Digital loyalty card for a convenience store
Convenience is the hardest place to run a loyalty programme, for one reason that has nothing to do with technology: a large share of what you sell makes you almost nothing. A flat earn rate across the whole shop takes your reward money out of exactly the lines that can least afford it.
The problem with one rate for the whole shop
Most platforms let you set one number: points per pound. It is simple, and in a shop with one margin it is right. A convenience store does not have one margin. It has a spread, from single figures on some lines to forty per cent and up on others, and a customer spending ten pounds might be handing you two pounds of gross profit or fifty pence depending on what is in the bag.
Give two per cent back on everything and you have given away a percentage of revenue, which is a different and much larger percentage of profit on the thin lines.
| Your margin on the line | Gross profit on £10 | Cost of a 2 per cent reward | Share of your profit given away |
|---|---|---|---|
| 6 per cent | £0.60 | £0.20 | 33 per cent |
| 12 per cent | £1.20 | £0.20 | 17 per cent |
| 25 per cent | £2.50 | £0.20 | 8 per cent |
| 40 per cent | £4.00 | £0.20 | 5 per cent |
Put your own categories against those margins. The row that should stop you is the first one: on your thinnest lines, a reward that reads as two per cent is a third of what you made.
What to do instead
Exclude the categories that cannot carry it. Every serious platform, ours included, lets you name categories that earn nothing. The usual candidates are the ones where your margin is set by somebody else and the customer is buying on price anyway.
- Exclude, rather than reduce, on anything where the margin is in single figures. A tiny earn rate on a thin line is a rounding error to the customer and a real cost to you.
- Exclude gift cards and similar, always. Otherwise a customer buys a gift card with points and you have paid a reward on a sale with no margin at all.
- Say plainly in the app which categories do not earn. Customers accept it when it is stated and resent it when they discover it.
Frequency beats basket here too
A convenience store's best customer is the one who walks past two competitors on the way. That is a habit, and habits are moved by small, frequent, certain rewards rather than by a large one a long way off. A reward every fifth or sixth visit, worth a couple of pounds, will do more than a five per cent rate that pays out at Christmas.
What to watch in the first month
One number tells you whether the rules are right: the share of your rewards being earned on your excluded and thin categories. If customers are working out that they can earn on the cheap lines and spend on the good ones, the rules need changing before the habit sets.
The other is redemption. Points that are never spent are a liability sitting on your books, and a programme nobody redeems from is not building loyalty, it is collecting a debt.
Related
- What a digital loyalty card costs a small business
- What unspent loyalty card points are worth on your books
- When a loyalty card app pays for itself
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.