give-receive-why-loyalty-works

There are two main things you can expect if you run a well-functioning loyalty program; customers come more often and they spend more each time they come. Overall, this can mean an interesting increase in sales. Figures vary depending on your sector – but a sales increase between 8-33% is highly probable.

Why does a loyalty program make people come more often?

The human brain is a wonderfully complex thing – and our inherent reward-centre is truly powerful. We instinctively crave the reflex triggered when we receive something we feel we have earnt. Acknowledgement or a pat on the back for good work, the first sip of a cold drink after strenuous exercise; regardless of the shape it take; reaching a goal we or someone else have set for us is satisfying.

And this means customers who are part of a loyalty program will be drawn to keep collecting their points. In practice, this means they are likely to make an effort to do so – by coming more often or by spending more. Exactly what the reward is matters less; depending on your business it can be anything from a cash discount voucher, a % saving or a free item. As long as it has a perceived value by your customers it works.

So having a loyalty program can be the deciding factor between your shop and your competitor. Even with an otherwise similar offering – as well as similar prices and quality –  having a loyalty program means customers are on average 50% more likely to choose your shop.

Why do people spend more?

Foremostly, for the same reason. They want to earn points and they want to earn them fast to reach their goal as soon as possible. Secondly, by offering something in return, customers tend to feel (subconsciously) obliged to shop with you. It is a subtle effect, but there is no doubt that it works – it is the same as offering free samples. Have you ever had a free sample in a shop and felt guilty for not buying anything?

You give and you get – and this very simple principle can make a huge difference in your business.

A well-run loyalty program can make an impact on any business. There are a few simple things to do to nudge it along in the right direction;

  1. Make sure you offer every new customer to join your loyalty program.
  2. Make sure existing customers are rewarded a little extra.
  3. Most importantly, make the customer part of it. Let them know they are receiving x points and how far away they are from a reward and what the reward is. Keep it simple – by giving 1 point per $1 or £1, or similar, it is easy for both staff and customer to see how points are given.

These things don’t seem as much in isolation, but the overall effect can be dramatic. Any other little things that are essential to making your loyalty work? Let us know in the comments.