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Disclaimer: Nothing in this article should be construed as legal or financial advice. Please always consult a knowledgeable professional advisor.
Looking to keep your customers coming back for more? If you don’t have one already, a customer loyalty programme is a great way to encourage customers to return, again and again.
Customer loyalty programmes are nothing new, but they are still important for not only attracting new shoppers, but also to help keep existing ones returning. Keep reading to discover the benefits of customer loyalty and how to improve your customer loyalty programme if you already have one in place.
Why is customer loyalty important?
When most UK shoppers consider themselves only loyal to up to five brands, you want to ensure you are one of their top five. 77 percent of customers subscribe to at least one customer loyalty scheme according to a study by YouGov on what the British think of loyalty programmes. And according to our insights, participants enrolled in a Square Loyalty programme spend, on average, 33 percent more after they join than before.
Plus, when the UK’s biggest brands are rewarding customer loyalty, your customers may expect that you have one too. And loyalty programmes can give you valuable insights on your customer’s shopping behaviour and help you personalise your service more, which can also help garner more customer loyalty.
What’s more, according to these customer loyalty statistics, it’s 5 times more expensive to acquire new customers than to keep existing ones. In brief, having a customer loyalty programme just makes good business sense.
How to set up a customer loyalty programme
There are multiple facets in building customer loyalty, but a dedicated programme can be an important part of maintaining that trust in your customer relationships. Once you’ve decided to start a customer loyalty programme (or maybe you already have one), you need to set it up. Using insights from the thousands of businesses that use Square Loyalty, we’ve discovered the best practices to create (and improve) a customer loyalty programme.
Whether you use a punch card or a branded mobile app, your customer loyalty program needs to have a reward that people want and a path to getting it that is easy enough to achieve (but not too easy). With that in mind, we recommend that all programmes — regardless of format — use these guidelines:
Most transactions should qualify for a star
At least 80 percent of your transactions should be eligible for a star. We see some sellers prefer to set strict rules for earning a star in order to incentivise customers to purchase more. However, our data suggests that doing so discourages customers from engaging in your customer loyalty programme and creates a negative perception of your business.
Customers should earn a reward in a timely manner
Settings that allow loyal customers to earn a reward within 30 days of enrolling are most successful. If they wait over 30 days, shoppers are more likely to forget they’re enrolled in a customer loyalty programme and don’t make a point to return to the business. Remember, the reward should entice your customers.
Offer a meaningful reward
Our research indicates that shoppers have greater satisfaction and are more likely to continue engaging with a customer loyalty programme if the reward is worth at least 50 percent of your average ticket value, and 10 percent of what they spent to earn the reward. Your customers have expressed their loyalty for your business, so why not make the reward worth it?
Types of customer loyalty programmes
Now that you have some handy guidelines, you’re ready to decide your loyalty programme format. You should keep three things in mind when choosing which format will work best for you:
- Your business’s average transaction size
- How often your customers return to your business
- How long it takes them to do so.
Here are some customer loyalty programme formats that we recommend:
1. Visit programmes
Visit-based programmes are best if your customers visit your business at least once per week. We often see this in businesses with lower-priced items, like coffee shops.
You can determine the value needed to reward your customers in a timely fashion using this equation:
Average customer return time (Days) x (Number of stars required to earn a reward – 1) = Time to reward.
For example, a cafe wants to reward its customers after they earn five stars. Its customers return every three days. Their time to reward (upon enrolling and getting their first star) is 12 days.
2. Spend programmes
Spend-based programmes are best if your customers visit your business once a month, or even less frequently. This usually includes businesses with high-priced items, luxury services, or long sales cycles.
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 programme where clients earn a star for every £25 spent.
3. Item/category programmes
Item-based customer loyalty programmes are best if you have a particular item you’d like to promote, such as a high-margin item or a best seller. They take longer to set up but can be well worth it if you are conscious of the margin you get out of your digital rewards programme.
Once you’ve set up your loyalty programme — or reworked your existing programme — make sure you promote it to your customers and get them using it.
Build out an email marketing campaign about the programme or post about your rewards on your social accounts. And make sure your employees promote the customer loyalty programme during checkout; you might even put a sign about it at the counter. Using Square’s EPOS system means your customers are spending less time on payments and more on learning about your loyalty programme.
Remember when contacting customers to make sure you always adhere to the relevant rules around data protection, GDPR and ePrivacy.
The more you invest in promoting your customer loyalty programme, the more people you can turn into loyal customers. But always keep in mind that successful customer interactions are the foundation of building customer loyalty.
Learn more about how Square Loyalty can help you grow your business.
