Introduction
A loyalty programme is a great tool for growing your business, however the focus should not be on rewarding good customers but on creating good customers. You can grow your business by increasing prices (limited), getting more customers (hard/expensive), selling people more when they shop, or getting them to return more often. The latter is what we focus on when it comes to loyalty.
Why most loyalty programmes fail
The problem with most loyalty programs is that they're often designed around rewarding ‘good’ customers. The issue with this is that these customers do not need to be rewarded, they are more than happy with your excellent products and services and while it is nice for them to be rewarded; you end up sacrificing a margin unnecessarily.
Reward schemes work for people that go out of their way to return in order to reach the goal, but fail for everyone that gives up. For good customers, ones that would have returned anyway, it’s just a discount.
The other problem is that this ‘reward good customers’ mentality creates ‘high jump’ programmes. Customers need to spend a certain amount to be eligible for a reward. The concern here are the customers that give up before reaching the reward bar. Some buyers just find it too hard; they don’t get their ten stamps or spend the requisite $200 or whatever the hurdle might be, and give up. All these people that give up and don’t return because the hurdle is too high are now lost.
Finally, most loyalty programmes are murky and complex. You get ‘points’ but what does a point mean in dollar terms? Is it worth the hassle?
Using the ‘points’ can be a complex (often external) process, and different from what customers are familiar with. It is almost like these programmes are designed to fail/prevent customers actually using their ‘points’ - while this might be a small win, the lost customer is much more costly.
What works?
A loyalty programme works when it gets a customer to return when they would not have otherwise. As mentioned above you are trying to create good customers rather than reward good customers. The key groups to focus on are the first time and infrequent customers. You want to convert as many of those as you can into regular customers, and if a small reward and a good suggestion gets them to return, it’s worked.
Offering first time customers a “ hurdle" can not be part of the plan. Every time they shop, no matter how small the purchase, they get something to make the next purchase a bit cheaper, but importantly you now have something tangible to tempt them to return.
Being proactive will mean you get the best out of loyalty. This means reaching out to customer groups and making suggestions that would interest them. This in turn means keeping track of what customers are buying so that you can make sensible suggestions.
Most customers, for example, like to know when the next book by their favourite author is coming or a good book that is similar to the previous one arrives. This is where local bookstores have an advantage, these suggestions can be genuinely hand picked. It is actually great service and a perfect excuse to chat to customers.
Finally, the programme has to be transparent and easy to use. Customers need to be able to easily see and understand what they have, and be able to easily use their loyalty credits as part of the buying process, be it instore or online.
How the loyalty programme works for bookshops in CirclePOS
Setup and loyalty rates
For reasons discussed above we have deliberately structured the CirclePOS loyalty scheme to be 'no strings attached' as opposed to a reward scheme where you have to accrue a certain amount to trigger a reward. Customers receive a reward on every purchase, and are free to use the credit against any future purchases.
The loyalty programme is enabled in financial settings and works at a group level for multi store operations. This is so that there is consistency between stores in a group and so that customers can roam within a group to use their loyalty credits.
Typically loyalty is set at 5% - 10% so if a customer spends $100 they will have $5 - $10 to credit against future purchases. We sometimes get asked what is the best rate to use but that is hard for us to say. The only thought on the matter would be that after an average purchase you would want the customer to have enough of a credit to entice them into returning to you rather than a central giant.
The other thing to set is expiry date and again this is a group preference thing but one to two years seems to be typical. For accounting/liability reasons it is important that an expiry date is set and expiring credits provide another good opportunity to reach out to customers to get them to come back.
On top of the base loyalty programme we have loyalty as a special promotion option this is a slightly different discussion which can be seen here.
The credits for information exchange
What you get in return when you credit customers with dollars is information. It is an excellent quid pro quo where everyone wins. In exchange for credits the customer allows you to contact them with suggestions that will likely interest them. It is important to be upfront about this and it can be done in a positive way (because it is), a counter spiel something like;
Would you like to join our loyalty programme, you will get 10% of what you spend added to your loyalty account that you will be able to use on future purchases, in-store or online and we will let you know about books we think you might like, when an author you like comes back in again for example.
It is actually just great service.
Reaching out to your customers
Finally you need to proactively reach out to your customers and suggest the books you know they will like. The more targeted this is the better. Author is a great example, people are normally very happy to be told when the next author they like is coming in but other things can also work. A particularly good book coming into a niche category or a book that is similar to another book that has sold well in the past. You can let all the people that have purchased that author, category or similar book know about the new one and at the same time remind them that they have some loyalty credits to spend on it. This is an offer most people cannot refuse, it is hand selling at scale, great service and so very successful.
Having an online shop is an important part of this as it makes it easier for customers to return. All they have to do is to click the link to the title in their email. This vastly expands the customer base that you can reach as people that are far away or not able to visit the shop itself can return.
Outreach starts in the Customer CRM part of the CirclePOS system. You simply ask the system to provide a list of the people that purchased a particular author or ISBN. The system will generate email addresses that you can import into whatever system you use to communicate with your customers.
Operations, how customers get and use their loyalty
Once set up, customers receive loyalty dollars every time they purchase something. It is a cardless system which only requires a name, email or phone number at the point of sale. On the website it is automatic as they are already checking out under their name and email.
When it comes to using credits the current balance is displayed in the cart and the POS where customers can opt to use it or not. Some do and some like to save it up for Christmas 🙂
Conclusion
A loyalty program is a great way to grow your customer base and improve your service at the same time. To work well the programme needs to be centred on creating good customers rather than rewarding good customers. It is important to gather information on what customers are buying so that you can reach out and suggest books that you are confident they will be interested in. Finally you need a website so that it is easy to return for the people that cannot make it back to your shop in person.
See other articles on specific features and how they can help bookstores
If you would like to learn more about CirclePOS, email sales@circlesoft.net or book a demo