When a loyalty card app pays for itself
Every loyalty pitch talks about retention and lifetime value. The question a shopkeeper actually has is simpler and nobody answers it: how many extra visits a month does this need to bring in before it has paid for itself. It is arithmetic, and you can do it in two minutes.
The two costs
The software has a price you can read, per shop per month. The rewards come out of your margin and scale with your sales. Add them together and that is what the programme has to earn back.
Say the software is forty pounds a month and you are giving two and a half per cent back on the sales that go through the scheme. If ten thousand pounds a month runs through it, the rewards cost two hundred and fifty pounds. Total, two hundred and ninety.
The one benefit
Ignore everything except extra visits. Better data and nicer receipts may be real, but you cannot bank them. An extra visit is worth its gross profit, not its takings, so a five pound basket at forty per cent margin earns you two pounds.
| Average basket | At 20 per cent margin | At 40 per cent margin | At 60 per cent margin |
|---|---|---|---|
| £4 | 363 visits | 181 visits | 121 visits |
| £8 | 181 visits | 91 visits | 60 visits |
| £15 | 97 visits | 48 visits | 32 visits |
| £30 | 48 visits | 24 visits | 16 visits |
Read the row that matches your shop. A cafe at four pounds and sixty per cent is looking for about a hundred and twenty extra visits a month, which is four a day. A salon at thirty pounds and sixty per cent needs sixteen, which is one every other day.
Why the cafe number looks frightening and is not
Four extra visits a day sounds like a lot until you count your regulars. A shop with two hundred members needs each of them to come back roughly one extra time every seven weeks. Put that way it is a small change in behaviour across a lot of people rather than a large change in a few.
This is also why the reward should be cheap to you and valuable to them. Everything in the first table is driven by the two and a half per cent. Halve the cost of your rewards by giving away a thing rather than money and the break even halves with it.
The honest caveat
Some of those extra visits would have happened anyway, and no loyalty platform can tell you which. Anybody who claims to measure that precisely for a shop of this size is selling you a number rather than a fact. Use the table as the bar to clear rather than as a forecast, and treat the first three months as the experiment they are.
Related
- What a digital loyalty card costs a small business
- How generous should a loyalty card reward be?
- Which loyalty card reward costs you least
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.