Loyalty Programs

Why reward good customers? After all, they are already coming to your store.

The answer: Because you want them to keep coming to you and not be swayed by some other “hot” home medical equipment retailer. Plus, good customers deserve those rewards. In return, they will buy more and you might establish a relationship that is better than that hot competitor can penetrate.

You have two general audiences: prospects — those who could and should be buying and/or renting from you; and customers — those who have patronized you at least once. Every business spends a lot of money to find and get prospects in the door. They advertise, use personal sales, Internet, direct mail, e-mail, social media, events, education, promotions, public relations and more. Why? Because prospects turn into customers.

After they’re in the door, though, then what? Why not consider a loyalty or rewards program? Regular customers are worth five to six times more than anyone else. And converting visitors into regular customers turns them into high value over the long term. They are your ambassadors and referral engines. After 10 purchases, they have probably referred seven customers to you.

Recent research indicates that increasing customer retention rate by only 5 percent can boost the average customer net present value by an astonishing 35 percent to 95 percent. In other words, getting them to come in your door — and come often — means more money.

Loyalty clubs are designed to commit and retain customers. They offer something unique from competitors and mobilize customers to build more customers. Some people just like to have the cute little plastic key ring bobs. Others are proud of their “memberships.” A loyalty program can also act as an advertising/marketing campaign to attract new customers by offering an added value to the business. In doing this, you save by having one campaign serve two purposes.

If you bill Medicare Part B, though, remember that you cannot offer any incentives of more than $50 a year, with an average retail value of not more than $10 per item. So offering a loyalty club that awards free goods to Medicare patients is problematic. (If you want to involve Medicare beneficiaries, be sure to check with legal counsel.) However, the boomer segment, the 64-and-under audience, women 40 to 55, young mothers and young families are all highly desirable target audiences.

So what kind of program should you choose? Look in your wallet or on your key chain. There are points-based programs, membership “buy-in” programs (pay $10, get $10 off of current purchase and become a member for ongoing special discounts) and programs that reward money toward a gift card from each transaction. Some simply reward based on the number of visits.

Take an independent bookstore; they started like a coffee club. With a simple printed business card, they log your book purchases. Buy 10 books; get one book free. Nice, easy, inexpensive, but no tracking. Now tie that to e-mail marketing sign-up. When someone signs up, you can simply enter them into your database for regular e-mail/offer contacts.

David Geyra of Plastic Card City is a manufacturer of plastic loyalty cards and key tags with numbering, bar codes and/or magnetic strips. He offers good advice to retailers. “As a retailer starting out, keep the work and record-keeping simple. Keep the program simple,” he says.

Geyra shares some basics. “What do you want to achieve? Then think about the customer. They want to know, ‘How do I accumulate and what do I get?’”

The next step up is the purchase of software. Some vendors provide online services to set up your program with subscriber tracking abilities. There are simple templates where you input the offer, i.e., make six purchases, get X; make 10 purchases get Y. The cards are scanned or swiped through your point-of-sale terminal. You control the program and information through the online portal. You pay an initial cost and then a monthly processing fee.

Start looking closely at rewards programs and how the right one might help you differentiate your business to engage and retain customers. A solid program will help you learn more about your customers’ interests and buying habits than ever before — and keep them coming to your store over and over.

Read more Marketing Matters columns.

Colette Weil is managing director of Summit Marketing, Mill Valley, Calif., a consulting firm specializing in strategic marketing and program development. You can reach her at [email protected] or 415/388-5303. You can “Like” Summit Marketing on Facebook.