With rising costs for customer acquisition and ever-tougher competition, more and more companies are looking for opportunities to create their own rewards program.
Thanks to their easy-to-understand rules and structures for earning and redeeming rewards, point-based programs are by far the most popular with customers.
The following article will provide you with a guide to the successful introduction of a point-based loyalty program for your business in a few steps.
As an example, we use a small fashion boutique, but the system shown is applicable to all stationary retail with just a few minor changes.
Defining our goal is simple. Our program is designed to increase revenue per customer through more frequent purchases with larger "shopping cart value".
However, this can only happen if our customers accept it well, meaning that customers can clearly recognize a value in their participation.
If loyalty programs fail, this is almost exclusively due to the factor "lack of participation". Customers must directly, preferably at the moment of registration, gain an attractive advantage out of their participation, otherwise the program is almost doomed to fail.
Of course we do not want to give away the farm, and therefore we need to make sure our program is attractive on the one hand but still profitable on the other
Therefore at the very beginning, we have to ask ourselves the question:
How much must a customer have spent with us to receive a premium.
Nobody wants to spend thousands of Euros just to get a 20% discount voucher.
Ideally, your rewards therefore have a high perceived value for the customer, but a low monetary value for you.
With this knowledge in mind, we can now start building our program.
In the next step, we first determine how customers can earn points.
The simplest form of the rewards program, but effective and successful for many years, is the allocation of points by order size.
Basically, this means:
|1,-€ Order Value||+1 to the customer card|
Quickly explained for customers, but also for staff.
With a simple trick, you can even use this system to increase the order value per customer by setting thresholds that a customer must at least reach to earn points. That could look like this.
|ab 25,-€ Order Value||+25 to the customer card|
|ab 50,-€ Order Value||+50 to the customer card|
|ab 75,-€ Order Value||+75 to the customer card|
The second slightly more complex option would be to award points only for the purchase of certain products. In this way, you can specifically promote the sale of individual products with a good profit margin and even better reward certain actions.
(Attention: There is a lot to go wrong, so it should only be used by professionals. Especially in retail this method can be very complicated and time consuming)
Here are some examples:
|Blouse (Autumn Collection)||+5 to the customer card|
|Coats||+10 to the customer card|
|Leather Jackets||+15 to the customer card|
|You can even give extra points for days or hours when there is little going on.
Happy Hour (Tuesday 09:00-12:00)
|+5 to the customer card|
This may seem a bit confusing at first, but do not worry, in the end we will give you a beginner-friendly compilation for a sample program that you can easily give a try.
Important: Your customers have absolutely no interest in points, they only want your premiums. So if you want your customers to earn a lot of points (and you want that, because then you're making sales), your rewards must be attractive.
As mentioned in the beginning, you should make sure that your rewards therefore have a high perceived value to the customer, but a low monetary value for you.
You reach this goal in two ways.
The first possibility (complicated) would be that you can clearly define each individual product in which points can be redeemed. So you could only "give away" products that have a low purchase price.
Here is an example:
|-150||Blouse (Summer Collection)|
|-200||Top (Vero Moda)|
The second and simpler option is to give a fixed conversion factor of your points as discount points for all your products. This version is also more popular with customers, as everyone here can pursue their own "savings target".
The important thing is that you choose a conversion factor that is not so high that it does not pay to collect your points, but not too low that it could even hurt you. A good guideline is a factor between 15-20.
As an example here with the factor 15:
So you grant each customer for 15,-€ they spend with you a future discount of 1,-€, while making sure that you only discount if you earned at least 75,-€ per participant.
Converted in percent, this customer receives 6.67% discount on this purchase, which he can assert only on the next visit or the next, and only if he has fulfilled the minimum order quantity.
Do not forget: Discounts from the rewards program of course should not be applicable to other discount promotions.
Choose a good name.
This does not mean that you should think of something as fancy as possible, but rather a short, clear name that directly describes what it is.
You can become creative when naming your currency (points). Of course, your points can also be called points, but if your name is good you can use it for promotional purposes.
"Beauty Hearts" or the "Style Stars", are a few examples that were extremely well received by customers.
Not everyone likes such creative tasks, so talking to a marketing professional can be extremely helpful, especially before the launch of your program.
Once again because it is so important:
If loyalty programs fail, this is almost entirely due to the factor "lack of participation". If customers do not know your program, how do they know how great it is?
Use all the surfaces you can use. Checkout, front door, walls, flyers, windows, etc.
School your staff to ask if customers want to secure their points after each and every order. Most customers will be eager to register on site.
But also use promotions. If you use a cloud-based system (like N-Centive), your customers can register themselves on a dedicated website. You can share the link to this website on Facebook, Instagram & Co, or even, as shortlink, on your print advertising, such as flyers.
Of course you make participation more attractive if you give away a small premium directly as the entry gift on this page. That does not have to be a discount. 5 starting points on the loyalty account should be enough.
The best way to promote your program for free is through a referral feature (friends advertise friends feature). This allows existing participants to invite their friends into the program with just a few clicks.
Of course you can also award rewards for these recommendations, but you should not use too expensive premiums or too high discounts here. The scope and effectiveness of such viral marketing is easy to underestimate.
You know that the cost of advertising per customer is constantly increasing, so now it is even more important than ever to focus on retaining existing customers and, above all, increasing your revenue per customer over time. This will not only help you to increase the annual balance, but also prevent migration of your customers to competition.
Nobody starts out with a perfect program, so just start, present your prototype to a few customers and work with their feedback. If you want, feel free start with the example on the next page.
By the way: At N-Centive, the free creation of your prototype takes just a few minutes.
Create your free account right here: Free Trial
Feel free to copy this table. It applies, of course, to any form of traditional retail and wherever goods are sold directly to consumers at a cash register.
|1 Google Maps Rating||+2|
|1 Facebook Rating / Comment||+2|
|Happy Hour Bonus (09:00-10:30)||+2|
|from 25,-€ Order Value||+25|
|from 50,-€ Order Value||+50|
|from 100,-€ Order Value||+100|
|from 200,-€ Order Value||+200|