How loyalty schemes can make happy customers

When we think of loyalty schemes, we often think of the big guys, such as frequent flyer programs and the big-chain supermarkets. But, loyalty schemes can work for small business, too. The secret is that they need to be all about the customer.

Customers like to feel special – it’s a bit like having your barista greet you by first name each morning; you feel valued, and part of the business’s community. And loyalty schemes can enhance that feeling of being valued.

General manager of Global Loyalty Sarah Richardson says: “Customers need to be rewarded in an emotional way which includes anything that makes them feel special and with a physical program that rewards them with benefits, points and discounts.

“Separately, they create a shift in behaviour which is increased when both are present.”

A 2017 study, For Love Or Money, indicated that 81% of consumers buy more from businesses whose loyalty program they are part of.

Frank Andrews, owner of Sydney’s Cafe Without a Name estimates that between 60% and 70% of his customers take advantage of his cafe’s loyalty scheme.

“We use a loyalty system app called Rewardle that allows customers to earn points every time they purchase a coffee,” he says.

“Customers can then redeem their points for coffee, food items, coffee beans to take home or for a re-useable cup. We are considering giving our customers the opportunity to redeem their loyalty points and we’ll make a (charitable) donation on their behalf. I think it’s something our customers will embrace.”

While his customers enjoy the scheme, Andrews believes giving them a positive experience is more important than rewarding them.

“When I have a positive experience as a customer I will tell other people about it, but I can’t recall a time where I have spoken about someone’s loyalty reward program,” he says.

 “For us it is part of the overall marketing strategy and another way for us to deepen our relationship with our customers.”

Behavioural specialist Bri Williams says there are a few factors small business owners need to consider when establishing a loyalty scheme.

“SMEs need to first consider the expected return on investment,” she says. “For the amount of money and time you sink into a loyalty program, you are likely to gain only marginal return.

“For example, all things being equal, a customer will choose business A over business B if they are a loyalty program member – they may as well. But if business B has a better, cheaper and/or easier product, then the customer is likely to go there.”

She says there are two main reasons small business set up loyalty schemes; data collection and/or to be seen to reward ‘loyal’ customers.

“Customers do expect to be rewarded for their ‘loyalty’, even though we are really talking about rewarding them for repeat business,” she says.

“Again, as soon as your product or service falls below expectation, their ‘loyalty’ will evaporate.”

She recommends small business set up experiments in store or online to learn more about their customers’ shopping habits.

“Worry less about developing loyalty – a strong feeling of support or allegiance – and more about developing habits,” she says. “Your goal is to get them to choose to shop with you over all other options.

“Modify point of sale, pricing, marketing letters and web pages and monitor the impact,” she says. For example, if you have a minimum spend policy on card payments, try removing the minimum and let customers know about the change. You are very likely to be rewarded yourself by increased customer spend  as well as increased customer loyalty.

“To design experiments, base your offers on what researchers have already discovered through behavioural science. We already know that music, typeface, pricing sequence, product shape and names impact customer behaviour, so make it easy for yourself by tapping into what has already been uncovered.”