Coffee lovers are serious about their morning brew. But with so many options for getting their daily fix, building brand allegiance takes more than friendly baristas who have memorised the preferences of regular customers. You can set yourself apart with great products and superior service, but a loyalty programme can help you convert occasional customers to your loyal regulars.
Increasing your loyal customer base is good for business on two fronts. First of all, it’s much more expensive to acquire a new customer than it is to keep an existing one. And second, loyal customers often spend more with you. For example, coffee shops that use Square Loyalty see 1.67 times more spend from customers enrolled in their loyalty programme versus customers that aren’t enrolled.
Whether you have a legacy loyalty programme, or you’re looking to start one for the first time, here’s how you can design a loyalty programme that will incentivize coffee addicts to keep getting their caffeine buzz at your shop.
Step 1: Decide how your loyalty programme will work
Before you start, you need to think about what you want your programme to do for your business. Boost frequency of visits? Increase order size? Once you determine your priorities, you can structure your programme to help you attain your objectives. For example, if you want customers to come into your coffee shop daily, design your loyalty programme so that rewards are based on number of visits.
Here are the three most common programme structures:
- Visit-based programmes reward points based on a per-visit minimum. For example, customers might earn 1 point for every visit at your business when they spend at least £5.
Pro: Rewards customers for coming in on a regular basis, encouraging repeat behaviour
Con: Gives all purchases the same weight, and doesn’t reward customers for larger purchases
- Spend-based programmes reward points based on the total amount spent before tax and tip. In this structure, for example, customers might earn 1 point for every £1 spent on a purchase.
Pro: Rewards customers more as they spend more with you
Con: Customers who come often but spend less have to work harder for points
- Item-based programmes reward customers for purchasing a specific item or category. You might allocate different point amounts to specific products like 1 point for a regular coffee or 2 points for a pastry.
Pro: Allows you to encourage specific purchase behaviours based on your business goals
Con: Only rewards customers for what you want them to purchase, not necessarily what they usually purchase.
Review your sales data – how often customers return, how much they spend, and what your most popular items are, what is your average order size – when you’re developing your structure to make sure it will encourage existing behaviours. Research reveals that 54 percent of consumers in the UK who have signed up to loyalty rewards programmes feel that it takes too long to accrue points. Over 96 percent believe loyalty programmes could be better, including improving ease of use, clarity of structure, increased awareness, or alternative rewards such as donations or unexpected offers as well as treats. So, it’s important your customers feel like they can use the rewards, that they’re accessible, and that they’re relevant. The catch is that you’re appealing to different demographics and types of shoppers. That’s why it’s vital to understand who you’re targeting.
Over 80 percent of food and drink businesses that use Square Loyalty use a visit or spend based programme. While there’s no right or wrong programme setup — you need to do what’s best for your business — your programme should:
Be easy for customers to understand and remember. Your customers should be able to grasp the value of the programme quickly. And they shouldn’t have to remember lots of rules.
Allow customers to earn points on most of their transactions. If you are going to set a minimum spend amount, make sure it’s lower than your average order size. That way, most of your customers’ transactions will earn points.
Help you achieve your business goals. You shouldn’t set up a loyalty programme just to have one; you should structure it to support specific goals like encouraging more visits or larger order sizes.
Step 2: Pick rewards that will keep customers coming back
Once you have a structure for your programme, you need to determine the types of rewards that will keep your customers engaged and coming back. Here are a few common reward types:
A discounted sale is a fixed percentage or monetary discount for the entire sale (ie. £5 off next purchase, 10 percent off next purchase)
A discounted item is a fixed percentage or dollar discount on specific items, like £1 off any latte
A complimentary item like a free drip coffee or free bag of coffee beans
Over 48 percent of food and drink businesses that use Square Loyalty offer a free item as their reward. You’ll also want to think about whether every time a customer reaches reward status they can redeem their points for the same reward (single tier) or if you want to develop multiple tiers of rewards that customers can cash in on. Here’s an example of what a multi-tier loyalty programme might look like:
Tier 1 (10 points): This tier would be something that customers always want and can redeem quickly, like a free cup of coffee.
Tier 2 (25 points): For customers that are willing to wait and accumulate points, you want to make it more worth their while. You might give a discount on your most popular (and more expensive) item, like a pastry.
Tier 3 (50 points): Your most loyal customers will definitely save up their points, so make sure they get something of high value in return, like a discount on their entire purchase. Or, perhaps a donation to a charity.
There are a few things to consider when you’re developing your rewards. First, you want to ensure that your rewards won’t cut your bottom line too drastically. Second, you need to make sure that your rewards will incentivise your customers. Before you implement your loyalty programme, survey your customers via email or through employees and ask them what type of rewards appeal to them the most.
Step 3: Choose software to help manage your programme
There was a time when loyalty programmes began and ended with physical punch cards. And as satisfying as it was to fill them up, keeping track of a bunch of cards was pretty inefficient — for you and your customers.
When it comes to loyalty programmes, simplicity is the key to success — you don’t want customers to feel like they’re applying for a credit card when all they want is to get a free coffee or muffin once in a while. Ease of use is also essential for participants in a loyalty programme, being one of the key areas mentioned by shoppers for improvement. That’s why digital programmes make so much sense.
Square Loyalty, for instance, integrates with your cafe point of sale. When you’re checking a customer out, you can easily enroll them just by asking them to enter their phone number and points get automatically tracked. Each time they come back, they can enter their phone number to earn and redeem rewards right from the point of sale. All of the purchases and points are logged in your POS’s Customer Directory so you get a holistic view of your customers’ activities. And your customer doesn’t have to worry about carrying around a card.
Step 4: Promote the programme
In order to get the most benefit from a loyalty programme, you need customers to sign up and use it. You should invest in marketing your programme the same way you do for your latest specialty roast or newest pastry.
Add information about your loyalty programme to your website, post about it on social media (you might call out one of your programme members as a way to highlight it), and email your customers to encourage sign-up.
But the most important place to promote your loyalty programme is in store — when customers are purchasing coffee from you. Add signage near the register so customers can read up while they’re waiting in line. And train employees to ask customers to sign up as part of the check-out process.
Step 5: Measure its success
As with any marketing initiative, you need to be able to measure the success of your loyalty programme on a regular basis. While that’s hard to quantify with a physical punch card programme, a digital loyalty programme provides a wealth of data for you to analyse.
With Square Loyalty, you can see the stats on your programme members in your Square dashboard. For example, you can determine how much loyalty members spend versus those that aren’t registered. In addition, you can see how frequently your loyal customers come back to your business versus non-loyalty customers. You can also see how many customers are enrolled, the increase in frequency of their visits, and how much their average ticket size has increased.
You should look at this data regularly to determine if your programme is set up correctly and encouraging the behaviours you want. But you should also regularly survey your loyalty members — in-person or through email — to see how they like the programme. Based on that data and feedback, you should tweak your programme so it provides the most for you and your customers.