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Loyalty Programs: 4 Options and How They Work

If you’re not sure whether your loyalty program is reaching the right audience, it’s time to take a closer look. Loyalty programs are designed to reward customers for their continued business with you. But if they aren’t being used by the right people, then what good are they?

Point System

One of the first steps in matching customers with a loyalty program is to understand how the different options work.

1. Point System

The first step is to review the type of points system that your customers are using. As you are reviewing the point system, make sure that your customers understand how it works.

If they aren’t familiar with the way that points can be earned—and if their earned points haven’t been recorded on their account—then they won’t be able to take advantage of this program.

The frequency of reward point accumulation also matters. If customers only earn points every time they make a purchase, then you’ll only be able to offer rewards in certain instances. It’s not an ongoing, regular basis. Those who pay annually will want to receive the same amount of benefits each year as well.

2. Tiered Programs

Some loyalty programs offer customers different levels of rewards depending on how much they have spent with the company. These tiered programs can be based on price points or frequency. A customer who spends $300 in one time will receive a better reward than a customer who only spent $50 at your establishment.

These tiered programs also require each customer to be classified into a certain level, which may not make sense for your company. For example, if you have customers who frequent your venue but spend under $100 at one time, it doesn’t make sense to give them the same benefits as someone who comes in only once or twice a year and spends more than $100 each time.

Based on how frequently customers visit your business, you may decide to offer them status based on their frequency of purchases. This is a great way to encourage regular visits by offering benefits only to those who have reached certain levels in the program. It can range from a free dessert or a small gift at every fifth visit.

A tiered program is a great way to offer more benefits over time. However, it requires that you have customers who visit frequently and spend enough money each time.

3. Cashbacks

Other loyalty programs offer customers cashbacks instead of points, which they can track with the help of a loyalty card issuer. This can be a great way to get your clients to spend more money, although it also requires you to know exactly how much each customer spends when they shop at your location.

For example, if someone pays for $200 worth of merchandise and you decide to give them $10 in cashback, you have to be sure that this is more than they would have spent otherwise.

Customers will never notice the value of something like cashback until their next visit when they realize how much money they saved on a particular purchase. Thus, it’s always important to make them aware of this. You can do so by including information about your loyalty program when they use their loyalty card. You can also include a statement with each receipt.

4. Programs That Give Away Prizes Instead of Cashbacks

Another great way to encourage your customers to keep using their loyalty cards is by giving away prizes in your program, not just cashbacks. While this does mean that it costs more money, it also means that you can get customers to keep coming back.

You will need to decide how your program will award prizes based on point accumulation and frequency of visits—just as with other types of programs. If, for example, you offer a free dessert every tenth visit, then you’ll have to decide how many points each customer needs to accumulate to receive this benefit.

You can also use your loyalty program to offer “instant win” prizes or raffles without having to purchase anything extra.

Consider a great promotion for two weeks during the Christmas season in your restaurant. Each time that customers used their rewards cards, they were entered into a drawing for free food. Your business can print the logo for your loyalty program on these raffle tickets and use them to enter customers into the drawing. It saved them from having to purchase any additional prizes or supplies.

Customers are likely to feel delighted to have a chance at winning something each time they spent money at their favorite restaurant. As a restaurant owner, you’re happy to give them extra chances to win something for free.

Loyalty programs are a great way to incentivize customers, but if your program isn’t working for the right audience, it could be costing you money. To make sure that your loyalty cards are doing what they should be doing, figure out who your ideal customer is and how your program works.

Jeremy D. Mena
Alcohol geek. Future teen idol. Web practitioner. Problem solver. Certified bacon guru. Spent 2002-2009 researching plush toys in Miami, FL. Won several awards for exporting tar in Libya. Uniquely-equipped for managing human growth hormone in Libya. Spent a weekend implementing fried chicken on the black market. Spoke at an international conference about working on carnival rides in Miami, FL. Developed several new methods for donating jack-in-the-boxes in Edison, NJ.