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Building Loyalty

7th May 2015

Loyalty cards are a great 'income generating tool' for small retail business owners and if you don't yet operate a scheme, its about time you considered doing so. Giving something away free goes against the grain for so many shop owners and it never fails to amaze me how many simply refuse to do it. But if you want to build loyalty that gets your tills ringing, then you need to implement a customer loyalty scheme.

Don't fall into the trap of thinking that a loyalty scheme is difficult or complicated to implement, it can be as hard or as easy as you decide. Technology does now give us the option of installing a swipe card based system that records all sorts of data about your customer and this is a great option for the small retailer. But there is nothing wrong with implementing a low tech based scheme either.

In actual fact most small retailers may be better off looking to start with a lower level entry scheme that allows them to get off the ground as soon as possible. I still operate a low tech hand stamp card system in our store and it has been effective for many years now. Our customers love it and go to extremes to collect their points.

For every £10.00 spent we offer a stamp to a loyalty card. If a customer collects 20 points and fills their card we give them a £10.00 voucher to spend with us. If you do the maths on this we are in theory giving a 5% discount, however if a customer spends £17.00, they still only get 1 stamp that is worth 50p, so in actual fact we end up giving loyal regular customers less than 5% back. But they come time and time again making unbelivable efforts to fill their cards, it works.

Another scheme I came across was where the retailer filled the customers spend into a blank box on a card. Once they had filled 6 boxes (six separate spends) they were given a 25% discount voucher off their next spend. Another similar scheme I came across gave the customer rewards such as jute bags. You have to think about your business and your customers to arrive at a scheme that will work for you and you must take a look at the maths and make sure you aren't going to result in generating a loss on your scheme.

Try to offer loyalty points on everything you do, although you can cover yourself by making a disclaimer on your card such as: 'Loyalty Card not applicable with other offers or discounted lines'. If you haven't got the margin in a sale price or discounted price to give loyalty stamps out, then this gives you the option to refuse. But at the end of the day, the rewards from a scheme will always outweigh the odd 'hit' you may take on an offer, so try to avoid refusing customers and give out points when ever you can. It will pay you dividends in the long run.

Every shop will be different. A high end fashion store will obviously have a different Average Transaction Value to a coffee shop, so you must think carefully about what is right to work in your line of business. You can start it as a trial and make a week long promotion, handing out loyalty cards to see how they work. If they aren't quite right, then you can tweak them so they work better. Or, if your first idea is a complete flop, too generous or creates too many problems, then you can simply scrap it and look to engineer a brand new concept for your scheme.

We used to shudder at the thought of knocking £10.00 off a customers bill, it seemed to go against all business sense. But as somebody quite rightly pointed out, the customer had spent at least £200.00 with us to achieve their discount. The more you give away, the better and it's true that the more you reward, the busier you will get. Try not to loose sight of this fact and don't get hung up on giving something away for free. Get behind your scheme and embrace a loyal and exciting future.

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