Loyalty card programs are simple, effective, and underused.
They can increase repeat customers and the number of visits per customer, improve customer loyalty, and ultimately grow sales and improve cash flow.
That’s a mighty impressive list of benefits.
Don't have a loyalty program? Start here now! Here’s how to take any loyalty program to the next level and turn it into a driver of more sales.
Which Businesses Should Have a Loyalty Card Program?
A loyalty card program should be strongly considered by any business that fits the following criteria:
- The business has repeat customers.
- Customers return frequently (i.e. multiple times per month).
- The business doesn’t sell one-off goods or services.
- The average order value is less than $50.
Examples of businesses that are perfect for a loyalty program include:
- Quick-service restaurants (e.g. burrito stands)
- Takeaway shops (e.g. sandwich shops)
- Coffee shops
- Ice cream parlors
- Hairdressers and barbers
- Yoga studios
- Pet groomers
That’s quite a long list, and there are a few surprises in there, but they all fit the criteria. And all would benefit from increased customer loyalty.
So why would these businesses consider starting a loyalty card program?
The Benefits of a Loyalty Card Program
Let’s run the numbers, so we have something to crunch on.
Assume your business can convert 2 new customers per month to your loyalty card program, that would not have become loyal customers otherwise, it would amount to 24 net new customers per year.
If your loyal customers visit twice per week, and the average order value is $20, then starting a loyalty card program has the following payoff:
- New repeat customers: 24
- Spend per customer: $20
- Annual visits (2 visits x 52 weeks): 104
- Revenue increase (24 x $20 x 104): $49,920
That’s right, for a business fitting the assumptions above, a loyalty card program would increase revenue by around $49,920 over the course of a year.
This will contribute $9,984 in additional profits at a 20% profit margin.
(Of course, there is a cost associated with printing the loyalty cards and then providing 1 in 5 or 1 in 10 visits for free, but I have assumed that the free visits are factored into the $20 average order value, i.e., your average order value is higher if you don’t have a loyalty card program).
Those numbers are almost unbelievable. But that’s only 2 new customers per month! Many small business owners will have even bigger opportunities than that.
In short, loyalty card programs are worth it.
How to Turbocharge Your Loyalty Card Program
Here’s how to start a loyalty card program and then take it to the next level and become a driver of more sales:
Step 1: Design & Set-up
There’s only really one decision to make: the number of times a customer has to visit to get a free order. This will depend on your product, pricing, cost structure and economics but the answer usually lies between 1 in 5 and 1 in 10. Make sure it’s clear what the reward is for the target number of visits (for example, a free coffee, a free burrito or a free order up to $20 in value).
Once you’ve figured this out, you don’t need a complicated digital solution. Print your loyalty program on business card sized cardboard and choose a way to stamp them that will be unique to your business. So simple.
Step 2: Encourage Participation
Here’s my value unlock: when you hand out cards to customers who aren’t already participants in your loyalty card program, make sure to pre-stamp the new cards so that 5 out of 10 (for example) boxes are already filled. Rewarding brand new customers like this is a great way to convert them to the program as they will feel obligated to reciprocate your generosity. Your conversion rate will skyrocket!
Step 3: Continually Execute
The first two steps are design choices that you can set and forget. This step requires you to continually execute on your loyalty program. Don't be passive, get on the front foot and emphasize your program. Some tips here:
- Train staff to hand out these cards to all new customers.
- Set a reminder to yourself (on your phone or in your email) to renew focus on your loyalty card program. We all know that when you run a business, things start to slide. Don’t let this happen. Once a month is probably about the right frequency. Use these opportunities to remind your staff to hand out cards to new customers.
- Collect the used cards when they are finished in a simple container. Keep a count of how many finished cards you are collecting each month. Is this number going up or down? What’s working, or what’s not working? Use this information to tweak and improve your program and training.
You’ll note, this is really simple. Anyone who fits the right criteria can do this and you can get started this week.
It’s one of my favorite business improvement ideas.
Some small businesses already have a loyalty program. If you don’t, strongly consider starting one right now.
If you do, don’t rest on your haunches. Chances are there are vast improvements you can make to your loyalty program to make it much more effective. Continually remind yourself and your staff to be on the lookout for new faces, give them a reward and incentive to start visiting more often.
There’s thousands to be made by prioritizing your loyalty card program.
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