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Develop a Customer Rewards Program with 3 Items in Mind

4 minutes Read

If you don’t have a sustainable loyalty program to reward your most valuable customers, you need to implement one – and the sooner, the better. It’s all part of a comprehensive customer retention program, and as you probably know, few small businesses can thrive without a solid base of repeat customers.

More than 75 percent of survey participants said guest loyalty programs helped them grow their business during the economic downturn. A full 90 percent said loyalty programs give them a competitive edge, and the vast majority plan to invest more in their programs because of their proven ability to drive business growth. A study from customer experience research firm Maritz reveals that 70% of persons from higher- income households ($125,000 +) are more loyal to companies that offer rewards programs. But customers of all income levels gladly take advantage of these programs, which can be a very effective way to ensure repeat business.

Choose the right kind of program

A good loyalty program is one of the best ways to keep your most valuable demographic – the repeat customer – engaged by supporting your business. That’s why all businesses should develop some form of reward system that’s easy to implement, maintain, and communicate. Ease of communication is particularly important because very often it is your staff that will be promoting the program, and your customers who will be using it. Don’t make things more complicated than they need to be.

A loyalty program must fit the culture of your restaurant, so it’s important to research carefully before you make a commitment. Also consider numerous other variables, such as your businesses size and your short and long-term business goals.

There are many types of loyalty programs, and some work better than others for businesses. For example, fee-based programs of the sort used by airlines and large corporations and credit cards will likely not work for the independent or franchise owner. So let’s focus on free programs that can be customized to suit the style and circumstances of your business.

Frequency, either by number of visits or number of purchases of a specific item, is one way to organize a reward program. For this type of program, customers can use a simple punch card of the kind you may have used by coffee shops in chains like Barnes and Noble and many neighborhood cafes. The upside of punch cards is that they’re easy to implement. The downside is that unless you have customers fill out demographic information on the card, and then take care to collect the info when redeeming it, the program will have very limited potential as a marketing tool. In addition, since so many businesses and stores use cards, customers are becoming less willing to carry them. Consider keeping your customer’s cards in a file box in the restaurant, or go virtual with a point-of-sale (POS) application.

A big benefit of rewarding customers for signing up is to help you add to your database for use with other marketing projects. You can reward registered members with e-mailed promotions, including coupons for sandwiches and drinks. An alternate point system is one where customers bank their points in personal accounts, which they redeem for desired rewards (much like airline frequent-flier programs). You can get creative with those rewards. While customers may enjoy a free beverage with their completed card, consider other gifts as well, such as free T-shirts, hats or mugs – which do double duty as advertisements.

By using your POS software, you can also develop a more sophisticated points-based program in which points earned convert to a cash value, which customers use for additional purchases or discounts. Once a determined amount is reached or action taken, the gift is automatically redeemed.

Partnership programs. Businesses who want to share marketing efforts with neighboring businesses might consider a partnership program. With this type of plan, you market to another company’s database and allow loyal customers a choice in redeeming rewards from either spot. Be sure to choose partners based on the kind of market they serve; you want to complement and augment your own list.

Most associations, manage gift certificate purchases (which are redeemable at all member restaurants) on their websites. The best aspect of this kind of rewards system, as opposed to discounts or coupons, is that customers receive an extra gift without perceiving a lower value at your restaurant.

Affinity programs build on a lifetime value relationship with customers based on mutual interests. For instance, your restaurant can donate a portion of a customer’s bill to a particular charity. Smaller, independent restaurants have long provided in-kind service (e.g., softball team sponsorships) to select neighborhoods, volunteer fire departments and emergency response teams, as well as area school and recreational team programs.

A formal affinity program links individuals to charities and causes. This can include specific events related to emergencies within your restaurant’s geographical region or, depending on your market, natural disasters of global impact.

Make a commitment – and keep it

Before committing to any loyalty or rewards programs, create a scorecard that captures the various types of programs, their potential benefits and drawbacks (including cost and ease or difficulty of administration, communication, etc.), and their profitability.

Be sure you can capture customer demographical data and purchasing patterns. The latter will help in targeting appropriate (and rewarding) promotions and rewards, which in turn, will prompt more frequent visits turning the occasional guest to a regular.

Take care to engage your core staff in the design process rather than present them with a finished product. Because employees are your first “sell” and because they know your customers, they are your best focus group and can be used as such.

Loyalty works both ways, and a loyalty program – even a simple punch card system – requires a long-term commitment from you. Once you start a loyalty program, it is absolutely critical that you maintain it and be able (and willing) to measure its results.

Loyalty is an emotion

No matter which type of loyalty program you use, you’ll get the most benefit from it if you remember that loyalty is an emotion. Accordingly you should do things to increase a customer’s emotional bond to your restaurant, such as adding a little element of surprise to your rewards program.

For instance, keep track of your most frequent customers and surprise them with a free service or discount. Other ways of reinforcing the bond can include sending your best customers – or all of the customers in your database – a free birthday gift certificate or a special holiday offer.

Your restaurant will benefit from repeat customers who serve as ambassadors by referring your place to their friends, family and business associates. Offering excellent food and customer service is of course the best way to ensure repeat business, but a good loyalty program will reinforce your efforts and give people extra incentives to keep coming back.


Photo credit: ChristianClan/