Every business owner knows that getting a steady stream of new customers is important — but even more important is keeping the customers you already have.
Returning customers tend to spend more on average, and retaining just 5% more customers can boost profits as much as 95%. But with both the costs of goods and living expenses on the rise, what can small businesses do to compete with big chains and online brands that are armed with more resources?
One simple answer is to implement a high-value customer loyalty program at your store — and modern point of sale (POS) systems make it easier than ever.
In this article, we’ll cover some effective and creative customer loyalty program ideas, along with implementation tips and advice on which programs are a good fit for specific retail industries.
Let’s get started.
The Basics: How To Set Up and Manage Customer Loyalty
Before we dive into specific ideas for customer loyalty programs at your store, let’s first dive into the practical side of things.
Generally, there are three ways to manage a customer loyalty program:
- Manually (e.g. physical lists, spreadsheets, and punch cards)
- Via your POS system
- Using a third-party solution
Each option has its pros and cons.
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For most small business owners, we highly recommend using a POS with built-in loyalty management. This eliminates the messiness of manually tracking loyalty members, while also avoiding the extra cost and complexity that can come from third-party services.
Great Customer Loyalty Program Ideas To Try Today
Now that we’ve talked about how to set up a customer loyalty program, what kind of program should you run?
The choice ultimately comes down to what your goal is for the program (e.g. more chances for marketing, boost in sales, recurring revenue) and what type of business you run. Here are some customer loyalty program ideas to get you started.
1. Point-Based Loyalty
What it is
A point-based loyalty system allows customers to earn a certain number of points as they spend money (usually one point per dollar spent). These points accumulate over time and can be redeemed for a percentage discount, free products, or a dollar amount off their check.
Who it’s for
A point-based loyalty program is a good fit for almost any type of retailer with regular visitors and in industries with a lot of competition (e.g. food markets, grocery stores, convenience stores, liquor stores). It encourages shoppers to choose you over the competition because they can continue earning points and therefore get closer to a reward.
Why it works
Point-based loyalty programs are popular with retailers for a reason. Many POS systems can manage this style of loyalty program natively, allowing you to track and apply rewards easily right at checkout.
Extra tips
Want to set up a popular point-based loyalty program? Here are some tips to get the most mileage out of it:
- Clearly communicate how customers earn points and redeem them. Create signage at the register explaining the system and train employees to explain. Customers won’t want to sign up for your loyalty program if they don’t know how it works!
- Don’t put rewards too far out of reach. If a customer has to spend a ton of money just to earn a small discount, they won’t be motivated to use it. Use the reports on your POS system to find out your average transaction size, and set your first reward tier at three or four visits' worth of purchases.
- Create multiple “levels” of rewards that get better as they go (like a 10% discount at 200 points, 15% discount at 350 points, 25% discount at 500 points). This will encourage people to hold onto their current point balance (and spend more money) to work towards a better deal.
- Use extra points as a motivator to boost foot traffic by running short-term events like triple points on select items for a week or double point days. These can be configured right from your POS system, so cashiers won’t need to remember to add the extra points manually.
2. VIP Clubs or Tiered Membership
What it is
A tiered or VIP membership program asks customers to pay a monthly or yearly fee in exchange for exclusive perks. The higher level a customer pays for, the more perks they get access to.
Who it’s for
Most loyalty programs are free, but for businesses that offer rare, high-end, or exclusive products and experiences, a paid loyalty program can create a more elevated experience. Businesses that might benefit from a paid loyalty program include:
- E-commerce businesses: Online businesses can offer free shipping or exclusive discounts for paid members.
- Subscription businesses: If a food business or boutique offers subscriptions, they can turn those subscriptions into memberships, providing additional discounts on certain items for subscribers.
- Butchers and farm shops: Butchers can offer paid members with monthly selections of rare cuts, discounts on regular purchases, or the ability to request specialty cuts.
- Cigar lounges: Cigar lounges might offer perks like free soft drinks, access to private rooms, or the ability to reserve spaces for their paid members.
- Liquor stores: A liquor store could run a wine club that reserves bottles for customers or give its premium customers exclusive access to high-end bottles.
- Boutiques: Boutiques can offer paid members early access to new arrivals, invites to member-only events, free shipping, and personalized recommendations.
Generally speaking, a VIP program isn’t a good fit for businesses that sell common goods, like grocery or convenience stores.
Why it works
VIP programs help boost customers’ emotional connection to your business, and offering valuable perks encourages them to come in more often to get the most out of their membership. For specialty retailers selling rare or unique products, this creates a club-like atmosphere for passionate customers.
Extra tips
Think your business might be a good fit for a tiered membership? Here are some tips:
- Ensure the fee you charge is worth the rewards. If you charge too much for a membership with minimal benefits, customers are likely to cancel it after a while instead of using it.
- Base your discounts and rewards on the items that are most popular. Use your sales reports to monitor your long-term and seasonal bestsellers for ideas.
- Connect with members and further foster that emotional connection by sending your VIP members an exclusive newsletter or blog that highlights new products or upcoming events.
- Hold member-only tasting or shopping events as another way to give your loyalty members exclusive perks.
- Throw some occasional freebies at your members, especially if you primarily sell high-margin items. The money you lose on offering free soft drinks or giving away accessories is nothing compared to what members will spend in the long run.
3. Member-Exclusive Discounts
What it is
For this style of loyalty program, members sign up for your loyalty program to get access to exclusive discounts.
Who it’s for
These can work for both paid and unpaid loyalty programs, although they are used a little differently.
You’ve probably seen member-exclusive discounts walking the aisles of any big grocery store, with signage advertising special, member-only prices or buy one, get one (BOGO) offers. It’s a great way to get customers to wander the aisles looking for deals.
For paid programs, it’s best to announce any member-exclusive discounts upfront, as it becomes another selling point for certain membership tiers — and perks shouldn’t feel random.
Why it works
Remember: A customer loyalty program is not only a sales tactic, but a smart marketing tool. When customers sign up with their phone number or email, you also get more data for customer segmentation, tailored promotions, and more.
Offering member-only discounts that are visible throughout the store is a great motivator to get an on-the-fence customer to sign up. It’s also an effective method for upselling loyalty members with attractive deals on products they might skip over otherwise.
Extra tips
Here’s how to offer member-exclusive discounts that work:
- Use eye-catching signage and displays to advertise any membership deals. The sign should include how much money members are saving compared to the regular price.
- Don’t choose which products to discount at random. Go for discounts on high-margin or popular items that people will actually want.
- Offer member-only BOGO or mix and match deals (e.g. buy three bags of chips and get the third free) —member deals don’t have to just be fixed discounts, but can be used to upsell, too.
4. Referral Programs
What it is
Advertising your store is important, but why do all the hard work yourself? Referral programs turn your loyal customers into spokespeople for your business by offering perks for bringing in their friends and family.
Who it’s for
Referral programs tend to work best for specialty or high-end retailers like boutiques or businesses with VIP programs. That said, they can also be useful for short-term promotions or new businesses to quickly get some word-of-mouth marketing.
Why it works
Even with the best marketing strategies, people tend to trust their immediate friends and colleagues more than you when it comes to brand recommendations. Many of your happy customers would probably be happy to recommend you anyway, so why not reward them for it?
Extra tips
As we mentioned, a referral program is often paired with other types of reward programs. Here are a few tips to make it work:
- Offer both the referer and the referee a reward for a new referral (e.g. $5 off their next purchase, 10% off a membership fee, etc.) to make it a nice treat for both people.
- Use only your best customers for referrals. If you already run a rewards program, send out referral offers to your frequent visitors or top spenders — they’re much more likely to take you up on it.
- Make your referral program time-dependent. Add a ticking clock to motivate customers to send that referral code before time runs out (e.g. “refer a customer in the next three weeks” or “holiday referral bonus”).
- Set up referral bonuses directly in your POS system as a one-time-use coupon code, a button that’s easily accessible on the touch screen.
5. First-Time Purchase or Signup Discounts
What it is
An easy way to build immediate trust is to offer a discount on the first thing a customer buys. You can do this by displaying a pop-up on your website or sending a promotional email when a new customer signs up.
Who it’s for
This could theoretically work for any type of business, but it’s a particularly effective tactic for businesses that sell online. Some businesses send out a discount coupon immediately after a purchase (e.g. get 15% off on your next purchase) to encourage repeat business.
It can also be a great way for stores that are launching an online shopping option (like a small grocery store offering curbside pickup and delivery) to get customers to try out the new shopping option.
Why it works
Many shoppers today are budget-conscious, which makes them more hesitant to try something new. A well-timed discount offer for a first purchase might be just the thing to make a visitor drop their guard and take a chance on your brand. Then, once they’ve signed up, you’ll have a way to get back in touch with them.
Extra tips
Need a few ideas to make this style of discount work? Here are some to consider:
- Make the offer show up as a pop-up on your website that also includes a form to sign up for an account or your newsletter. That way you’ll catch a new visitor’s attention right away.
- Create a sign-up discount that can either be applied to the current purchase or as a coupon to be used another time. Since returning customers tend to spend more money than new ones, a code might encourage them to come back and spend more.
- Leverage signup bonuses as a powerful incentive to enroll customers in a paid membership since they’ll see the benefits right away.
Related Read: 5 Ways To Build Your Small Business’ Online Presence
6. Punch Cards
What it is
A punch card is a classic, physically punching out spaces on a card when customers make a purchase until they hit the end, which nets them a discount or a freebie. These days, punch cards can also be digital through an app.
Who it’s for
Unlike a point-based system that assigns points based on the actual dollar amount spent, a punch is the same for every purchase. That makes them a good fit for food markets, delis, and any type of business that sells products that are roughly the same value.
Why it works
A punch card usually culminates in a freebie, so earning another punch is immediately satisfying. It’s also very cost-effective for the business. If you sell sandwiches at your deli for $8 and give out a free sandwich on every tenth sandwich a customer buys, that’s $80 earned for an $8 loss.
Digital punch cards, usually offered through third-party services, make the punch card model easier and more personalized, allowing customers to earn rewards based on their favorite items.
Punch cards are also a good fit for services like equipment rentals or repairs to encourage them to stick with your shop.
Extra tips
A punch card is an oldie but a goodie for certain types of businesses. Here are a few more ideas to get the most out of it:
- Define what counts as a single punch. Choose whether to offer punches per purchase or per item. If you’re selling food, we generally recommend per item as it’s a great way to upsell customers.
- Punch cards don’t have to be permanent. Consider using old-school punch cards for short-term promotions or only for certain departments. Many POS systems don’t support punch cards natively, but having a physical card for a short-term sale can be an exciting way to shake things up.
How the Right Technology Takes Customer Loyalty to the Next Level
Most retailers have some form of customer loyalty program or membership — but many of them aren’t taking full advantage of them.
Customer loyalty programs are a valuable sales tool, but with the right technology they can be so much more. A customer loyalty program that integrates with your POS system also tracks customer data, letting you:
- See how often customers visit your store
- Understand what types of products your most loyal customers buy the most
- Which promotions and coupons were most effective
- Which channels (i.e. in-store, online) your customers use
- Average transaction size
All of this information can be used to fine-tune your marketing strategy and merchandise planning.
Customer information gives you the ability to segment customers, too. For instance, a grocery store owner could filter their customers to those who bought cereal in the last 30 days, and send just those customers a coupon for a BOGO cereal deal.
Make Your Customer Loyalty Program Ideas a Reality
You might think that running a customer loyalty program and keeping track of all those points and rewards is a challenge — but you’d be surprised.
With the right POS system, you can easily create a custom loyalty program that fits your business and applies the right discounts automatically.
At POS Nation, we believe in empowering specialty retailers with the industry-specific tools they need to improve the customer experience and help them compete against the big guys.
Try our Build and Price tool today to create your perfect POS system today.
by Gina Obert
by Spence Hoffman
