BUILDING A SUCCESSFUL FREQUENT BUYER PROGRAM
Summary: Frequent buyer programs, are some of the most commonly recognized customer retention strategies for most businesses. Yet many organizations don’t utilize them to their fullest potential. In this post, learn how to maximize the return on investment with proven strategies for growing your frequent buyer programs.
On their face, frequent buyer programs are pretty easy to understand. Whether you’re talking about the ubiquitous coffee card or gas station fill-up clubs, program members are awarded y, after x number of purchases or visits. These programs are about two things, increasing frequency and decreasing churn.
As technology has progressed however, these special loyalty programs have added a lot of horse power, that in many cases, goes unrealized. For example: Merchants can now use conditional logic to build multiphasic programs. Tiered memberships can add an element of gamification into your program that boosts engagement. Social media can be leveraged to increase penetration and build revenue.
When implemented correctly, frequent buyer programs sing, and can be used for everything from driving regular donations to your local non-profit to building large multi-brand crossover campaigns. Yet most programs still adopt a simple “Buy ten, get one free” approach that leaves millions of dollars on the table, every year.
Aside from the obvious goal of making more money, there are some basic goals, specific to your frequent buyer program, that can act as bellwethers of its success.
- Increase Penetration: Like our overarching loyalty program, we want to get as many of our existing shoppers using our program, as possible.
- Increase Breakage: “Breakage”, or the percentage of discounts awarded, measures the number of coupons utilized when compared to the number awarded.
- Increase Average Order Value: If we’re going to be giving something away at the end of this process, we want to make sure we make it worth it. That means cranking up the amount each customer spends per award given.
14 WAYS TO SUPERCHARGE YOUR FREQUENT BUYER PROGRAM
For the sake of clarity in this post, we’ve used the phrase “punch” to represent a visit or purchase of a product – as in a “punch card”
1. Leveraging Sunk Cost
You’ve probably noticed that it gets easier to complete a task, the further along you are. You’ve cleaned half of the house and are pretty invested. You might as well push through and clean the other half, right? As counter-intuitive as it sounds, one of the thorniest challenges you’ll face with frequent buyer programs is getting people to the reward portion of their investment.
Capitalize on this most dependable of human behavior patterns by starting new customers off with a couple of punches to get going. Studies show that customer who were started with at least 30% of the goal completed, finished the task up to 50% more of the time.
2. Go Omnichannel
48% of loyalty program members say that their discounts expire before they can use them. While this may seem like a bonus for you, it produces exactly the opposite of what you’re trying to accomplish. You want someone to have the experience of being rewarded for shopping with you.
One of the best ways to do this is to make your frequent buyer program more accessible. Digitizing your punch cards through an app or other service is one of the best ways to do this, but you want to make sure that customers receive a punch, whether they shop in-store, online, or through a mobile device.
3. Provide a Carrot
We all love a little encouragement. Following up on the importance of leveraging sunk cost and understanding why breakage is important to your frequent buyer program. If your customer goes dormant for specific period of time, program an automated message letting them know how close they are to completing your task. Remember that breakage is critically important.
4. Create Punch Multipliers
Have a particularly competitive time of year? Celebrating a special occasion? Let customers know that they have a limited time to multiply the number of punches they’ll receive, based on their usual order. These can be particularly effective motivator around the holidays. You want to reach people at the zero moment of truth, when they’re just realizing they need your products.
5. Create Tiers
A customer gets to the end of your frequent buyer journey – then what? You could hand them a new ‘card’ and say, “start again”. Or you could up the ante with a tiered program. As your customers completes each phase, they ‘earn’ membership in the next tier. That is, when a new shopper has completed their first journey and graduate to the next level, they earn a larger reward for completing your goal.
This, again, leverages sunk cost. If someone has worked for months to get to a ‘gold level’ discount program, they are less likely to lapse out of that program.
6. Leverage product combinations
There’s no rule saying that frequent buyer programs must involve only a single item. For instance, “Buy 10 coffees, get 1 free”. Try using your program to grow your average order value by increasing the number of products in a single purchase.
For instance, if a cup of soup costs sells for $5 and you get the 10th soup free, you’ve earned $45. If a soup and sandwich or soup and salad combo sells for $10, and you get the 10th combo for free, you’ve made $90 in the same span of time.
7. Get Creative
A key tenant of a great frequent buyer program is that it’s fun and memorable. We want to create a sense of discovery here. While the traditional frequent buyer experience involves a pretty rote punch card system in which the buyer gets a check mark for each additional purchase, there’s many ways to get members more engaged.
- Humans, as a rule, like to collect things. Instead of punches, give members a new character or badge to collect each time they visit.
- Instead of punches, reveal a new piece of the puzzle, when customers make a purchase. You can do this through digital or physical scratch cards.
- Everyone loves being at the top of their game. Create a leader board and base your rewards off where customers stand.
8. Make it Visible
It’s very important to goal completion that customers be able to check their progress in your program’s journey. Most loyalty programs will offer some form of account page, where customers can login. If shoppers are accessing your frequent buyer program through an app, you can build a page right in through a loyalty-based SDK. If you’re loyalty program is restricted to a brick and mortar location, you can even create physical boards with each customer’s name and the number of actions they’ve taken.
Gamification, one of the hottest trends in digital design and development right now. But don’t let that fool you. The same concepts can be applied virtually anywhere. In fact, you may remember one of the most successful frequent buyer programs in history – McDonald’s partnership with Parker Brothers’ Monopoly franchise. The program has been running for over two decades.
If you’ve never played, visitors are awarded properties for each item they purchased. When diners completed various “Monopolies” within the board they could win various free items. If you managed to complete the whole board, the prize was one million dollars.
Of course, you don’t need to have a million dollars in the bank to roll out successful gamification principals. In Betaout.com’s blog on the subject, the author says “The real value [of gamification] is in engaging and motivating your users at a deeper level. Your game design should be based on your user’s journey.” The same applies to your frequent buyer programs:
- Build a story around your customers’ progression through your frequent buyer program.
- Award them at various stages along their journey to maintain interest.
- Create a ‘holy grail’ reward, to keep them coming back.
10. Short Term Frequent Buyer Programs
Looking to increase your share of shoppers’ holiday budgets? Short term frequent buyer programs could be a great strategy. Build a holiday themed campaign using seasonal punches instead of your normal punches. Give your shoppers a punch for each holiday themed item they purchase. Create a limited time offer with special holiday themed awards.
Don’t stop at the holidays though. Limited run products like wine and beer vintages, new product lines, and accessories make for great frequent buyer programs.
11. Cross-Promotional Frequent Buyer Programs
Shoppers are fickle and will sometimes go to several different merchants to purchase items that they could easily get at your store in one trip. Frequent buyer programs can be leveraged to encourage shoppers who normally remain in a single lane to branch out or to
If you’re looking to break people into your wider selection of offerings, you can encourage them to join departmentally based programs that award them for purchasing a certain number of items from each category in your inventory.
12. Segmented Frequent Buyer Programs
Alternatively, create a segmented program that focuses in on selling products in a specific category. For example, if you sell clothing, create a children’s specific frequent buyer program. Social media advertising can be a great way to get you started off. Simply target against users who already like your page, but also have shown interest in children’s apparel.
13. Work with a Partner
Work with a vendor to sponsor a branded frequent buyer program. We’ve seen these programs work well in a number of different verticals, including hair and skin care, pet supplies (especially food), CPG, and more.
Manufacturers specifically, know that they’re competing against various other products and brands you carry. Creating a sponsored program gives your partner access to your customers and a leg up on the competition.
14. Use Social
Word-of-mouth is widely believed to be the ultimate form of promotion. A completely uninfluenced act of evangelism by a neutral source, based solely on their real-world experience with a product or brand. It begs the question, “how can I use word-of-mouth” to grow the adoption rate of my frequent buyer programs?”.
The answer is, that if we can’t pay for it, we can at least promote it. And social media is a great place to start. Similar to loyalty programs, at large, you want to try to give happy shoppers every opportunity to spread the word about your business. The best time to do this, is often after they’ve completed each phase and have earned a reward.
- Give shoppers a head start on their next cycle, by awarding ‘bonus punches’ for sharing their reward on the previous cycle.
- If members are earning punches digitally, program a “share on social” pop up.
- Multiply the value of their next reward for sharing an image or video with the award.
Frequent buyer programs are just one in a spectrum of customer retention strategies that can help increase traffic to your business, whether that be online or in-store. For more information on how bLoyal can help you drive customer lifetime value with omnichannel loyalty and rewards software, CLICK HERE to contact us with additional questions.