Thought Leadership

How To Setup A Great Loyalty Program

In It To Win It!

If you’re in the retail or restaurant business and you’re not paying close attention to loyalty programs, you should be. It’s hard these days not to – they’re everywhere. For example, it was no surprise to me that 86% of Canadians are members of at least 1 loyalty program. The average Canadian is a member of 4 programs and the average Canadian household is a member of 9 or more programs. Folks are collecting box tops, trading cards, stamps, points, and buying memberships anywhere they can, and they have been conditioned to do so by the chains that nationalize their programs.

To my amazement, independent retailers and restaurants in Canada are not doing loyalty programs, much to their own detriment. Loyalty increases the frequency of existing customers and improves retention of new customers. Running a WagJag or posting a coupon in the local paper is much more expensive than marketing to your existing customers, and this has been mathematically proven over and over again. Unless you are deliberately trying to attract new customers so that you can capture them in your loyalty program, save your money and invest it in your own loyalty offering.

Whatever promotion you offer, it should be intended to do four things:

  1. Drive more customers into your business
  2. Increase profits and revenue
  3. Increase stock rotation and preferably slow moving higher margin stock
  4. And provide you with customer data to remarket or analyze down the road.

In my career here at Armagh, I have seen hundreds of promotions offered by my customers. Many of them, unfortunately, do not do what they were intend to do, so here’s a few things that I have learned along the way that might help you to customize your own loyalty program for your retail store or restaurant.

Look Before You Leap

Consider your point of sale system and include your service provider in the discussion. I have seen retail store and restaurant owners have meetings and print marketing materials and send out email blasts only to find out that the loyalty program they have dreamed up isn’t possible with the POS system they currently own. This usually leads to self-inflicted strained relations with their POS system provider and is completely avoidable by simply doing some homework first. Whatever you plan to do, it must be compatible with your POS system, as the POS system is absolutely critical in the tracking of whatever program you launch. If your POS system doesn’t have a points or loyalty program, or there is no compromise available between what you want to run vs. what is available in your system – you need to change POS systems. If you’re a new business owner and you haven’t selected your POS system yet, you should consider Catapult for retail or Digital Dining for restaurant. Both systems we offer have loyalty programs that are very detailed and easy to use, and even if you don’t select one from Armagh, you should use them as a benchmark for whatever system you ultimately choose.

What’s In A Name?

It must have a catchy name. I know. It’s cosmetic, and that’s unlike me, but it really matters what you call it. Remember, if you market the loyalty program effectively to your customers you’ll eventually have thousands of members and the program will be around for decades. You really need something that your store can be proud of and your customers can easily remember so they can pass on to other customers by word of mouth.

It Must Be Well Planned

They call them loyalty plans for a reason – they’re planned. Once you have a great loyalty program name, you need to carefully organize the details of the program. You can’t do this willy-nilly. If you need some professional paid help with this, get it, and I can’t stress this enough. You need a program brochure outlining the details of the plan so that your staff can easily educate themselves and hand out to customers asking questions about the program. You need a sign up form asking for the customers information so that your staff doesn’t unnecessarily tie up POS terminals with data entry. You need a customer card or key-tag so that customers can be easily recalled at the POS and their purchases and redemptions can be tracked with ease. You need to determine the percentage return on your loyalty plan and how your customers will realize that reward.

Keep It Simple Stupid

Remember who will sell this program – your staff. Make it too complicated and they won’t even try. Even if you sell the loyalty program yourself, remember who you want to join the program – your customer. Make it too complicated and they won’t try either. You should also actively try to avoid program contradictions with other marketing initiatives. It’s not a good program if it causes you to get into arguments with your customers over whether or not you’ll include one thing or another in your loyalty program. Make the reward calculation simple – it should be a points or dollar percentage return based on purchases, and your POS system should track it automatically. Beware of anything you have to mail, count, track, or redeem manually – it is unlikely that any plan you create that has an intense labour requirement on the part of you or your staff will be successful. Any promise you make that is not fulfilled is worse than making no promise at all. In other words, if you promise a customer you will mail him a gift certificate if his purchases reach a certain level and you fail to follow through because it’s too much work or you don’t have time to do it, your loyalty program will be contrary to your goals.

Quid Pro Quo

Don’t be afraid to ask for some information in return for a decent loyalty program and make sure your staff are trained on how to ask for it politely. Ask for their name, address, postal code, telephone number, cell phone number. Also ask for their birthday and anniversary if appropriate. The information that you gather when people join will be invaluable for tracking sales preferences, remarketing to your client base, keeping your customers informed about new products and services, and monitoring for fraudulent use of the program.

Make sure your sign up form has a question about receiving a newsletter or information from your company. Make sure your brochure has a sincere statement about privacy that you intend to follow and be honest about how you intend to use their information.

Make Your Loyalty Program Worthwhile

Customers are better informed today than ever before. Using Google, they can easily look up other competing loyalty programs online and determine which ones are the best , and they will not be easily fooled by a loyalty points scheme that promises much and delivers little. On the other hand you don’t need to give away the store either. Shopper’s Optimum program gives back $1.70 for every $100 spent – that’s 1.7%. Canada’s most famous program – Canadian Tire Money – gives back 50 cents for every $100 spent, which works out to a 0.5%. It doesn’t seem like much until you consider how many programs boost their programs for customers by offering double and triple points to encourage customers to buy slow moving but higher margin products. A triple points item on Shopper’s Optimum pays the customer at a rate of 5.1%. On the flipside, they will encourage redemption when they need cash flow and stock rotation by offering double and triple redemption days at strategically slow periods during the year. Theoretically a Shopper’s Optimum customer purchasing a triple points item and redeeming on a triple points day can be paid back at a whopping rate of 15.3%!

It’s An Investment

If you take nothing else away from this article, remember this:

You are investing in your customer. This is not the same as a cost. Investments pay a return on your money and you can measure it. One of the most common mistakes that I see when people set up their customer loyalty program is the assumption that they will lose money on their regular customers – there is a fallacy that says “they would buy anyway”. Unless your store is in a prison and your customers are prisoners, this is an incredibly foolish assumption. Even if you’re the only game in town your customers still have lots of options. They can make their purchases online; they can go one or two towns over. Worse yet, they can decide to stay home. There’s a difference between liking your brand and being loyal to your brand. Customers that like your brand buy from you. Customers that are loyal to your brand recommend you to others and buy from you.

Two more things to consider – the relative cost vs. the relative redemption. At a rate of 1.7%, in order for your customer to get $20.00 worth of value they have to spend $ 1,174.47! And let’s compare this to other promotions you may have run in the past. For example, a restaurant might offer a two for one coupon. That’s a discount of 50% plus the advertising cost of running the coupon in the magazine or newspaper! WagJag and Groupon deals are even more expensive. By investing in a loyalty program you take your advertising dollars, give them directly to your customer, and then they take those advertising dollars and spend them in your store. By running the program yourself you eliminate the middleman and can offer more value to your customer for the same or less money.

Sell! Sell Sell!

Your goal should be that 100% of your customers become a member of your loyalty program – period. To do this you need to sell the heck out of it and to do that you need to get your team on board. There shouldn’t be a single customer that comes to your cash register that doesn’t get asked at least once if you are a member and would like to join. When new customer boarding on the program begins to lag, offer an incentive plan to your service staff to board customers on the plan. Pay them 50 cents for every customer that joins during their shift.

Your customers will have questions, so you should have a simple brochure that explains the loyalty program in detail and has a FAQ (Frequently Asked Questions) list. Your staff should be well acquainted with the details in case they are asked a question.

You must be dedicated to the long term success of the plan. You can’t run it for a week and complain that the program isn’t working. You have to use it as a long term strategy for increased sales and ultimately increased profits.

Signs Of Success

Say it out loud with me… “Redemptions are good.” A loyalty program that is never redeemed is not a successful loyalty plan. The best loyalty programs have a high rate of redemption. Remember, we want to build long-term loyalty – not run a flash-in-the-pan promotion. For the loyalty program to work, customers need to perceive value for their time and effort to participate. You should also by now have a database of information that you can now market directly to.

Review and Measure Your Loyalty Program

Ultimately, you need to sit down and look at the data, confirm if the program is working. You’ll need to get some reports out of your system such as total sales vs. total redemptions, and evaluate the return on your investment. You may not be 100% successful at first try and therefore may need to make some adjustments to get it right. Eventually, your loyalty program will begin to pay off. By then it’s on auto-pilot and you can turn your marketing attention to other things, like getting even more customers.


About Armagh POS Solutions

Armagh has been serving the retail, restaurant and grocery industries in Canada since 1979, delivering solutions for a range of operators from single-unit small businesses to multi-unit national chains.

We are specialists in touch screen and scanning point of sale (POS) systems for both restaurants and retail stores, cash registers, scales, liquor inventory control systems, and grocery label and wrapping equipment.

With 40+ years POS industry experienced the sales staff at Armagh provides experienced consultants in point-of-purchase management, customer service efficiency, process automation, and restaurant order management.

Armagh’s award-winning Catapult Retail POS Software and Digital Dining POS Restaurant Software are best-in-class, and Armagh is a QIR and Diamond Toshiba Alliance Partner.