Tony O'Connor, Loyalty Expert
Tony O'Connor Loyalty Expert
11 minute Read • 23 Aug 2021

Say hello to more return customers with a rewards program

Rewards programs have been around for decades. Over that time, the loyalty industry has changed and evolved. Now that we have digital infrastructure, universal broadband and smartphone apps, there are a world of new opportunities in loyalty.

It's a well-known fact that large multinational companies tend to have their own rewards programs, which is good for them. But what happens if you’re a smaller company with a few branches? Or a small business? Or even a one-man-shop? 

Well, you might be surprised at some of the options available these days, but before we go any further, let’s ask an important question...

 

Is a rewards program right for your business?

As you might expect, the best modern rewards programs aren’t free. So you need to make sure you’re going to see a return on your investment.

Rewards programs help you build a stronger bond with your customers - so the first question you have to ask is ‘Will my customers benefit from a rewards program’?

There are a few ways to answer this. First of all, do they like free stuff? (Chances are that’ll be a yes).

Are your customers already 100% loyal to you? If so, you don’t need a rewards program. However if you do want them to shop with you more often, then a rewards program will help achieve that.

But how can you be sure?

 

The psychology behind rewards programs

There’s been a lot of studies into how rewards programs work. And if, indeed, they work at all? What researchers have discovered is that rewards programs work on the principle of reciprocity. 

You may not recognise ‘reciprocity’ (and saying it is even more challenging) however you are definitely aware of the concept. We all are. It is innately human.

Reciprocity is when two parties exchange things for mutual benefit. For example, if you open the door for me, I will open the next door for you.

If you invite me around to your home for dinner, I will bring a bottle of wine.

If you choose to shop at my store, I will give you a freebie.

It’s definitely not rocket science, but it has been proven to work, over and over again - and with today’s technology we’re able to do a lot more with this fundamental principle.

 

How reward points work

The first companies that started using points in their reward programs were airlines. Every mile you flew with them earned you an ‘Air Mile’ which you could redeem for discounted flights, or seat upgrades, or even a selection of consumer goods from their catalogue.

Air miles still exist today, but the programs have become so watered down that they are almost worthless. You really need to be a very frequent flyer to see any benefit.

But now other reward companies are also offering points, and some of them also offer valuable, attainable rewards.

The mechanism that allowed this to happen was barcodes, or QR codes, on a card, that people swipe, adding their points to a computer database. This simple process allows people to accumulate a lot of points, over a longer period of time.

Even more recently, smartphones have made the process even simpler. Now people can use their phone to save points at different retailers. Then, with a couple of swipes, they can access their accounts at any time to check their progress and select the rewards they’re working towards.

 

Choosing the right rewards

As a shop owner, or service provider, how can you harness the power of these programs to build a stronger bond between your business and your customers?

The most obvious solution is to choose a mixture of rewards that will appeal to the different tastes of your customers. Perhaps a few cheap rewards, a few expensive rewards and a few in between?

Another technique you can use is to put stock you’re trying to get rid of into your reward program, but ask for a lot fewer points, in comparison to other rewards. This will make your customers feel like their points are worthwhile, they’re getting a great deal - and you’re getting rid of unwanted stock.

There are many other examples of how you can make your rewards work for you, but it’s time to move on to an even more important aspect of the rewards program.

 

How rewards can help increase sales

Yes, you read that correctly. You can use your reward program to actually increase general sales of your products and services.

First of all, it’s a proven fact that when people come in to your store to claim a reward they will almost always purchase other things from you.

The psychology is pretty simple. If I pop in to the butcher to redeem my points on 2 pieces of steak. While I’m there, I will also pick up some sausages - and maybe some lamb chops. And I will walk out having paid a smaller amount than I should - so I will think I got a great deal.

The data also shows us that your regular customers also tend to spend more with you in the long run. So while people are racking up the points, to claim the rewards they want, you are also racking up the sales.

 

Collecting and analysing data

The truly amazing thing about modern rewards programs like this is that they record every transaction made by every customer. This provides you with some very valuable data.

It’s suddenly very easy for you to see who your most valuable customers are. When they buy. What they buy. How often they visit your shop, and a lot more.

In fact, you suddenly have the same access to data that a nationwide supermarket or an international airline might have.

Which is amazing - but how do you access it all? Well, that’s where the dashboard is your new best friend.

 

Using dashboards to accelerate growth

Some people find computer dashboards can be a bit intimidating when they first encounter them.

If you’re one of these people, relax. It works exactly the same as a car dashboard. 

As you know car dashboards measure different things around the car, such as velocity, engine revolutions, gas level, distance travelled, radiator temperature and whether your lights are on or off.

All of this information is then displayed to the driver who uses it to drive the car to the desired destination.

That’s also how computer dashboards work. They are a quick, easy way to see how many sales you’ve made over a certain period, which customers have spent how much, among other facts and figures.

Used properly, they can also make your marketing endeavours a lot quicker, a lot cheaper and a lot more profitable 

 

Marketing with a modern rewards program

Now that you have all of your data in a single place, it’s time to use it. That means putting a marketing plan in place.

You can easily isolate different segments of your customer base, such as those who buy sausages, for example - and offer them discounts on sausages next time they come into your store. 

Or you can send out emails to everyone, offering them a free lollypop next time you see them.

Or a 50% discount on products that begin with a ‘G’. Or anything at all, really.

You can set up a monthly newsletter, with a simple drag-and-drop template and access to a library of free images. This lets you update customers with news and information, and a lot lot more.

 

Automated Emails are a game changer

Now, this is where things start getting really interesting. Automated emails allow you to set up certain parameters and criteria, and when they are met your rewards program will automatically perform the appropriate action.

So, let’s say I used to be a regular customer, but I haven’t made a purchase with you in a while. Once a customer has been away for say 3 months, you can arrange for a single, personalised email to be sent to be automatically, saying how much you miss me, and offering me a special 20% discount next time I come into the store.

Or, perhaps you want to start generating more positive reviews? You can set up an automatic email so that when a customer makes their 5th purchase at your store, they receive a simple, unobtrusive email politely asking for a review.

Our data shows that not only are customers who have shopped a few time with a store more inclined to leave a review, but it is almost always positive in nature.

 

Happy Birthday and other celebrations

Of course, there are many, many other situations where automated emails can be used. It often depends from business to business and on the customer base.

The classic example is a Happy Birthday message when it's your customer’s birthday. You might want to include a special deal, or not. 

The customer may pop into the shop, or not (Birthdays tend to be a busy time). However even if they don’t, they’ll appreciate your message and you would have grown your affinity with them in their mind.

 

Incorporating Giftcards

Another, often overlooked, tool you have at your disposal are giftcards. Having these available to your customers work on a number of different levels.

First and foremost, it’s a guaranteed sale. The customer pays you in advance, so there’s no risk whatsoever on your part - and on average , around 20% of giftcards are never redeemed, which means free money.

However, even giftcards that are redeemed are worth a lot more than the Euro value on the front. Often, the recipient of the giftcard will be paying a first-time visit to your store, meaning you’ve got a chance to sign them up to your rewards program and build another regular customer.

 

Building a stronger connection

Ultimately, everything I’ve described here will help your business build a stronger connection with your customers. There are a lot of variables. Some elements will be more effective than others, for some businesses.

At the end of the day, nobody knows more about your business than you do, so it’s up to you to experiment with different tools and different approaches. Keep an eye on the data, and use it to make even more effective decisions in the future.

 

Building for the future

With the current challenges regarding the global pandemic, and the associated turbulent economic situation, it’s more important than ever before that you make the most of your existing customer base.

That means rewarding them, communicating with them and including them in the future plans for your business.

You might also want to consider looking at using a modern digital rewards program.

Regardless of how you choose to proceed, there's no doubting that encouraging more return customers is more important than ever before.




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