How Useful Are Retail Loyalty Programs?

Customer loyalty programs in retail come in many shapes and sizes but are often a big selling point for potential customers. They can be the foundation of a customer’s relationship with a store and are proven methods of enticing happy customers to come back again and again.

But how do you know if a loyalty program is right for your store? When are loyalty programs useful and how do you choose the right one? How can retailers enhance customer loyalty with a program?

Types of loyalty programs

Reward options for a store often depend on the kind of products produced, how expensive they are, and whether or not your customers all share a particular interest. There are a number of different approaches to rewards, and many businesses leave different avenues open to customers so they can enjoy their own preferred loyalty reward.

If your products are relatively cheap, like a coffee shop, then free coffee is a common and perfectly standard reward. The production cost of coffee is relatively low but the markup is high, so both parties get a good deal. For businesses like these, the investment in the loss of one sale’s worth of revenue is easily recouped through customer loyalty. One free coffee gains the business of a customer that will come back over and over again for their caffeine hit.

Many other companies with more expensive products want to build customer retention but cannot afford to lose sales entirely. For these businesses, discounts, gift cards, additional services or access to specialist resources and media can be equally effective loyalty strategies.

A business still profits even though a customer saves money through the loyalty program. However, the value of the transaction is higher because it encourages repeat business.

The sense of exclusivity is a powerful tool for a business to wield. Loyalty programs that give customers the sense they are in a club will be effective at gaining repeat custom. Even handing out a gift card or reward points slip for customers to carry in a purse can build a sense of loyalty as existing customers carry their attachment to your brand with them wherever they go.

If you trade in specialist goods a loyalty program could involve access to online resources related to that interest, whether they be educational or just entertaining. Businesses are constantly coming up with different ways of making their loyalty programs stand out and this provides an out-of-the-box solution for businesses and a VIP experience for customers.

On the other hand, JustFab’s VIP membership scheme cuts prices dramatically in exchange for monthly purchases^[1]. Amazon Prime brings a wide range of benefits for a yearly membership that brings great value to the loyal customer provided they use a number of Amazon services to make more savings. Both make loyalty a mutual benefit and have helped boost the company’s customer base.

Customer loyalty in the internet age

For most of the 20th century, customer loyalty strategies might have meant knowing your customers' names, asking after their loved ones, and serving with a smile. But with the continual growth of retail giants and the rise of the internet, many small businesses don’t get a chance to learn the names of customers. For those competing online, there isn’t even the chance to smile before a sale. This means retail loyalty solutions often need to be material.

Annex, a loyalty program business, discovered that loyalty members spend 5-20% more than non-loyalty customers, and make purchases 5-20% more often. They also state that online reward programs tend to increase overall revenue by 5-10%^[2]. This means that retailers operating online receive a huge boost to sales by implementing an online loyalty program and can’t afford to miss out.

Online loyalty tends to come in the form of free products and discounts. Businesses looking to take advantage of an online store can often be more generous with online sales as they look to widen their market and make sales nationwide and beyond. Giving consumers a good deal with a loyalty program that brings repeat custom through a website can be a key part of a retailer's growth strategy.

Modern business strategy

The internet age has also seen businesses everywhere recognising the value of consumer habits and preferences. Some of the best loyalty programs use this to benefit the business.

Starbucks was an early company that began using a mobile app loyalty scheme. Customers log in, make their purchases and points accumulate on the app. Simultaneously, Starbucks data-hub would find customer data that they use to adapt their services and menu to customer preferences^[3].

These businesses use technology to learn about customer experiences and are in a better position to fulfil customer needs. This is useful not only for retaining customers but for expanding business and having customers rely on them for other product needs spotted through the analysis of this data.

How to build customer loyalty in retail with POS

Implementing a useful loyalty program in a modern commercial environment is impossible without retail loyalty program software. When considering which POS system you want to trust your business with, looking at what features it possesses that can help you retain customers as you seek to grow is a good place to start.

Epos Now’s retail solutions come with a free inbuilt customer loyalty scheme. This software can:

• Reward customers automatically with points accrued on purchase of whichever products you place in your program
• Manage and maintain your reward scheme with detailed, easy-to-use customer accounts
• Build VIP customer relationships with membership schemes, each with their own point system
• Remain present in your customer’s purse with personalised loyalty cards to instantly load a customer profile before each sale
• Boost sales with marketing schemes managed through your POS

The Epos Now in-house loyalty platform has all you need for customer relationship management. Swipe card readers can attach to the side of any Epos Now terminals so your retail hardware can use customer swipe cards. These cards can be designed to advertise your business and build that sense of belonging in your customer base. 

However, Epos Now software will also integrate with several leading loyalty scheme providers. LoyaltyDog operates mid-service and can show you the offers a customer has available to them based on their current points allowance, encouraging a quick redemption and further purchases. The scheme integrates seamlessly with Shopify making it the perfect choice for hybrid retail businesses.

RewardIt gift card systems provide a reusable, secure loyalty system that provides transaction reports for easier accounting processes and provide as much as 50% in additional revenue when compared with a voucher system. RewardIt has found people spend 20% more than the card's original value on average.

Whichever retail loyalty program you use, Epos Now can help you make the most of it, and provide 24/7 support to ensure you have all the guidance you need. Speak to our experts or find out more about how to get the best scheme for your business.