How to start a digital loyalty card for a small business
Starting one is five decisions and an afternoon. Choosing badly on two of them is what makes a scheme cost more than it returns, so those two are dealt with first.
Decide what you are paying people to do
Almost every scheme pays for spending more. A shop that already sells to the same customers each week does not need them to spend more, it needs them to come back a week sooner, and those two goals want different rules. Spending pays for a bigger basket. Visits pay for the gap between visits closing.
Pick one before you pick anything else. A cafe, a barber and a sandwich shop almost always want visits. A homeware shop or an off licence, where somebody comes in when they need something, usually wants basket size. Everything below follows from this choice.
Set the reward so it is reachable and affordable
The reward has to arrive often enough that a customer believes in it and rarely enough that you can pay for it. That is one calculation, and it is your average basket against the reward you are offering.
Work out what a customer spends in a typical visit, decide how many visits should earn a reward, and multiply. If your basket is four pounds and you want a reward every eight visits, the customer spends thirty two pounds to earn it. A free coffee that costs you about seventy pence in beans and milk is roughly two per cent back. A pound off is about three per cent. Both are sane. Ten per cent is not, and the schemes people abandon are almost always the generous ones.
| Decision | What it does | What goes wrong |
|---|---|---|
| What you reward | Visits, or spending. Sets every rule after it. | Rewarding spending in a shop whose problem is how rarely people come in. |
| How much | Two to three per cent back suits most shops. | Ten per cent given away because it sounded generous, then withdrawn six months later. |
| What the reward is | A free item costs you its cost, not its price. | Money off, which costs you a pound for every pound of it. |
| How people join | A printed code on the counter, scanned with a phone camera. | An app to download, which loses most people at the install. |
| Who runs it | Whoever is on the counter, in one sentence they can say. | Nobody, because the owner set it up and never told the staff. |
Make joining take one step, not five
This is where most schemes in small shops die, and it has nothing to do with the rewards. Somebody at a counter with a queue behind them will not download an app, wait for it to install, make an account and verify an email. A printed code they point a camera at, that opens a card in the browser they already have, is the difference between a scheme that fills up and one that does not.
Whatever you choose, count what it costs you in sign ups rather than what it costs a month. A scheme that half your customers never join is more expensive than a dearer one everybody uses.
Tell the people behind the counter
A loyalty card that staff never mention is a loyalty card that does not exist. Give them one sentence to say, put the code where it is seen while somebody is paying rather than by the door, and tell them what to do when a customer asks how many points they have.
What it costs to try
Two costs, and shops usually only think about the first. The software has a price you can read, and for a single shop in the United Kingdom that is roughly fifteen to sixty five pounds a month. The rewards come out of your margin, and that is the number that decides whether the scheme pays for itself. At two per cent back on ten thousand pounds a month of member spending, the rewards cost two hundred pounds.
Set the rules so the arithmetic works before you print anything. Changing a reward later is possible and it is not free: customers notice a scheme getting meaner far more than they noticed it getting generous.
The first month
Expect sign ups in the first fortnight and very little else. A loyalty card cannot show you anything until people have been in twice, so the first useful number is not how many joined, it is how many came back. Watch that, and leave the rules alone until you have it.
Related
- How generous should a loyalty card reward be?
- Digital stamp card or points: which suits your shop
- What a digital loyalty card costs a small business
Written for shopkeepers rather than for a search engine. The arithmetic here is yours to check, and if a figure looks wrong for your trade, tell us and we will correct it.