Spurr’s digital loyalty program provides an automated and cost-effective way to retain your existing customers. Why? Because keeping one customer costs you 10 times less than acquiring a new one, depending on the industry you’re in.
A loyalty program can help you increase revenue in the following ways:
Spurr currently offers 4 types of Loyalty programs. You may select the program that best suits your business needs:
The customer earns 1 stamp per visit with a minimum spend.
You may consider using a visit-based program if your customers visit your business on a weekly basis or more. We often see this in businesses with lower-priced items, like coffee shops.
Consider rewarding stamps based on a per-visit minimum spend, whereby the customer earns one stamp per visit if they match or exceed the minimum spend.
The customer earns 1 stamp for every block of the minimum spend.
Spend-based programs are best if your customers visit your business once a month, or even less frequently. This usually includes businesses with high-priced items or long sales cycles.
Reward points based on the total amount spent before tax and tip. For example, 1 stamp for every RM10 spent on a purchase.
You can determine the value needed to reward your customers in a timely fashion using this equation:
Average customer return time (Days) x (Purchase requirement to earn a star) x (Number of stars required to earn a reward – 1) / Average transaction size = Time to reward
For example, a salon would like to reward clients for spending $100 or more on services. Its clients come in every two months for styling, and spend $75 per visit on average. The salon might consider a four-star program where clients earn a star for every $25 spent.
The customer earns 1 stamp per visit with a minimum spend.
A product-based loyalty program is best if you have a particular product you’d like to promote, such as a high-margin item or a best seller.
Reward points based on purchasing a specific item or category. For example, a drip coffee earns 1 point, a latte earns 2 points, and a sandwich earns 3 points.
The customer needs to achieve your defined total spend in order to earn a reward.
The total spend program can help encourage your customers to purchase more over a given period of time in view of the reward that you are offering.
Ever heard of hyperbolic discounting? It refers to the fact that people predictably prefer small rewards soon to larger rewards later.
Once we understand this, it makes sense that it’s better to have a small reward after a small number of visits (get 1 cup of coffee after 5 stamps) rather than a large reward after a larger number of visits (get 1 large chocolate cake after 20 stamps).
Most of our merchants require 8-10 stamps for a reward. Some like Fotofly (a photography studio in Utah) even give away a free session every 5 sessions.
It makes sense to get one free coffee after having bought 8-10 coffees.
It doesn’t make sense to get a free coffee after having bought 10 steak dinners. That’s pretty underwhelming.
Recommendation: As a general rule, try to make your reward worth at least about 10% of the total amount spent to get it.
If your customers have to spend $100 to get a reward, it should be something more than $5.
SOURCES & REFERENCES:
Retaining customers is the real challenge | Bain & Company
The Value of Keeping the Right Customers | Harvard Business Review, Amy Gallo
The Value Of Investing In Loyal Customers | forbes.com, Patricia Rioux
50 Stats That Show The Importance Of Good Loyalty Programs, Even During A Crisis | forbes.com, Blake Morgan
Repeat Sales | Investopedia, Carla Tardi
Marketing Metrics | Paul Farris
What is a Repeat Customer and Why are they Profitable? | smile.io, Alex McEachern
Maximizing the Impact of Your Brand Advocates | smile.io, Kirsten Burkard
6 Customer Retention Systems (& Why CRM Should Be One of Them) | hubSpot.com, Sophia Bernazzani