Winning a new customer costs money, whether through ads, discounts or marketplace commission. Someone who has already bought from you is far easier to bring back, as long as they have a reason to return. That is the job of a customer loyalty programme. The trouble is that many shops set one up on impulse. Discounts go to everyone, stamp cards get printed and forgotten, and a few months later nobody can say whether the programme worked.
This article walks through how to set up a customer loyalty programme for a shop, from choosing the right mechanism to measuring whether customers actually come back.
Decide what the loyalty programme is for
Before choosing points or coupons, decide which behaviour you want to change. Different goals call for different mechanisms. Some common ones:
- Getting customers to buy more often, like a café that wants office workers to visit twice a week.
- Raising the value of each purchase, like a cosmetics shop that wants customers to add one more item.
- Filling quiet days or hours, like a restaurant that is empty on Monday lunchtimes.
- Keeping regulars from switching to a competitor that has just opened nearby.
- Collecting customer contact details so you can reach them again in a reasonable way.
Pick one or two main goals. A programme that tries to do everything usually ends up with rules that confuse both customers and cashiers.
Bring your cashiers in early. They are the ones who offer the programme, take phone numbers and answer questions about points. If they do not understand the rules, customers will not be interested either. Give them one short line to use, such as an offer to join for free so today's purchase already earns points.
Points and membership
Points
Points suit shops with frequent repeat purchases, such as convenience stores, pharmacies, baby supply shops and coffee shops. Customers earn points on each transaction and redeem them for a discount or a specific product.
Keep it simple. Customers should be able to work out roughly how many points they earn and what they can get for them. The first reward should be reachable within a handful of visits. If it feels like a year's wait, people stop caring. Set an expiry period and write the rules down clearly, so there is nothing to argue about at the till.
Membership
Membership gives status. Members get special prices, early access to new products or particular services. It works well for businesses with a smaller base of loyal customers, such as hobby shops, boutiques or salons. Membership can be free with conditions attached, or paid with benefits clearly worth more than the fee.
Make sure the benefits feel real. A five percent discount that anyone can get through a regular promotion does not make members feel special.
Coupons and flash sales
Coupons are useful for specific goals. Birthday coupons, coupons for customers who have not visited in a while, or a next-purchase coupon printed on the receipt. Because they can be limited per customer and per period, coupons are easier to control than a general discount.
Flash sales work differently. A large discount for a short time gives people a reason to visit, or open the online store, right now. They are good for clearing seasonal stock or livening up quiet hours, but they become risky if you run them too often. Customers learn to wait for the next sale and stop buying at full price.
Whatever the mechanism, work out the effect on margin first. A 20 percent discount on a product with a 25 percent margin leaves very little profit. Decide which products can be discounted and which cannot.
Measuring repeat purchases
You can only judge a loyalty programme if you know who is buying. That means linking transactions to customers, for example through a phone number taken at the till or an account on the online store. Without that, you are guessing.
A few simple figures worth tracking each month:
- Repeat purchase rate, the share of customers who bought more than once in a given period, such as 90 days.
- Average time between purchases. If the programme is working, this tends to shrink.
- Average basket value for members compared with non-members.
- Redemption rate for points and coupons. If it is very low, the rewards may not appeal or the rules may be too complicated.
- Programme cost, including the value of discounts and rewards redeemed, compared with the extra sales from returning customers.
Compare these figures with where you were before the programme started. Give it at least a few months before drawing conclusions, because shopping habits do not change in a week.
Phone numbers, birthdays and purchase histories are personal data. Indonesia's Personal Data Protection Law (UU PDP, Law No. 27 of 2022) governs how this kind of data is handled. Ask for consent when signing up members, keep the data in a system with restricted access, and do not send promotional messages too often.
Running loyalty from one system
A loyalty programme is easiest to run when the till and the online store share the same customer data. Etalasse offers coupons, points, membership and flash sales in one system that combines an online store with a POS cashier, with customer and order data kept in sync across every sales channel. You can find out more on the Etalasse page.
