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Giving Back To Stay Competitive
Giving Back To Stay Competitive

How a rewards program can help you attract and retain customers

If your craft store doesn't have a rewards program, it may be time to start one.

"Rewards programs keep customers coming back for more and in turn, keep them longer," says Thomas H. Gray, a business management consultant based in Lisle, Illinois. "Customers who have bought several products, or several times, are much more likely to continue to do so than those who have not. They become 'sticky' customers, resistant to appeals by competitors."

Many businesses spend a lot of time trying to attract new customers, but that is inefficient. It costs about five times more money to acquire one new customer than it does to continue selling to an existing customer. And as a bonus, existing customers, on average, spend 65 percent more than customers who are new to your store, according to Gartner Research.

So, what can you do to hold on to these VIPs? A rewards program can be key, accelerating the frequency of customer visits and the volume of their purchases.

Getting started

Begin by gathering data about your customers, says Gray, who authored "Business Techniques for Growth: More Tools for Small Business Success" and "Business Techniques in Troubled Times: A Toolbox for Small Business Success." Look at key data such as how much your best customers are spending and how often they are visiting your store.

"All businesses must have a customer database set up first," Gray says. "It can be as simple as a spreadsheet, or a more sophisticated CRM system. Once this is in place, you now have a way to track transactions by customer."

First determine which relationships are most important to your business and design a rewards program that cultivates those customers. To determine the type of rewards program that will offer the most return to your company, answer the following questions.

  • Is customer tenure the most valuable?
  • How important is the dollar value of purchases?
  • Do you want to offer surprise bonuses upgrades?
  • What are your competitors doing?
  • How much can you afford to spend on the program?

Once you've answered those questions, identify your most loyal customers — generally those who are in the top 10 percent of the most frequent or profitable patrons. Targeting them with your program makes more sense than offering a general broad discount for all patrons.

So do rewards programs outperform discounts?

"That's a hard one to measure, but my own behavior favors strong rewards programs like Marriott's, or amazing deals on Amazon and other online purveyors of hard goods," says Annemarie Marek, president of Marek & Co., a marketing communications and media relations firm based in Dallas.

Marek says that a good rewards program must deliver exciting incentives to motivate consumers.

"Too many rewards programs have been diluted so that earning a reward either takes too much effort or too much time," she says. "Start by offering incremental incentives. For the crafts' business, identify which items are most popular and what excites your customers. Once you identify these items, offer them as incentives. Those that have greater value should be laddered in order to earn them."

A tiered rewards program, based on earning points, is reliable, easy to understand and typically functions best. A customer database can capture frequency of purchases, so you can make special efforts to reward those who buy often and create special offers to motivate others to move into that category.

"Maintaining a rewards program means constantly refreshing the incentives you wish to offer to your frequent buyers," Marek says. "It also requires the technology support that enables you to track participation and provide access to the points that have been earned."

Implementation

The best way to start a membership rewards program is to keep it simple, Gray says. Begin by recording transactions by customer, select the number of points you want to offer per dollar spent and assign points to a schedule of rewards that are tied to a product or service that the customer must return to the store to receive.

"For example, a knitting store may wish to offer a free knitting class, or a bead store may consider giving away a hand-selected combination of free beads," Gray says. "Don't limit your rewards program to discounts only, because discounts don't have a lasting impact on customers' memories. Physical prizes or earned bonuses resonate much more."

If you're hesitant to do it alone, companies such as Perkville.com can help you design a membership rewards program that best meets the needs of your business.

So start nurturing your customer base today to reap the reward of customers who return time and time again.


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