A customer loyalty scheme can be a great way of rewarding the best customers at your cafe. Not only is customer retention central to cultivating brand loyalty, but it can also help your business financially. It can be 5-10 times more expensive to acquire customers than to retain them. And loyal patrons also spend 67% more on average than new consumers.
Creating loyal customers is about more than a great loyalty scheme. But if you’re looking to make your cafe’s customer loyalty scheme a success, here are a few tips to consider.
1. Think about your customer loyalty scheme’s objectives
How much do you really know about your customers? You probably recognise a number of faces, and a few by name. Maybe you know their favourite drink. But how much of your business comes from loyal customers versus those just passing by?
How often, on average, do your loyal customers purchase, and how much do they spend? Do your best customers always order the same thing? Are they willing to experiment with new offerings? And how do you go about turning a casual customer into a loyal one?
Getting to know, and build relationships with, your customers is key to making your cafe a success.
The information you aim to gather from your customer loyalty scheme should be used to cement relationships, attract new and similar customers, and improve your business in ways that will make your customers even happier.
Keep in mind that every customer who signs up for your customer loyalty scheme is inviting you to interact with them. So don’t miss out on the chance to learn more about their preferences.
These loyal customers are the perfect target market to survey to tailor your loyalty program. They can even to help shape the types of products you offer. Customers love to be involved in changes they can see and taste in your cafe!
2. Be clear how you are going to measure success
As with any marketing initiative, you need to be able to measure the success of your customer loyalty scheme. Of course it should increase customer happiness and retention, and there are ways to measure these things.
Different companies and programs call for different analytics, but here are a few of the most useful measures to consider for your cafe’s loyalty program.
Customer Retention Rate
This metric is an indication of how long customers stay with you. With a successful customer loyalty scheme, this number should increase over time as the number of loyalty program members grows. According to Fred Reichheld, author of ‘The Loyalty Effect’, a 5% increase in customer retention can lead to a 25-100% increase in profit for your company.
Churn is the rate at which customers leave your company. Negative churn is a measurement of customers who do the opposite: they visit more and/or purchase more. These help to offset the natural churn that goes on in most businesses. Monitoring your customers’ purchase patterns as part of your customer loyalty scheme can help spot what is and isn’t working for them.
Net Promoter Score (NPS)
NPS is a customer satisfaction metric that measures, on a scale of 1-10, the degree to which people would recommend your company to others. It’s calculated by subtracting the percentage of detractors (customers who wouldn’t recommend your product) from the percentage of promoters (customers who would recommend you).
Of course, the fewer detractors the better. Improving your net promoter score is one way to establish benchmarks, measure customer loyalty over time, and calculate the effects of your loyalty program. A great NPS score is over 70%, and your loyalty program can help get you there.
3. Customer loyalty schemes need compelling offers
According to Neilsen research, 75% of consumers admit what they really want from a customer loyalty scheme is discounted or free products, so bear that in mind.
Some cafes offer their loyal customers a number of points for every £1 spent in store, others offer a stamp card deal where buying certain number of coffees will get you a free one.
It’s always worth checking out what the local competition are doing, not only the likes of Starbuck’s Costa and Caffe Nero’s loyalty offering but also what your local independent cafes offer.
It may also be worth thinking beyond the standard discount. Offering money off your next purchase or a free cup of coffee is expected, but can train your best customers to expect to pay less.
According to a study by Stanford University, “Buy 10 get 1 free” type programs tend to work best not for your most frequent customers, but for those mid-range or infrequent customers who may need that extra incentive.
Rather than always discounting the product the customer orders already, expand your loyalty program to offer discounts or free samples of new products. Getting your regular coffee drinkers to try a speciality coffee, introducing iced coffee drinks, encouraging coffee bean purchases, or adding food to the mix are all great ways to increase your business without discounting.
Whatever you decide, our suggestion would be to KISS, or ‘keep it simple, stupid’! The more complex your customer loyalty scheme, the harder it is for your customers to understand and for your staff to promote.
4. ‘Surprise & delight’ your customers
One trick that can work well in motivating customers to take advantage of your loyalty rewards is to pre-load their account with a “bonus”.
According to a Columbia University research study, “The illusion of progress toward a goal induces purchase acceleration,”. Instead of requiring customers to buy 10 cups to get 1 free, require them to buy 12, but start them off with 2 points already loaded.
Random free rewards are another amazing way to surprise and delight your customers. Consider periodically giving your best customers a free slice of cake or even a free branded mug, tote bag or t-shirt, well, just because. They will love you for it, and probably tell others about it too.
Creating loyalty is more than just giving away free stuff. Human beings like to be part of a group, so consider ways you can ensure that being part of your exclusive club is a way for your customers to feel special.
5. Paper vs. mobile customer loyalty schemes
Paper customer loyalty schemes are still commonplace for many independent cafes, but they come with quite a few disadvantages.
Not least of these is the associated hassle of paper loyalty for your customers (and who wants to upset them?). Sure some of your older customers might prefer paper to mobile, but paper loyalty cards are so often lost, forgotten or run through the wash and that won’t make for a happy customer.
There’s also the question of how to monitor your Return on Investment or ROI. Every marketing initiative should be measured for success, but how can you possibly know how many cards you have given out, how many active members you have, or indeed when you can expect to be giving out loads of free coffees?
Mobile loyalty programs can be an effective strategy to drive repeat visits, especially from tech-savvy digital natives but increasingly from all demographics.
The majority of the UK’s high street retailers – including the big coffee chains – are going mobile for good reason. Consumers are rarely without their smartphones these days so mobile loyalty can help you reach a key group of customers who may not yet be loyal enough to carry around a card but who may be open to a mobile loyalty program.
The right mobile customer loyalty scheme can also be a great way to encourage (and reward) referrals too…
6. Capitalise on word-of-mouth referrals
Attracting new customers is much more difficult than maintaining old ones, and your customer loyalty scheme will go some way to help with that.
One often-overlooked mechanism in getting new customers is referrals, so think about a way to create a referral incentive program – in other words reward your customers for bringing their friends in.
In one recent survey, 82% of customer loyalty program members referred at least one person to their program and 42% referred four or more. Customers who bring their friends and business associates to your cafe will help you build even more loyal customers.
Compare the low cost and high effectiveness of a customer referral scheme to the high cost and low effectiveness of local print and online advertising and it starts to make even more sense!
7. Make it worthwhile (and easy!) for your customers
The purpose of your cafe’s customer loyalty scheme will be: to keep your customers buying from your business over your competitors; to encourage them to buy from your business more often; and to encourage them to spend more with you.
Most of your customers will be aware of that. So if they like your business (and your coffee!), if your customer loyalty scheme is easy to participate in, and the incentives are there, they’ll be more likely to sign up.
8. Promote the hell out of it
Your customer loyalty scheme will only deliver long term value if you commit to it. Market it in-store at your cafe – in your windows, on your menus, at your counter, even in the loos. Market it via your website, Facebook and Twitter.
If you are collecting your customers’ email addresses, email them with special offers and deals to entice and reward them.
Encourage your staff to ask every customer if they are members, and get them to sign up those that aren’t. incentivising your team to can also pay dividends: one of Scrummy Club’s cafe owners took their whole team for a celebratory drink once they’d crossed the 100 members mark.