Loyalty Programs that Reward Your Business and its Clients
March 15, 2017
From engaging clients to growing profits, there are numerous reasons to offer a loyalty rewards program. But for the program to actually grow your business, invest some time to set it up strategically. If you randomly assign points to purchases with no plan in place, you could just be cutting into your existing revenue.
Beyond client retention, what do you want to achieve through your loyalty program? By having an objective, it will help structure your program so that you are not throwing away profit but rather investing it to grow your salon. A few possible goals include:
- acquiring customer contact details
- increasing frequency of visit
- raising average ticket price
- increasing retail sales
With your goals in mind, consider what actions you want clients to take and how you will reward clients for those behaviors.
The most popular way to run a loyalty program is to reward clients with one point for each dollar spent. Although it may work well for many businesses, it may also be a missed opportunity as it does not motivate clients to change their existing purchase pattern. They will have no motivation to buy products, try new services, or spend more money.
Instead, consider your main objective and find ways to achieve it. For example, to increase retail sales, you can give clients 2 points per dollar spent on products rather than the 1 point for services.
Or if your objective is to raise the transaction amount, you can offer points in increments of $5 or $10. By doing this, you can upsell a product or an add-on service to get them to the next level. To provide a more concrete example, let’s say that you award clients 50 points for every $10 spent. Someone with an invoice of $47 may choose to spend an extra $3 (or more) to get those 50 points.
Frequency of Visit
In some situations, you may choose to not even reward points based on their purchase amount. If your goal is to increase the client’s frequency of visit, it would be wise to reward customers for each visit. Thus, the more often they visit your salon, the quicker they will rack up the points.
Since clients who prebook tend to visit more regularly (e.g. every 4 weeks rather than letting it drag out to 5 or 6 weeks between visits), you can offer bonus points to prebook their appointments.
If your salon has a waiting list during peak hours but is quiet during the day, you can use your loyalty program to spread out those appointment requests. By offering “Happy Hours” or “Double Point Tuesdays,” you can encourage clients with a more flexible schedule to come in during the slower periods. That way, the peak appointment times will be available to more customers who can only make it at those times.
Loyalty points can also be given as an incentive for clients to fulfill your secondary goals. Motivate your salon guests to bring a friend, try a new service, purchase a gift card, book online, or share a positive review.
When deciding how many points to award clients for certain behaviors, consider what the end goal is worth to you. It may be beneficial to give 5 loyalty points to clients who book online as you will have fewer distractions from people calling to make appointments. But if you also give 5 points for referring a new client (which could bring you hundreds of dollars each year), you are essentially saying that a client referral is of equal value to an existing client booking an appointment online.
Also, consider if the point value is enough to get clients to take action. If the redemption value for writing an online review is only a few cents, they may not find it worth their time or effort to follow through.
Every salon, spa, or barbershop will have different valuations. A walk-in business may find that getting clients to sign up is extremely important as it allows them to acquire email addresses for marketing purposes. To get these walk-in clients to sign up, a barbershop may want to give a welcome bonus equivalent to $5 which the client can use on their second visit.
On the flip side, a salon who only accepts appointments may find it pretty easy to collect contact details, simply by promising to send a confirmation SMS or email. For this reason, it may not make financial sense to award any points simply for signing up.
For a loyalty program to succeed in the long run, clients must feel that they are benefiting from the program. Ultimately, are they receiving a reasonable amount back within a fair amount of time? If they need to spend $1,000 to get $1 off a product, the reward may not be enough to interest them. However, if they will receive a 10% discount every 6th visit or $5 off for every $200 spent, they can see the value of the program.
Further, are they able to use redeem the points towards something they actually want? Some businesses may set up restrictions on what the client can redeem the points for. While it may make sense in some circumstances (e.g. encourage retail sales by only allowing points to be redeemed on products), having restrictions will generally just cause clients to lose interest. If they can only use points towards one product line which they aren’t even interested in, they will have no motivation to spend more and accumulate points in the first place.
When determining the redemption value of points, remember that the perceived value is not equal to your cost. A $5 reward does not actually cost you $5 as that value includes your profit margin. So if you give away a product that you sell for $5, it will only cost you the price you paid to acquire it.
A few months after launching your loyalty program, take a look at some of your business reports. Are you achieving your goals? Have you seen an increase in client retention, frequency of visit, retail sales, and referrals? Have you seen a greater rise in revenue than the amount you have spent in redemptions (and liabilities)?
If you aren’t seeing the desired results, investigate why the loyalty program isn’t working the way you want it to. Be willing to fine tune the program to make it work for your business.
A loyalty program is a great way to motivate clients to spend and visit more. However, slow down to think through your strategy to ensure that it will help your salon and spa to grow.
Manage your loyalty program with Insight Software. Determine how clients can earn and redeem points, set point expiry dates, create loyalty levels, and run reports. Download a free trial or call 1-888-919-5841 to learn more.
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