Customer Loyalty Programs: Right for You, Right for Your Customers

Coupons-with-purchase, loyalty cards, customer apps: they’re all ways to offer your clients a little bonus in return for their repeated business. Are they right for your business? If so, which one? It depends on several factors.

First of all, your business must be of the kind that repeats on a fairly short cycle. Lawn care is good. Snow plowing, also good. Residential exterior painting, not so good; how many times is a customer going to have his house repainted in a lifetime? Some businesses are not obvious candidates but can make use of these programs if they’re clever: an example would be a small computers supply repair shop that encourages its clients to bring their computers in once every 6 months for a free “pro level” virus scan. A coupon could be bundled with every invoice over $100 (to keep the perception of value), and a stated retail value of say $25. That the service isn’t available EXCEPT with the coupon is not something you need to mention. This gets your customers to spend their money with you when they’re looking for peripherals, and literally increases customer loyalty. Who doesn’t want to be sure their computer is virus-free? And it takes just a few minutes of pro time, during which they can talk to the customer about what else they might need that day.

Loyalty cards are common in businesses like cafes which deal in high volume low cost items. It doesn’t make sense for Boeing to throw in a free 767 if you order ten, but a drip coffee costing a quarter and selling for two dollars? Sure. Particularly as with every coffee purchase, the customers are probably also getting scones, muffins, or sandwiches which are notdiscounted. This would work for you if you have goods or services you sell on that kind of profit margin, and the customers keep buying over time. Examples might be window cleaning as a service beyond the basic house cleaning service, or spray wax as a add-on at a car wash.

Customer store credit cards and apps such as the Starbucks app/cards are very popular with retailers, and they should become popular with service providers too. Plastic scannable cards are pricier than cardboard loyalty cards and a stamp, but they’re often given as gifts and can be loaded with any amount. Whatever amount the customer puts on the card acts as an interest-free loan to the business, which is ingenious if you think about it. Apps can be surprisingly reasonable if your clientele tends to be tech-savvy and would appreciate it. It can really brand you as a big timer, but a custom app can be made for less than $100 thanks to several websites that let you drag and drop features and put together your own app. For a small extra fee you can remove the website’s branding and have effectively a custom app to keep your customers constantly in the loop. In one place they can see all your blog posts, tweets, Facebook page updates, and specials. For more money (because security always costs money, and it’s money well-spent) you can have an app that functions as a customer card, preloaded with cash that is available to you instantly.

As for group buying websites like Groupon, LivingSocial, and the rest: a word of caution. An entire paragraph of caution, actually. Many businesses have been burned by over-optimistic expectations. The kinds of clients that are brought to a business by a 50% off web coupon are not the same financial prospects that your existing customers are. They are bargain hunters and are unlikely to patronize your business at full retail. And depending on your operating costs, cash buffer, and line of credit, you can actually be driven out of business if a sudden flood of Grouponers descend upon you, eating up your inventory and labour budget while not even covering their cost to you. It has happened, particularly to fledgeling businesses that didn’t have cash reserves to carry them over. Don’t let it happen to you.

Loyalty discounts are a lovely gesture and a sound business practice when done carefully. In New Orleans they call it a “lagniappe,” a little extra thrown in to keep you coming back. Make sure that the lagniappes you give your customers are as good for you as they are for them, because when they do come back, you want to be open for business.

Last Updated By: Rochelle Sanchirico

Last modified: January 16, 2018