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So, your customers have been asking about your loyalty program, and you’re thinking of setting one up.
Problem is, you’re not quite sure what the loyalty reward should be.
How do you decide?
Here are some of the questions you may have when setting up a loyalty program:
- How many stamps should earn for a reward?
- How much $ spend should earn a stamp?
- Roughly how many visits should be needed to earn a reward?
Let’s walk you through the things you’ll need to know:
1. Have as few stamps required as you’re comfortable with – get to a reward ASAP
Ever heard of hyperbolic discounting? It refers to the fact that people predictably prefer small rewards soon to larger rewards later.
Once we understand this, it makes sense that it’s better to have a small reward after a small number of visits (get 1 cup of coffee after 5 stamps) rather than a large reward after a larger number of visits (get 1 large chocolate cake after 20 stamps).
Most of our merchants require 8-10 stamps for a reward. Some like Fotofly (a photography studio in Utah) even give away a free session every 5 sessions.
Every 6th photo session at Fotofly is free!
2. Make your reward substantial enough for customers to look forward to – about 10% of total spend
It makes sense to get one free coffee after having bought 8-10 coffees.
It doesn’t make sense to get a free coffee after having bought 10 steak dinners. That’s pretty underwhelming.
Recommendation: As a general rule, try to make your reward worth at least about 10% of the total amount spent to get it.
If your customers have to spend $100 to get a reward, it should be something more than $5.
3. Consider having a minimum spend per stamp to encourage customers to spend more
If you’ve spent $10… why not spend $2 more?
CandyBar allows you to give multiple stamps per visit. If most of your customers typically spend about $8 per order, for example, you might consider making 1 stamp = $5 spent.
That way, your customers might be enticed to buy an extra slice of cake to get that second stamp.
4. Exploit the Endowed Progress effect – give your customers free stamps!
This is called the Endowed Progress effect – customers are known to visit more when they get “free” stamps.
Recommendation: When someone first gets a loyalty card, get your cashier to give them a couple of extra stamps. Getting 3 out of 10 stamps on your first purchase can be very motivating!
Here are some examples of loyalty programs that our existing merchants are currently using:
Mission Juice: 12 stamps = 1 Free Juice ($6 spent = 1 Stamp)
Artistry: 10 stamps = 1 Free Coffee (1 cup = 1 stamp)
Matchaya: 10 stamps = 1 Free Soft-Serve
The Lawn: 10 stamps = 1 Free Meal ($13 spent = 1 stamp)
Still unsure of what your loyalty program should be?
If you’ve thought through all of this and you’re still not sure, just go with “10 stamps = 1 free <something small>”, and try it out!
Ask your customers what they think (CandyBar even allows them to message you with their feedback). If they don’t find it enticing, you can always switch it up later.