Repeat customers are often the backbone of a successful business. One of the best ways you can generate repeat customers and build your relationships with them is through loyalty programs. We often see big businesses have these types of programs, such as the Starbucks Rewards Program and the PC Optimum Insiders Program, but what is not as commonly seen is a small or medium sized business using similar types of programs. It is incredible how much these programs can influence a consumer’s behaviour!
Before diving into the types of brand loyalty programs you can implement with your business, here’s some basic psychology knowledge which will help you understand the power of loyalty programs, how they can change consumers' actions and why these techniques work. After all don’t forget, the field of Psychology goes hand in hand with the field of Marketing!
So are you ready for some Psych 101? Don’t worry, we promise this will be significantly less reading than almost any university psychology class!
Positive Reinforcement: One of the most basic psychological concepts out there, and one of the simplest to understand. Positive reinforcement occurs when one completes a desired behaviour, the individual will receive a reward upon completing that behaviour. This concept is what drives those repeat purchases and forms the foundation of any loyalty program. At the end of the day if the consumer knows they will be rewarded after purchasing from a brand a certain amount of times, or perhaps even just after one time, they will continue to make purchases to experience the full benefits of being part of a loyalty program.
Classical Conditioning: A basic psychological theory discovered by Ivan Pavlov and also known as “Pavlovian/Respondent Conditioning”, this describes the process of learning through association, embodied by an experiment where Pavlov presented his dogs the sound of a bell with food, and over the time the dogs learned to associate the sound of the bell with the availability of food. When presenting consumers with a promotional offer (stimulus) that drives a conversion (a purchase) then over time the consumers will associate the promotional offers with making a purchase and will spend more money! A loyalty program only incentives them to make purchases further by incorporating positive reinforcement.
Now that wasn’t so bad, was it? You can now explain the psychology of loyalty programs to all your friends and family when things start to get awkward at the dinner table. Woah! Anyways, let’s get to the good stuff.
3 TYPES OF LOYALTY PROGRAMS YOU CAN IMPLEMENT WITH YOUR BUSINESS
RANGING FROM SIMPLE TO COMPLEX
1. The Gift Card
Implementation Difficulty: EASY
Many of us don’t realize the power of a gift card or some wouldn’t even consider this a type of loyalty program but it surely can be. This is perhaps the easiest “program” you can implement with your business, and is extremely cost effective. With the power of the digital technology at our hands you can make a basic virtual gift card for your business that can be gifted via email at almost little to no cost, rather than having to print physical copies of them. Some of our favourite online resources for creating gift cards/certificates include: Canva’s Free Gift Certificate Maker, Adobe Spark’s Free Gift Certificate Templates tool, and Shopify’s FREE Gift Certificate Template - all offer useful and free ways to make digital copies of these! You will likely have to pay a fee to order physical gift cards regardless of where they are from but some sites may offer bulk discounts.
Although you may not be influencing the consumer who is purchasing the gift card to be the same consumer to come back and make a purchase, the consumer who received said gift card is still a consumer who will come to make a purchase as a result and you may now have a new customer in the process of all this! Then further down the road, they may also purchase a gift card and boom.. another new customer! Immediate positive reinforcement may not exactly be as prominent with a gift card system, but there is still a form of delayed reinforcement where, for example, this can take the form of the consumer who purchased the gift card receiving a positive response from the person they gift it to later on. Think of it like working out. There may be no immediate results after your first day of working out with a new routine, but over time you will start to see results and it will encourage you to continue engaging in that behaviour.
So, as gift cards aren’t quite the same as your typical loyalty program, they can still go a long way in expanding your loyal customer base. One simple thing you can do to enhance the power of gift cards is add an expiry date to them so that you can facilitate the purchasing journey. Additionally, make sure that your website has a gift card purchasing option that is easily visible to consumers. This is especially important to make sure the process is fully functional around the holiday time where consumers will likely be more on the hunt for gift cards. To much surprise, there have been countless websites where the business does not make purchasing a gift card from them too easy and that may deter someone from making a purchase since the process is not as convenient for them.
2. A Points Program
Implementation Difficulty: MEDIUM
Ah, the points program. A program that works for many. A program that can
work for your business. However, the implementation and planning that goes behind developing a points system is a bit more complicated than just offering gift cards.
There can be numerous moving parts that go into a reward points system. These moving parts can range from simple to complex.
You will have to design a points program to make sure you are keeping it cost effective for your business but also cost friendly for your consumers. Below we will go over two different types of points programs you can implement with your business today starting with an easier one!
The Classic Stamp Card
If you are a business with a brick and mortar storefront, then this may be the perfect fit for you! The concept may seem a bit outdated now, but hey, it’s pretty low cost and easy to maintain. You can also still use digital marketing to your advantage by promoting content through your social media channels and an email list that will encourage consumers to come in to get a stamp card.
This system is almost as easy as the gift card example we discussed previously. All you need to do is create and print some cards you want to give out to consumers who visit your shop, and set the number of stamps they need to collect when they come in each time in order to receive a free drink or food item. For instance at your local bubble tea shop, you may want to have a consumer get their card stamped over six times before they can receive a free regular sized bubble tea of choice.
A Mobile App
This one will likely require the help of a third-party to implement, meaning it may also be more costly to implement. On a more positive note, there are numerous programs out there that you can use to help you make an app where you do not have to necessarily sacrifice an arm and leg for such as Appypie’s App Builder - Free App Maker.It all depends on your business and marketing goals. If you want a lot of customization, you may have to hire a developer that will work directly with you to create a tailored app for your business which will of course cost more. However, the benefits of having a mobile app for your business can be significant such as:
Gaining direct insight into consumer’s purchasing patterns through data collection which you can then use to modify your rewards program to generate profits.
Easily customizing rewards for your consumers such as offering special discounts after they have purchased certain items or a certain number of items.
For example, Garage Clothing has developed the Garage Studio app that has made it easy for consumers to keep track of their rewards and shows them what types of rewards they can unlock next.
If you are needing to sell more of a specific item, you could also customize it so that if a consumer buys the certain item during a limited timeframe, they will receive extra points during the time frame that will get them even closer to unlocking their next reward.
Many of us carry our smartphones with us when out shopping, so it’s very easy for us just to take out our phone when paying and have the employee scan it to collect points or redeem a reward rather than shuffling through your bag or pockets looking for the one stamp card you got over eight months ago!
3. A Personalized Program
Implementation Difficulty: MEDIUM - COMPLEX
Many of us are familiar with Amazon Prime. Some might not realize this is also a form of a loyalty program! With Prime, you have many new features that you can explore when you sign up to be a Prime member. Instead of taking the standard format of accumulating points when making repeat purchases, members will pay a fixed fee every month or two (depending on the plan) to experience the rewards that come with being a Prime member.
While it may not seem as obvious, this type of loyalty program still works in a similar manner as the classic points program to encourage repeat purchases. Once a consumer knows they have purchased a membership, they will likely not want to waste it. The way these types of more personalized and membership based programs work is that you still must make purchases from the brand in order to experience the benefits of having the membership. With Amazon Prime, to experience the feature of having fast and free delivery that comes with the membership, you still must make a purchase. Do you see where we’re going with this?
While these types of programs have the most potential to be extremely profitable, it is also initially the most expensive and complicated to implement. For one, the logistics that go behind planning the free and fast shipping for Amazon Prime members is beyond what many smaller-medium businesses may be willing to do. However, it is possible to integrate aspects of these programs with your business that are relative to your scale. For instance, for your consumers that live in the same city you are operating in, it may be much easier to offer a similar benefit such as Amazon’s fast and free delivery. It will be much less complicated to plan efficient delivery routes if it is just within your city by creating a subscription/membership program with your local consumers. You can also offer them a discount on some of your products, or access to members-only products if they pay a fixed membership fee.
Our last example that fits this more personalized rewards category includes creating different tier-based memberships with each type offering different rewards. Starbucks is a good example of this as consumers get better rewards based on the money they spend/items they purchase and the level of rewards member they are (Starbucks “Gold Card”). Another example would be Office Depot’s free loyalty program which allows you to “Unlock VIP status by spending $500 in a 12-month period and enjoy even more benefits.” (Via Office Depot).
So as you can see, there are many different loyalty programs you can try and implement with your business to boost profits and attract those repeat customers. These programs can range from very simple gift cards to completely innovative and customized programs! Which one(s) will you decide to go with?