Is a customer rewards program right for your retail business?

As a business owner, you’re always on the lookout for methods to boost sales. It costs more to create a new customer relationship than it does to maintain an existing one. Knowing that no customer is more valuable than a repeat customer, one sure path to increasing sales is rewarding existing customers for spending more.

A loyalty or customer rewards program can be a cost-effective way to nurture customer relationships, provide a competitive edge, and gather additional data about customer purchasing patterns and satisfaction.

Benefits of a customer rewards program include:

• More sales for less effort: Established customers return more often and spend more over time.
• Differentiation: When customers have a choice between equivalent vendors, they will go back to the one where they get free stuff.
• More data at your fingertips: Gather data from your customers about when and how often they purchase, and what they buy.
• Motivation to shop: Those who see progress toward a reward are more committed to keep working (shopping) to achieve that goal.
• Connection with a wider audience: Share program promotions and coupons with your mailing list and social media channels — and enlist customers to spread the word for you!

Download the free worksheet

If you’re considering starting a customer rewards program, download our free planning worksheet to get started. Read on for the highlights …

Customer rewards program options

Design of the customer rewards program is completely under your control and creativity, but the most popular methodologies include the following:

Reward purchase quantity

You’ve seen this approach at local stores where each purchase is of similar value (think coffee shop, frozen yogurt store, or car wash). Make purchases and eventually earn a reward equivalent to one of those purchases.

Reward total spending

Rewarding spending amount can be a better option when a variety of products are offered, and customers have a wider spending range over time. This method provides an incentive for both purchase frequency and size. In addition, you have the option to choose alternate currencies: dollars spent, miles traveled, hours of service purchased.

Upfront payment for future rewards

Customers get immediate access to attractive benefits — but at a cost. Consider the success of Amazon Prime: customers pay an annual fee up-front, in exchange for unlimited free two-day shipping and other perks. With an advance investment, customers will be motivated to shop with you again to make sure they get their money’s worth.

Key success factors

What key elements will make your customer rewards program successful?

Motivate customers in a way that benefits your business

Encourage behavior that improves your bottom line: whether that means shopping more often, buying more per purchase, shopping online as well as in person, giving referrals, posting reviews, or engaging on social media.

Keep rewards valuable, relevant, and exclusive

To some customers, the most valuable reward is a discount or store credit toward future purchases. To others, it’s access to special privileges, such as free shipping, or early access to sale items or events.

Choose rewards that are perceived as benefits, and are directly related to your business.

Make progress easy to track

In order to leverage the psychological power of a loyalty program, customers must be able to see their progress so that they’re motivated to reach the next milestone.

Go digital with your program

Initially, businesses offered punch cards that customers kept in their wallets. While simple to initiate and execute, it’s darn near impossible to figure out whether the program is actually improving your bottom line. Low startup cost is overshadowed by the lack of useful data collection, the possibility of cheating the system, and the burden on customers to remember their card.

Fortunately, no one leaves home these days without their smartphone.

Digital loyalty programs driven by smartphone apps remove several obstacles:

• no more cards to remember or carry
• no need to punch, stamp, or otherwise physically track each transaction
• data becomes readily available

Then again, the idea of creating a custom app can be daunting. Fortunately, there are numerous companies providing mobile apps and services to drive reward programs at a reasonable cost, such as Bellycard, Perkville, FiveStars, PunchCard, and Flok. Many of these programs start at less than $100 per month.

Or consider integrating Sweet Tooth right into your existing eCommerce site powered by Shopify, BigCommerce, WooCommerce, or Magento.

Use these strategies to maximize program performance

Get the most out of your customer rewards program with these strategies:

Keep it simple: Make it quick to join, easy to earn points, and simple to claim rewards. Don’t make customers work to participate.

Reward non-shopping activities that encourage spending: Give customers bonus points for bringing in their own friends via referral, or sharing on social media.

Advertise in multiple ways: Promote in your brick-and-mortar store, on your website, via social media, through direct mail, and in your email newsletter.

Talk it up in-house: Encourage employees to recruit customers to join. Consider rewarding employees for recruiting efforts and results. Even better, automatically enroll shoppers with their first purchase.

Stay flexible: Continually evaluate ways to improve, revise, and enhance the program based on customer and employee feedback.

Get creative: Don’t limit point accrual to purchases. Reward participants for joining the program, and reaching milestone dates such as birthdays or membership anniversaries.

Consider tiered reward levels: For your VIP shoppers, devise ways to earn bonus rewards beyond the regular program, or access to VIP-level benefits.

Scrutinize the data: Use your reward program to evaluate customer shopping behaviors.

Make sure that the business boost outweighs the cost of the program.

Don’t invest in a program until you’re ready: A rewards program only brings customers back if you’re already providing high-quality, reliable products and services, at the right price. Without these factors in place, your effort in implementing a customer rewards program will be ineffective.

Worksheet: Planning a customer rewards program

Now that you know the basics, let’s get started. If you haven’t already done so, just sign up to download our Planning a Customer Rewards Program worksheet for step-by-step instructions to get your new program up and running.

Feature image by Token Company via Visualhunt / CC BY

Originally published at Garage.