driving factor when they decide where to shop. 1 in 4 say they would change if a different store opened nearer to where they live or work – indicating location is an important factor for customers when choosing where to shop.

The survey also lists the top 10 businesses we are most loyal to;
1. Hairdresser
2. Newsagent
3. Butcher
4. Baker
5. Greengrocer
6. Florist
7. Shoe shop/Cobbler
8. Clothes store
9. Fishmonger
10. Book shop.

Interestingly the list consists only of specialist shops – big supermarkets combining clothes, furniture and groceries are nowhere to be seen despite their ‘all-in-one solution’ and, often, car friendly locations. It is an interesting contrast to the picture often presented in media, where we tend to see a focus on consumers being disloyal and focused only on price, largely influenced by online shopping.

Online shopping may be convenient and easy – but British consumers still seem to put their loyalty with their local shops, appreciating familiarity and what these shops bring to the community.

*See the original survey here.

Almost any business in any sector can run a loyalty program and elaborate on repeat business. The benefits and rewards from focusing on your existing customers as opposed to only focusing on gaining new business are many – and it’s an area you should not ignore. Did you know, on average, customers who have bought from you before, are more than twice as likely to buy a second time than someone who has never bought from you? This means – your existing customers are low hanging fruit and relatively easy to sell to. So what type of loyalty program can your business run?

There are as many types as there are customers. Choose how you want to reward customers first. An instore-voucher is always a good idea. This can be a percentage discount or a cash discount. These are great because they make it highly likely the person returns to you. If you make them transferable they can also be a great way of getting new business – the recipient can give it to a friend recommending you. What’s more, an in-store voucher is very rarely used at its value. A person with a £10 voucher is unlikely to limit his or her purchase to the value of the voucher, rather they are likely to use the voucher as part of a purchase bigger than they would normally make. Or, forget to use it completely.

Another popular approach is to give away a freebie. We all know the free coffee/hot drink tactic. For low-cost, high frequency items this can work a treat. And as with the in-store voucher, is the user likely to include the value of the voucher in a bigger purchase. Psychologically, we are prone to treating ourselves to something extra when we are getting something for free. That muffin seems very cheap when your coffee is free, doesn’t it?

A cumulative approach is another option. Let your customers earn points based on their spend, and set up rewards at varying levels. The psychological effect her is tremendous – the rewards do not have to be high value; what’s more is people are usually tempted to up their overall spend if there’s a freebie included.

If you already run a loyalty program, but it feels stale and old – sit down and have a think. How can you make it more exciting for customers? What rewards can you offer that will make customers eager to earn their points? Each approach has its strong points – choose the one that suits your business and your customers.