Selecting the right Loyalty program for your business is critical for success. We have listed a few core principles below to help you create a successful Loyalty program.
Overview
Consider the following factors when determining the program that will work best for your business:
- Your business’ average transaction size
- How often your customers return to your business and
- How long it takes them to do so
There are a few core principles to follow when creating a successful Loyalty program:
- Most transactions qualify for a star - We recommend at least 80% of your transactions be eligible for a star. We see some sellers prefer to set strict rules for earning a star in order to incentivize customers to purchase more. However, our data suggests that doing so actually discourages customers from becoming engaged in your Loyalty program and creates a negative perception.
- Customers can earn a reward in a timely manner - We suggest settings with which loyal customers earn a reward within 30 days of enrolling. Longer than that, we find buyers are more likely to forget they’re enrolled in a Loyalty program, and thus don’t make a point to return to the business.
- Offer a meaningful reward - Our research indicates that customers have greater satisfaction and are more likely to continue engaging a Loyalty program if the reward is worth at least 50% of your average ticket value, and 10% of what they spent to earn the reward. Your customers have expressed their loyalty for your business, why not make the reward for doing so worth it?
Below we explain how to use these principles in action.
Visit Programs
Visit-based programs are best if your customers visit your business at least once per week. We often see this in businesses with low-priced items.
You can use this equation to determine the values needed to reward your customers in a timely fashion:
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 their customers after earning 5 stars. Their customers return every 3 days. Their time to reward (upon enrolling and getting their first star) is 12 days.
Spend Programs
Spend-based programs 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 very long sales cycles.
You can use this equation to determine the values needed to reward your customers in a timely fashion:
Average customer return time (days) x (Purchase requirement to earn a star x (Number of stars required to earn a reward Stars to reward - 1) )/Average transaction size = Time to Reward
For example, a salon would like to reward clients for spending $100 or more on services. Their clients come in every 2 months for styling, and spend $75 per visit on average. The salon might consider a 4-star program where clients earn a star every $25 spent.
Item/Category Programs
Item-based programs 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 program.
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