Wednesday, April 10, 2013

Customer Loyalty Programs

As a small business owner, I'm always looking for additional opportunities to market my business, aren't you? And the easier and less expensive the better. But finding those opportunities is a challenge.

We all know it costs more to gain a customer than it does to retain a customer.  But if you sell a product that people don't really need, how do you get that customer to keep coming back to you?

Not long ago, I decided to implement a customer loyalty program. It took a few weeks before I settled on the right product. According to Hubspot, the most common loyalty programs are:

1.) Points systems. We're all familiar with these - we walk into our favorite coffee shop and are offered a frequent purchase card which is stamped or punched with every purchase. Or the purchased dollars equate into points to be converted to a free item. This can be difficult for business like most of your who read my blog - selling with stores utilizing online marketplaces.

2.) Tiered reward systems. This program expands the point system by offering one level of reward for, say, 50 points, another level of reward for 100 points, etc.  Still difficult to coordinate for the small business with limited time and resources.

3.) Upfront fee for VIP benefits. I recently purchased some kind of card from Staples for some kind of reward. Does my ambivalence show through here? Again, not a program for me.

4.) Non-monetary rewards for customer values. You've heard the sale - for every $x in sales, y number of trees are planted. Honorable, but not for me.

5.) Partnerships. Specifically, this article referenced Twitter campaigns, but my favorite comparison is a local company which offers, this week, free tickets to the Disney Ice Capades for an estimate. Hmm.

6.) Games. McDonald's Monopoly anyone?

7.) None. Offer a quality product and customer service with the sale, and loyalty will follow.

I'm sure most of you, my loyal readers, feel you choose strategy #7. And I hope each of you does offer a quality product and exceptional customer service. But I wanted to do something more.

So last fall I began a Refer A Friend program. The steps for me are easy enough to implement:

1.) Identify customers who have made their second, or more, purchase. For you Etsy sellers out there, these customers are easy enough to identify - a little star is placed by his name in your sold orders log. For my non-Etsy customers, I can easily identify them with the auto-type feature in my database.

2.) Create referral cards. Use the products you have on hand. I happened to have on hand folded business cards, but I could easily use regular business cards as well.  For gifts, I have a card I enclosed into a coin envelope easily found at your local office supply store which I've stamped "Thank You." Using these business cards and thank you envelopes, no additional supplies were necessary.

3.) Create a unique coupon code. I have a simple formula of customer initials and year.  So "DN2013" is my personal coupon code. This allows me to track when the code has been used. I offer a 15% discount to a new customer who has been referred, as well as a 15% discount to my referring customer.

4.) Include the card with my customer's order!

This program has worked well for me. I have a way to thank every customer for his/her return purchase with a method which encourages him/her to spread the word about my product and to reward him when he does!

After working with the program for nearly nine months, I have the following recommendations for anyone interested in implementing such a program:

  • Use what supplies you have on hand. I know many of you order your business cards through online printers, so perhaps this option isn't for you. But most of you have a printer and scissors and can easily print something using a postcard template on colored paper. Even cheaper - write a personal note on the invoice/packing slip!
  • Offer a discount substantial enough to make it worthwhile to your customer and his friend. I could probably even go up to 20% and my logic is this - it costs more to gain a new customer. Why not pass those savings on to your customers? You'll possibly gain a sale you would not have received otherwise, and your customers will appreciate your gesture! 
  • Measure your results. Let me repeat - measure your results. Give yourself plenty of time - one quarter is not long enough. Maybe the coupon code, which is your most tangible means of measurement, isn't used as frequently as you'd like. But do your customers come back? Honestly, I've only had a handle of customers make referrals that I can track from the coupon. But I've seen these customers return, and I truly believe it's the "something that makes them feel special" which helps them remember me when they want to purchase a similar product.
I know there are sometimes fears about offering coupons or sales. My wisdom is - don't be afraid! I know the mental calculations of "loss" of revenue or cash flow, but those losses are nothing compared to the loss of a sale, or the loss of returned sale!

Do any of you offer loyalty programs? What works for you? What would you like to do but just haven't been convinced to take the plunge?

I love to hear from you!

Happy sales,

Dorene

Related Posts Plugin for WordPress, Blogger...