Hey there @CafeCubana. Before I give you my perspective, you should know that until a few years ago I was adamantly against ever having a loyalty program at Piper’s Ice Cream Bar. I found the ones I participated in with other businesses to be painful, intrusive, hard to use, and quite honestly not worth my time. But when Square rolled out a product that looked promising, I decided to jump on board. So, I’m speaking as a former skeptic.
I’ve used Loyalty for a couple of years now. I have around 2,600 current loyalty customers. Is that a lot? I guess that depends on your perspective. I’ve found that customers who really like loyalty program will sign up and those that aren’t interested won’t. I think that for an ice cream shop, my enrollment is about right.
My program is pretty simple. I award one point for every dollar spent. Customers earn a $1 reward for every ten points ($10) spent. They can redeem those rewards anywhere from $1 to $15 at a time — but no more than $15 can be redeemed in any one transaction. I also have loyalty tiers that give my active customers the chance to earn multipliers of points so that they earn rewards more quickly.
Is it worth it? I have a spreadsheet that I use to review all of my “Square” costs. In it I track my card processing fees, Square service subscription fees, and discounts offered for my loyalty program. I use this spreadsheet to monitor how much I am paying to “Square” as a percentage of total sales dollars.
In the case of Loyalty, when taking into account my monthly fees ($45 per month at my level) AND the reward discounts that customers choose to redeem, I am currently paying 1.43 cents ($0.0143) per sales dollar. In other words, my loyalty program is costing me about 1.5 cents per dollar. I consider discounts under $0.03 per sales dollars to be reasonable and acceptable, as a marketing cost.
We don’t use all of the loyalty bells and whistles. For example, other than the normal text messages that customers receive updating them on their loyalty account status, we only message customers about special loyalty events and programs. We don’t remind them to use their rewards. We don’t beg them to visit us. We don’t abuse the privilege they gave us to text them by inundating them with texts. Keep in mind I’m a Boomer who hates all of this instant “we need you to remember us” communication that is everywhere these days. LOL. Anyway, this approach works for us. Loyalty customers sign up on an average of around 100 new customers per month. That’s perfect for me for a program that I don’t have to put a lot of effort into.
I’m going to tag @ryanwanner who is a fellow Square Champion and a coffee shop seller. I believe that he uses Loyalty and can speak to the economics of it from that perspective of being a coffee shop.
But my prices and check averages are probably close to yours, and I can tell you that for me it is absolutely worth it. Best of all, my loyalty customer base loves it and they tell me so. Last year, they made up 17% of my total sales, and that 17% spent on average 93% more than non-loyalty customers per transaction — $27.12 per loyalty transaction vs. $14.03 per non-loyalty transaction. That’s pretty impressive in my book.
