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Loyalty Program

POS SOFTWARE

The most popular loyalty program used by retailers today is probably stamped rewards cards. See some samples above

What it is, that a person comes into the shop and buys something. Every time they buy, they get a stamp, and after several purchases, they get something. It is an excellent method if you’re looking for a way to increase repeat customers and sales.

We suggest ten (10) stamps to the goal.

Here is a step-by-step approach that works.

1) Look for items with a decent margin and high demand, e.g. greeting cards, pet accessories, perfume, etc.

However, you can use it for anything. If you are stuck for ideas, consider using all purchases over $10. One problem here is if you try to knockout departments because they are low margin, you are advertising that the other departments are high priced. 

2) You need a design for your cards. Most printers can show you samples. Make sure you keep your brand image in mind, as each card is a simple and effective marketing tool that your customers carry. Select a design that is unique to your shop.

We suggest that it has twelve (12) spots to stamp.

3) Make a use-by date line. Unused points can be a real legal problem for a business. This line will be handwritten on the card.

We suggest a year

4) Select a simple, unique self-inking stamp that fits onto the squares of your loyalty card. This also has been shown to reduce fraud.

- Now, it is up to you if you integrate it into your POS system. There are some significant advantages to making it integrated.

-- It reduces fraud

--- It allows you to track your customers’ spending habits and collect valuable insight into improving your business.

--- Knowing their details, you can market your business to them.

5) When someone buys something on offer in the shop, offer them a card. If yes, they get one stamp for joining the item and one for buying. So everyone starts with two stamps. This gives them the feeling that they are closer to their reward as now they are 17% there (2 stamps out of 12).

We suggest you read here if you want to know the scientific reasons why we suggest this:

6) Once the reward is redeemed, they get a new card with one stamp credited for rejoining the program. Then they get another stamp for the free offer they redeemed. This overcomes this problem of them starting with zero as now they are at 17% again.

Give it a try and see how you go. Then let me know.

Ideas people consider:
a) Consider offering a smaller reward on the sixth (6) stamp. In practice, we have not found this to work well. 
b) People that buy on their birthday get an extra stamp. Never seen this idea used, but I think it will work.
c) Big purchases get two stamps. Since the purpose is to get people to buy, this idea seems self-defeating.  
d) Slow days get a bonus stamp. I can see it working well in many retail environments but not in others. Maybe have a chew on this one.

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POS SOFTWARE

I was reading this article THE OVERSATURATION OF POINTS PROGRAMS: ARE YOU TOO LATE TO THE POINTS PARTY where this expert on loyalty programs answers states, "Therefore, the simple answer is, no, you're not too late. However, one mustn't neglect the core elements that make a loyalty program successful when designing a points-based program."

I agree with him. Retail loyalty is not exclusive; customers can sign up for many customer loyalty programs; no reason why you cannot be in their group. Customer loyalty programs are now a popular way to keep customers.

The core element of modern retailing is DATA, DATA and DATA! The industry standard is that this loyalty data is worth 1% of turnover to a business. This covers a loyalty program's cost as it increases customer frequency of purchases, basket sizes and retention rates.

The loyalty program's value today is access to your customers' email (and SMS) accounts. You can use this to market to your customers. Think of it, it costs nothing to send emails, and the returns can be high. When we measured a simple birthday offer, it had a success rate of 25%. 

What is the problem with telling customers that you exist frequently?

The first point is customer loyalty software. This is essential for running successful reward programs. Well, you have a really good one in your POS Software here. You have various options in choosing programs in your software.

Please give it a go, and let me know how you travel.

Maintaining a strong customer relationship can give your business a solid base.

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POS SOFTWARE

While having a customer loyalty program is beneficial to your business. You should be aware that somebody will always be looking to take advantage of the perks in your system. Often they do this without realising that their actions count as fraud. So if you run a loyalty program, you should know that it is not immune to fraud.

There are two types of loyalty systems we actively support:

Points: Where someone gets points for each purchase, and they can use these points to get benefits in your store. I have never heard of this fraud in our system. I would know as many of our clients are small to medium businesses who know their regular customers and would report if something goes wrong with these points. It is much harder to commit fraud if customers are verified and their purchases tracked.

Note: It would be highly worrisome if it happened as it would need to be internal as our system is secure using SQL used by banks.

Yet if you buy a business, I cannot emphasise enough how important it is that you address the issue of unused loyalty points with the previous owner.

Discount vouchers: they get an instant credit on their next purchase, say $2 off on their next buy for a $25 purchase.

Now, this I know has caused problems.

A customer leaves the shop and often throws the receipt in a bin nearby. Another person comes along, grabs the receipt, shows up in the shop, and buys a $3 item claiming the $2 discount voucher. One quick fix is to put the receipt in the bag. The problem is that the retailer wants the shopper to see the voucher to encourage them to buy more instantly, so they give it to them in hand. If you question it, his friend, acquaintance, etc., gave it to them.

A similar problem is when a person comes to the shop to buy two things. They buy the first item, collect the discount voucher and use that voucher to buy the second item. This is interesting as it's questionable whether it's fraud or the retailer's stupidity.

Loyalty programs are a great way to build brand loyalty and encourage customers to return to your business but must be reviewed. Check your shop information for suspicious behaviour.

A standard measure is that a loyalty program should cost the retailer about 1% of turnover, although I have seen 2% used. On a million-dollar turnover, you are looking at $10,000 to $20,000, it is worth checking. Also if you are over that, it's certainly time to review what is happening without supplier support, I doubt it's worth it. 

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POS SOFTWARE

Whenever I talk of loyalty marketing, I almost first hear the public is overwhelmed by the major loyalty programs! If so, why does nearly everyone else do it? Can they not count? For example, I went to a small car parts shop today and was told of their loyalty program. The same happened when I went to a homeware shop. The homeware shop was in a big shopping centre. You might think they do not need a loyalty program as the major loyalty program brings customers in the centre, but they were keen to sign me up too. They even offered a $10 discount to sign up on my first buy.

Loyalty marketing works. That is why retailers use it.

The most successful technique in loyalty marketing is *Birthday Marketing*.

It is so simple to do with our loyalty program. Put in the customer's birthday when entering them into the loyalty program. Although it is much better to use their actual birthday if they do not tell you, make it an anniversary date with their joining date. You can always correct it later if they point it out. Do not worry if it's the wrong date. It will work almost as well anyway. Once done, they enrol on your customer's birthday program. This will allow them to receive special offers and discounts on your products and services on their birthday.

Several years ago, when we did a calculation, we saw about 25% success with our clients in our clients. Here are some figures from  Experian which show a higher figure.

) People buy on birthdays

) Birthdays are all year round

To do Birthday marketing, you must send a simple 'Happy Birthday' message. It will be appreciated and read. Almost everybody reads these emails. To start, here is a simple email to send, which I am sure you can improve to your needs with little effort.

Happy Birthday Email

Happy birthday, <name of customer>

Thank you for being with us. We want to make your birthday as memorable as possible. To celebrate, we're are <something>.

We appreciate everything you do for us and hope you have a wonderful day and year!

Wishing you all the best,

The friendly crew at <your shop>

Set up here.

 

Then towards the end of the month, send a VIP email or letter to all your clients who have birthdays next month with your birthday email.

 

 

Start now!

Tips For Creating A Great Customer Birthday Program

- Try to make the emails personalized with the subscriber's name.

-Send emails a few weeks before their actual birthday and then again about their birthday. Two hits are better then one.

-Use a special offer or a voucher rather than a discount percentage. They are more like a present.

-If you have a website, include a link to a particular page with a few items or offers. If what you offer did not appeal may be something on that page that will appeal.

-Track the results, so you will know how well it goes for you. Our enhanced targeted, data-driven marketing reports let you know.

I doubt you will stop once you start it, as the cost is almost zero and it will produce sales.

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POS SOFTWARE

​For many years, the study "For the love or money" has been the best study of Australia's customer loyalty and loyalty programs. The 2022 edition is now released. You need to pay for the study itself, but the executive summary is free and accessible here.

It is worth a read if you are a retailer thinking about a loyalty program. 

About 88% of Australians enrolled in at least one loyalty program. The average is 4.3.

About 46% consider themselves active, which is up on last year. That is a lot of people, about 40% of Australia active.

Have a read. I am confident you will get a few thoughts.

 

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POS SOFTWARE

What is commonly done is to measure a customer's spending in a loyalty program in a retail shop. Then compare these figures to the average customer.

I am sceptical.

The spend is not profit.

Yet many so-called retail experts quote this as a critical measure of how successful the loyalty program is as they rarely get profit figures. So this is the best they can do.

The other issue is that one supposes that members of your loyalty programs are already spending more in your shop. So, in most cases, they are spending more with you already. The extra problem here is that they do it to gain more rewards in their purchases, so you are often discounting your products to people who are buying them anyway.

If you are running a loyalty/VIP program in your shop, here are some KPIs; I recommend looking into them.

In my experience, even vague figures are better than none.

Budget

A professional marketer will budget a loyalty program's cost at 1% of sales. Sometimes they will take it to 2%, but it is too much to do anything higher without the suppliers' help. If you are doing a million turnover in your shop, you are looking at about $10,000 cost maximum. 

You need to know whether you are getting $10,000 back in profit.

Membership

Examine your membership. How big is it? Is it growing or declining? Where are the members coming from? Existing customers or new customers? If it's existing customers, then your program is dubious.

To determine this, you need names.

Are you just giving a discount to existing customers?

Email list

The email addresses are said to be worth 2%. If you are not collecting these email addresses, your loyalty program is down 2%. In today's market, you must communicate with your customers. You have to find a way to get your customers to come back. This is the key to profitability.

Usage

How many are using it, and at what frequency?

Member spending vs. non-member spending

The primary purpose of a loyalty program is to get you more customers and get them to spend more. Is it? So do not just check the sales totals but also the basket size, profitability, etc.

Pre-membership vs post-membership spending

What do you need to know that it is working?

The figures can be gotten here.

​Use your data, not the seat of your pants.

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If you’re a retailer not running a loyalty program, what does it cost you?

Let us do a guesstimate.

Say you collect a 1,000 email addresses of your customers.

Say you send out a monthly email newsletter to them. This costs you nothing.

At a super conservative value of 1% effectiveness, say with $20 profit per hit. That is a $200/month profit on 1,000 members of your loyalty club.

In one year, you have about $2,500. Its paid its way.

Plus, it puts your name out in front for no cost.

 

A card promotion advertised through a loyalty program resulted in

-No of transactions increased 20.7%

-Total average weekly increase (overall) on cards was 44.5%

-Average card basket size increase 19.8%

Plus, there were extra purchases as customers bought more than cards.

Read more here.

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The current report of probably the best loyalty analysis in Australia is now out at For Love or Money™ 2021. It is in its 9th edition. 

If you want, a free and quite detailed executive summary is available there too. One point for sure if you get it, it will give you much to chew over. It did me.

Looking through the report, I noticed that the active participation rate is down. This is not a COVID thing, as it's been going down since 2015. In 2015, 59% of Australian shoppers used a loyalty program. Today it is down to 43%. Also, transactional loyalty programs, where the customer gets money, are down in 2019. Then, they comprised 76% of all loyalty programs; now, in 2021, they are down to 69%. I am not surprised as these schemes often end out giving away margins with little reward to the merchant. 

Far too often, the customers in loyalty programs will often buy the items anyway. Hold this thought as important later.

Still, after going over these reports plus what I know, here is a guestimate of a budget of what a modern loyalty program would cost you.

Your customer's name and emails addresses, buying history and their permission to use the information in your loyalty program are considered to be worth about 1%. So most loyalty programs tend to hover about this figure. If they go much over this, it is generally because of suppliers help. For example, you promote a supplier product in exchange for them giving you a lower price during the sale. 

So if we are looking at million-dollar sales in a shop, your budget   (1%)  is $10,000. Say your expenses of running the loyalty program is $2,000. Then we have about $8,000 worth of product discounts to give away. 

Now based on the report, only about 48% of the people using your loyalty program are buying because of your loyalty program.  

So if your margin is 30%, to cover your $10,000 expenditure, you need to get about $70,000 of turnover in your loyalty program. 

The formula here is (Turnover required) = (1% of turnover)/((margin%)x48%) 

In this case, the discount you would be offering your customer =$8,000/$70,000  about 10%. 

If the margin you are pushing is 50%, then you need about $40,000.

The discount you could offer your customer much better, about $8,000/$40,000 or 20%.

So push a higher margin item in your loyalty program.

Note few professional marketers get profitability figures. Only only transaction amounts and they work on average industry needs. Your views might be different on this as you have detailed financial figures and specialised needs.  

Also, consider that a loyalty program is a minor factor in your customer loyalty. It is minor. A factor far more important is your relationship with your customers. 

Still, this gives you a starting point.

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For four hours on Friday evening, many Coles supermarkets had to close. This was because they had technical issues with their POS Software processing payments at the point-of-sale. 

If Coles had our Multi-Shop POS Software with replication, this would not have happened. Which highlighted one interesting observation made by Xero CEO to me that often "small business today has better technology than big business".

Still, this outage would have cost a lot, plus Coles would have suffered a  loss of goodwill. What happened is what we call in business - a pain point. So we can see how they used their loyalty program in response to this pain point. The very next day they offered their customers "triple flybuys points...purchases" also free delivery to online shoppers who spend $50 or more.

It shows the flexibility of loyalty points, that as required, it is easy to adjust. I have also seen it to encourage shoppers on slow days when they offer something like "double point on...."

If you have not yet got a loyalty program, I can assure you that it works well in all business sizes. So check out this quick video.

 

Then take a look at the free loyalty program and free CRM offered by our POS software.

 

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This highlights the problems with loyalty rewards that do *NOT* have computer auditing to the account.

Yesterday the Woolworths receipt hack received wide coverage.

What it is that a person collects receipts from the bin or trolley in this case. They then claim the benefits of the shop's loyalty program using these receipts. 

Here, the person did not even think she was stealing, nor do many in the public. 

The result is that the retailer pays to the person who may not even shop at the store the benefits. This payout can be very high. For example, on discount vouchers, merchants are advised to set the payout at 50% of the profit. Here you would be giving away half the profits to a person who does not even shop with them.

It goes much deeper than that. 

Loyalty rewards programs do not get much in the way of scrutiny. Security is often very lax as the rewards are not cash. That makes it open for abuse. This lack of oversight attracts thieves.

What you need to do is examine your loyalty programs for any such potential loopholes. 

Then Make Your Reward Loyalty Program Secure

 

 

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