The importance of customer rewards systems

We all know people love a bargain, and what everyone loves even more than that is getting something for free, which is why customer reward systems work so well. By keeping existing customers coming back rather than focusing all your energy on the much harder task of attracting new customers, you will see a far more impressive long-term result. Of course, different types of loyalty programs yield different results, but the fact that they are successful is undisputed around the world.

Nine out of 10 Irish adults are part of a loyalty club, with the average adult having four cards in their wallet. Those statistics offer a very positive outlook for loyalty marketing, but it also means there is a lot of competition, so your business’s loyalty program needs to stand out from the crowd.

Are loyalty rewards worthwhile?

Loyalty can mean a lot to your bottom line. Following the economic crash in Ireland and around the globe, major companies and even small businesses realised just how important customer retention was to keeping their businesses ticking over. Naturally, fewer people were spending and it became incredibly hard to attract a constant stream of new customers. It was far easier and cheaper to keep existing customers coming back than it was to attract new business. And that is a lesson that should not be forgotten now that the economy is in recovery.

What do you want to achieve?

Whenever you implement a marketing strategy to your business, it is important to know exactly what you hope to achieve. With rewards systems, the obvious result is to entice existing customers to come back, but you can go further than that. What demographic are you aiming for? What exactly do you want to sell? What profit margin are you looking for? Are you trying to reach new customers as well as existing ones with the promise of loyalty rewards? When you have decided exactly what you want to achieve from a specific marketing campaign, then you can look at how to implement it.

Who should you reward?

Statistics show that Irish consumers over 25, and particularly women, are the most prudent and responsive to rewards systems. That means, if you are running a loyalty program aimed at that target market, it is more likely to yield positive results. However, it certainly doesn’t mean you should shy away from other demographics. For example, a more male dominated industry such as a hardware store or barbershop can use the same methods and potentially reach similar results to, say, a cosmetics store or hair salon. It is the advertising method that might differ a bit between these markets. Customers in barbershops and hardware stores might be more responsive to rewards systems they are made aware of at the cash register, for example, rather than by email or via social media.

How should you reward your customers?

There are three main structures for reward systems. The first is a reward for the number of purchases, whereby the customer receives a point for each sale. This is a popular method for coffee shops, barbershops and video rental stores. For example, a café might provide a card with six stamps on it, rewarding their customers with a free coffee each time they fill the card.

The second structure is a reward for total spending. This involves either money off when spending over a certain amount, a voucher for spending over a certain amount, or a rewards system at the end of the year, which reflects the amount spent throughout the year. All of these options work particularly well at Christmas time. For example, if a parent is buying presents for their children at a major toy store and there is an offer of ‘3 for 2’ on toys or a free €10 voucher when spending over €100, they are likely to stick to that one store for the bulk of their Christmas present shopping, rather than spreading their purchases around a number of shops.

The final structure involves immediate discounts for purchases, such as free shipping when you spend over €30, or ‘buy one, get one free’. A number of online shops do this particularly well, including Amazon and getthelabel.com, enticing customers to spend a bit more to get more value for their euro. For example, getthelabel.com will offer different deals such as free shipping when you spend over €100 and Amazon offers instant cash bonuses when acquiring an Amazon credit card during certain promotions.

What avenues should you use?

Loyalty programs are great, but if you don’t market them, you won’t see the results you want. There are a few ways to run these incentives, from advertising on social media to email promotions and direct mail. Once you’ve gotten the message across, then you need to focus on how to make the system work, which is usually with loyalty cards.

If your business has a direct sales-to-customer focus, then the most important first step is to ensure your staff members are letting every customer know about the loyalty program that is available in store. If it’s a card, they should offer it to the customer or client; if it is a voucher, they should be letting them know if they are a few euros short of being eligible for it. Next, you need to come up with a way of reaching customers on a broader scale. You don’t need to stick to one method here. For example, you should be sharing it on all your social media pages and emailing all of the customers in your database.

The avenue that has proven the most effective in Ireland is direct mail. According to independent research commissioned by An Post in 2013, 70 per cent of Irish consumers surveyed in the study said they preferred to receive loyalty rewards by post, as opposed to by email or online.