Frequent Buyer Programs

One of the things that differentiates successful businesses from not so successful businesses is the fact that the successful businesses are amazing at getting their customers to come back and do business with them time-and-time again. That’s where a frequent buyer program comes in.

A Frequent Buyer Program (also known as a Loyalty Program) rewards buyers every time they purchase. Many use a points system that awards a certain number of points every time someone buys something. Once they accrue enough points they can then redeem those points for various products or services. There are three different types of Frequent Buyer’s programs …

1. Points redeemed for prizes

This type of program is formal and probably features its own membership card. It also has a sophisticated method for accruing and awarding points every time a purchase is made.

You might have a points structure like:

  • 100 points – free muffin
  • 200 points – $20 gift certificate with alliance partner
  • 400 points – double movie pass
  • 750 points – $50 gift certificate from alliance partner
  • 1000 points – Family pass to a theme park.

2. Discount Club

Under this type of arrangement, customers receive a discount card and when they present it at the cash register they get cash back off their purchase.

3. Product-specific

This is a simple program (like the one a coffee shop runs) where customers are given a card and those cards are stamped each time someone purchases. Once a certain number of purchases have been made the customer is entitled to an additional product or service of the same type purchased, free.

4. Reward customers for different spending levels.

Rewarding customers on dollars spent during a certain period is excellent for building sales during slow season. For instance, spend $400 in our store during April and you’ll receive a $50 voucher for purchases in May. This encourages the customer to purchase in April (during slow season) AND during May which is (say) your busy season.

The Rewards

Naturally, it makes sense to ensure the rewards are of the highest possible perceived value and the lowest possible hard cost in order to maximize your profit margins.

Here are some points to consider …

1. Extra purchases of the same product free e.g. your 5th cup of coffee FREE.

These rewards are simple to administer however they are the same as giving a discount and the challenge with this type of program is that you’re giving away purchases that the customer would have ordinarily paid for.

For instance, they would have purchased their 5th cup of coffee at some point anyway. It would be much more profitable to give away, say a free muffin or doughnut with the 5th coffee purchase (assuming a doughnut isn’t something they usually purchase).

2. Set “award” items that have certain points values attached to them.

When people receive these points they accrue. The program features a number of rewards that each have a certain point value attached to them. When members accrue enough points they can cash in those points for the reward.

For instance, the National Australia Bank operates a NAB Gold Rewards program where it offers its customers:

  • Retail & entertainment vouchers
  • Credit to your credit card
  • Travel rewards
  • Qantas Frequent Flyer points

For every $1 someone spends on their NAB Credit Card they are awarded 1 reward point.

Discounts on Future Purchases

Once people have accrued a certain number of points, allow them to receive a certain percentage discount on their next purchase or for all future purchases for the next (say) 6 months.

Other privileges that you could offer, that AREN’T related to the purchases they make …

  • Free postage and handling
  • Free gift-wrapping
  • VIP shopping hours
  • Special events – wine and cheese nights, closed door sales, pre-launches
  • Advanced notice of new product releases
  • Special “member only” newsletter with privileges from other businesses
  • Referral discounts
  • Birthday card and cake … and the list goes on.

9 Ways To Use Your Frequent Buyer Program As a Marketing Tool

Naturally, your frequent buyer program is costing you money to set up and administer, so it’s vitally important you get a great return on your investment. In saying that, it’s also a very powerful marketing tool so use it as a draw card when promoting your business.

For example::

ONE: Editorial-style advertising – run news-style ads with headlines like:

“Ipswich single mother gets paid to shop at [your store}”

“Chermside grandmother cuts grocery bill by 10% at [name of store]”

… and so on.

TWO: Launch it by writing and emailing your customers, putting posters up in your store and by approaching media outlets with the view of getting free publicity.

THREE: Approach charities and suggest that they ask their supporters to donate the points they’ve accrued to the charity so the charity can then redeem them and benefit financially.

FOUR: Feature point-of-sale signs offering bonus points on certain product purchases – especially on “dead” stock you’d like to shift.

FIVE: Have merchandise displayed in your shop that’s worth a certain number of points. When they’ve accrued that amount of points they’ll receive that item FREE. To encourage even more repeat business keep your customers informed of how many more points they need to get a specific item FREE.

SIX: From time to time during a promotion, instead of offering a discount offer bonus points. It looks more attractive to customers and is less expensive for you.

SEVEN: Send points statements to members to keep them informed of how many points they have accrued.

EIGHT: Send out flyers in the local area promoting the frequent buyer program.

NINE: Feature bonus point incentives for referring their friends.

In Summary

  • Frequent buyer programs get your customers to keep coming back and buying from you again and again.
  • There are various types of programs you can implement, including a points, discount or product-specific program.
  • Rewards for your program could include gifts of the same purchase, discounts on future purchases and other gifts not related to the purchase, such as free shipping, free wrapping or VIP shopping hours.
  • There are 9 ways you can use your frequent buyer program as a marketing tool.