Loyalty Schemes – Could it be time for your business to launch one?

With belts tightening and Christmas around the corner, it’s more important than ever to form strong bonds with your customers, as well as attracting new ones. According to Accenture, more than 90% of companies have some type of customer loyalty programme. Shopify also report that as many as 84% of consumers say they’re more likely to stick with a brand that offers one.

What is a loyalty scheme?

A loyalty scheme is a marketing tool to generate and reward repeat purchase. It aims to turn your regular customers into brand loyalists and encourage your special occasion customers to become regulars. Customer loyalty relies on many factors working in tandem, including customer service, quality of product, pricing, and rewards. Working out what is most important to your customers will be an effective way of encouraging them to return.

Points-based loyalty programmes

Points-based programmes reward customers with points for each purchase. When customers reach a certain number of points, they can cash those points in to receive a product or a discount. For example, Caffe Nero gives a stamp for every handmade drink bought. Once a person reaches nine stamps they get the tenth handmade drink free! Waterstones give a stamp for every £10 spent – on reaching ten stamps the customer gets £10 off their next purchase. This is the programme many small retailers use and can be the easiest to manage.

Subscription-based loyalty programmes

Subscription-based loyalty programme requires customers to pay an upfront, monthly, or yearly fee to join. For example, Pret offers a £25 a month subscription to get up to 5 handmade drinks a day. According to a Barclaycard Payments study, businesses are diversifying into new areas to increase sales, with three fifths (61 per cent) creating subscriptions designed to be purchased as presents in time for the festive season. This comes as 38% of Brits also said they plan to gift a subscription product or service to their loved ones. Of the retailers most likely to launch new offerings to appeal to Christmas shoppers 72% are festive food and drink providers.

Values-based loyalty programmes

Values based programme differs from others because they don’t offer any explicit rewards to customers themselves. Instead they emphasise the organisation’s values, for instance donating a portion of proceeds to one or more charities. This can generate good will and loyalty by tapping into a popular cause. London based Flock & Herd’s #kievs4Kyiv campaign raised over £600, with the business donating £2 from the sale of each Chicken Kiev to Unicef. The short term lost profit is far outweighed by the interest and public goodwill an initiative like this creates. Charity donations are also likely to be tax deductible too. Retailers like Waitrose and Asda offer a token-based system, where customers are given tokens to choose which charity will receive a % of spend.

Why offer a loyalty scheme?

A customer loyalty scheme can be a win win for both business and customer. For the business it can help retain customers, introduce new ones, compile a customer marketing database, and generate goodwill. For customers, it represents good value in terms of discount off future purchases but also offers other benefits such as access to exclusive promotions, new products, and even loyalty card holders’ events.

But a word of caution. The scheme must be well thought through, with clear terms and conditions to avoid unhappy customers, or offering rewards that cost the business too much. So, if you’re thinking of going ahead, consider the following:

What are you going to offer as rewards?

If you go with a points scheme then points for pounds, points per transaction and points per visit are the most popular. Ten percent is a common theme, i.e. on a £1 equals one point system, if customers spend £50 they can redeem £5 off their next purchase.

What level of scheme do you need?

Loyalty schemes don’t need to be complicated. A simple stamp loyalty card system can be set up quite easily and at minimal cost. Order some loyalty cards for customers from a local print firm, buy stamps for the tills, draft your T&C’s, then train your team and you could be set up in a couple of weeks.

Alternatively, you could go the electronic route

using software or an external firm such as The Butchers App or Reward It. Once launched, these loyalty programmes can capture customers’ purchasing habits and demographic information. Provided you have obtained permission to collect customers’ contact information for marketing materials, this information could be used for a wide range of marketing initiatives. See Essington Farm’s loyalty scheme as an example.

For more advice, full members may contact NCB head office on 01892 541412.