Thanking customers verbally is strong in itself when done in a sincere way. Further offering a free gift to your customers to thank them for their loyalty is a nice gesture that can foster a sense of goodwill between you.
A Rewards Card encourages loyalty to your business two ways – firstly, the freebie they’re getting and secondly, the effect that a Rewards Card has on the customer’s motivation to spend.
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Just to make sure we’re on the same page when talking about Rewards Cards, I’m talking about business card sized cards you may get from a store where each time you buy something from that store they stamp the Rewards Card with their store stamp. Then, after the card is full of stamps, you get a free gift or discount of some sort and get given a new card to fill up again.
The latest in Rewards Cards are digital loyalty cards where customers with smart phones can scan a QR code on site and gain points and freebies.
Is it Tacky and Will You Lose Money?
Some managers and business owners won’t consider introducing a Rewards Card system because they may have a preconceived idea that Reward Cards are tacky or would demean their product or service in some way.
Some other managers and business owners become concerned about loosing money by giving away something for free, thinking they can’t afford to ‘loose’ the money by giving away free gifts.
If you can relate to either of these or if you have a hesitation about the cards for some other reason then perhaps by the end of the article your mind may be changed. I’ll show you how Rewards Cards give you three things – loyalty, repeated business, and free advertising.
In Australia there’s a chain of coffee shops called Gloria Jeans. They give away Rewards Cards to everyone. The incentive of filling up the card to get a free coffee keeps people coming back but customers pay about $1 more for a coffee than they would elsewhere.
So, does Gloria Jeans really loose money by giving away a free coffee after selling the customer 10 coffees?
Breaking Down the Psychology
Let’s take an example Day Spa. This hypothetical Day Spa which has two other Day Spas in competition with them that offer similar services.
The psychology of the Reward Card can be broken down like this…
First visit – the customer is given the Rewards Card with one stamp on it after their treatment. The receptionist explains how the Rewards Card works and explains the customer will get a free treatment valued at $100 at the tenth visit.
At first, the customer may not really think much of the the card because they may not think they will be able to fill it up.
The Reward Card then is put into the customer’s purse or wallet. Think about this – how many times do people open their purse or wallet daily? Now think about the fact that your business logo is on a card in their wallet. It is a subtle but effective marketing tactic; you’re now marketing to them every time they open their wallet or purse.
Subsequent Visits – after about six to twelve months, if it’s a good Day Spa, say this customer has accumulated 7 stamps. This is where the Rewards Card gives the strongest psychological impact on the person because the customer thinks, “I only need 3 more treatments before I get a free one”
Now, I ask you this – if they didn’t have the Rewards Card would they have paid for 3 more treatments at the Day Spa? If the customer didn’t have the card this Day Spa could possibly have lost a few hundred dollars of business to their competitors.
When they fill up the card that means this Day Spa has gained a few hundreds of dollars of business minus the cost of one treatment they gave away for free. This is important because…
That’s money you may not have had if they didn’t have the incentive of filling up the card.
Breaking Down The Math:
A treatment costs $100
The Rewards Card gives the customer a free $100 treatment on the 10th visit
Over a six months to a year they have 6 treatments which is a total of $600
The customer realized they only need 3 more treatments to get one free. 3 treatments is a total of $300
If you didn’t have the Rewards Card you could have lost $300 to your competitors.
By the time this customer gets their free treatment they have spent $900 with your business, which I’m sure you’d agree is well worth thanking them for with a free gift.
Summary – to earn $900 from this customer the Day Spa only spent money on the printing of the Rewards Card (say $5 including design) and the wholesale cost of the free treatment (say $50 depending on the profit margins they would operate on). With those figures this Day Spa spent around $55 to make $845.
Obviously you need to provide great services to keep a repeat customer happy and the Rewards Card won’t do all the work. However as you can see, a Rewards Card can influence a customer’s decision about where to spend their money.
Not only is it good practice to reward loyal customers with a free treatment, it is also a way to encourage the customer to stay with your business even if your business is surrounded by competition.
Thanking your customers for their patronage is a powerful way to let them know you appreciate them. Your customers are your business. Without them there isn’t a business to speak of when you break it all down.
Have you got a Rewards Card in your purse or wallet right now? Do you know someone who does have a Rewards Card (or a few) in their purse or wallet? Think about it.
The bottom line is – people like Rewards Cards and they increase business so if you don’t already use them get one made up and start.
If you have a Rewards Card in your purse or wallet right now that’s a good place to start when you think about what kind of design you’d like. Otherwise, ask your graphic designer or just Google ‘Customer Reward Card Designs’ or ‘Customer Loyalty Card Designs’ and see what you find.
Or, if you want to skip the paper-card and go straight to digital Rewards Cards I can help you set up your own QR code Loyalty Card System. Contact me to find out more about benefits of a customer reward card.
If you are not in a business that could use a Reward Card system such as the one described try to use your imagination to think of another way to show your best customers that you value their loyalty. Brainstorm ways of how can you thank them yet encourage them to do more business with your company at the same time.