Coffee Shop Loyalty Programs - re-thinking the tradition.

[Rowley]

The reason I'm making this post is to get some unique thinking about your loyalty program brewing, and to show some solid facts on what little changes you can do to kick a current loyalty program into shape.

About loyalty programs. A loyalty program shouldn't be considered a bane or a turnkey marketing gimmick, consider your loyalty program a method to winning your customers wallet. That card with your name on it implores the receiver to return for their reward.

Frequency of loyalty. Want your customers coming back sooner? Previous studies show that as a customer nears the 'freebie', their return rate increases. Then in April 2004, a structured experiment on loyalty was given at a car wash. The stakes where simple, buy 8 get a free car wash. The different was 50% of the customers received a card which required them to buy 10 car washes instead of 8, but the first 2 washes were already marked off. Effectively the two cards were equal. The conclusion was that customers who thought they started off closer, returned for car washes far more frequently.
I have had employees tack on a couple extra points on a loyalty card, and I enjoyed simply the feeling of importance (the waitress knew I was a repeat customer, and I was complaining how difficult their $100 per point card was) Result was I returned far more frequently.

Giving away the store. Another coffeeForums member already said their distrust for their loyalty system, because customers were making 10 purchases of regular coffee, and requesting a free blending drink (or similar). Insurance is sometimes priceless in marketing, you will need to plan for the what if... (what if a customer makes copies of his loyalty card and punches them out himself?)
That is where Subway, a major food chain in America failed at their loyalty program. A college student found a way to copy their stamps used and then sold full cards to classmates. This caused so much havoc, Subway has yet to reinstate a new loyalty program (to my knowledge). And all honest users of their previous loyalty program lost all value to their partially completed stamp cards (e.g.. myself included)

When planning your loyalty program at think about these what ifs...
What if, someone finds a way to copy a complete card. And how much will I loose before I can find out? (a simple solution is to ID each card if you use disposable cards, if an ID returns to the store too soon or has already been submitted you will know you have a fluke in the system.)
What if, customers are cashing in on the expensive drinks? (Well you could tier your loyalty system. One for coffee and tea, and a separate card completely for the more expensive items.) I also recommend you write your numbers down, you might not be loosing much on the deal but gaining a loyal customer that may forget their card from time to time.

Competition I'll close on the final note of competition in loyalty systems. Always know your bottom line, do not get caught up in a fierce competition with another places' loyalty card based on returns. If their loyalty system sounds better then yours, take some time to actually use their loyalty system and try to find every detail for 'why they can get away with it'. You may just find something you haven't thought about implementing yet. (maybe some fine print, a direct marketing newsletter, or special privileges for loyalty card holders.)

The majority of this post can be accredited to this April's Harvard Business Review article 'Your loyalty program is betraying you'.

Thank you, I'd love some feedback or comments from anyone whos interest is peaked.

 

[kscupofjoe]

Good post.

In my experience the "abusers" aren't the majority. I have had a few people buying the cheaper drinks and then getting an expensive one, but it has not been a frequent enough issue for me to be concerned.

My loyalty system has always been Buy 10 drinks get a Tall free. The most common abuse of that for me is people ordering the largest size and then presenting their card. However almost all the people doing this order the largest size anyway, and the cost difference for me isn't large enough to discount the benefit of return.

In fact I believe this would still work out in our favor. If someone knows they can buy 10 small drinks and then use the card to get a large, it is much better incentive for them to return, and you'll be making up for the loss easily by how much more you are selling (and faster).

 

[silverkatzchen]

I have just a couple of suggestions that have worked well for me:

1) Write the type of drink on the back of a disposable card (including size) not only do customers feel like we know "their drink", but when it comes to the freebie, they understand what kind of drink is free without asking questions.

2) My cards expire 30 days after first purchase. (And they say so on the card) Most of my customers come so frequently that they use up one card in 1-2 weeks, hardly any complaints.

I've found this makes all the issues disappear, and helps loyalty.

 

[morrisn]

Loyalty Cards

Our Loyalty program is part of our POS system, the customer does not have to carry a card, they appreciate it because they have to many already. We track them by their phone number. The system is fair for both parties as it tracks a points value, ie: a $2.00 drink is worth 20 points and takes 200 points to redeem, a $ 4.00 drink is worth 40 points and takes 400 points to redeem - a buy 10 get one free and the customer can save up to get the free larger drink if he wants. He would buy 20 of the $ 2.00 drinks to get a $ 4.00 drink. It really helps control costs of the Loyalty program and it is probably one of the most inexpensive POS programs available.

 

[MrJerry]

This is a very interesting topic. We won't have our shop open until December of this year so this is great food for thought.

With our online division (were we only sell 1 lb and 1/2 lb bags) we offer a loyalty program. Very simple, cut the label off the front of your bag, send 10 of them to me and I'll send you a free 1/2 bag of you choice. Most of my clients have their free 1/2 lb bag included in with an order. They might order 2-5 lbs of beans and the 1/2 lb is throw in with the order...this saves me a great deal on shipping and it keeps them coming back!

 

[H Man]

Re: Loyalty Cards

Our Loyalty program is part of our POS system, the customer does not have to carry a card, they appreciate it because they have to many already. .... It really helps control costs of the Loyalty program and it is probably one of the most inexpensive POS programs available.

Which one are you using?

And did you come up with the points system? or was it built into to the POS system?

It's very clever either way and I like that you don't have to issue a card and the customer doesn't have to carry it. Nice 8)

 

[kc1]

In the UK, Caffe Nero operate over 200 coffee shops and still manage to offer a loyalty scheme. How does a company of this size police it? How do they stop employees from just stamping away and giving full loyalty cards to friends or selling them on? Surely this is the reason that Starbucks don't offer a similar scheme?