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Business scenario: Your loyalty program works, but it’s costing you too much

June 7, 2018

Have you checked on your loyalty program lately?

While the time for spring cleaning may have passed—hello, summer!—one part of a business’s operations that frequently flies under the radar is a loyalty program. If you have one installed, now is the time to crunch some numbers and make sure that it’s working the way it should.

Why? Because there have been a few high-profile companies that recently made some “tweaks” to their loyalty programs. It’s easy to assume that a program is working when in reality, it’s draining your cash. Starbucks shifted their program from a system based solely on the number of visits to a system based on how much is spent. Alaska Airlines and American Airlines ended their points partnership after realizing it wasn’t beneficial. And, after announcing their acquisition by Amazon, Whole Foods pulled their rewards program until further notice.

Completely ending a rewards program can cause your customers to turn on you. It’s important to reward your customers’ loyalty. In the restaurant industry, a loyalty program can increase sales by up to 20%, making it well worth your time to get the loyalty rewards right. If you find your program is draining money, try to make an adjustment, rather than cancelling rewards altogether. Here are some ways to change course should you discover your loyalty program is costing too much.

Use a “membership” model.

If you’re already making it rain rewards, one way to pivot is to introduce a tiered, membership-style structure. This can help drive repeat business and VIP retention without making it seem like you’re selling anyone short. Simply convert points or punches into different tiers, and then group rewards into batches. A tiered structure can help encourage repeat visits, higher sales, and better loyalty.

Likewise, membership programs go a step beyond traditional loyalty programs by providing a special “elite” status to which customers can aspire. There are many creative ways which small businesses can provide incentives to valuable customers that will drive additional spend and visit frequency, often to great effect.

Introduce a higher customer tier.

Already using a membership structure? Treat your VIPs like true royals by reserving the best perks for those customers that bring in the biggest sales. Create a tier just for them with non-costly, high-value perks to make that top level extra-aspirational. For example, offer exclusive access to a pre-sale event or off-menu tasting dinner where your product can shine and your customers can feel extra privileged. Think about ways to give your most loyal customers that feeling of rarity, while also showcasing your business in a low-cost way. It’s a win-win for your business and your customers.

Switch between points and punches.

As Starbucks discovered, simply rewarding someone for coming in does not bring in the same value as rewarding someone for purchasing at a certain dollar spend. Pivoting from punches to points can give you a way to motivate the type of behavior you’re looking for. One way to do this is to “convert” everyone’s existing punches into points; then, use a tiered system to encourage people to spend to the next level.

Alternately, if your business is already in the business of having high dollar spend per transaction (hardware stores, landscaping businesses, and dentists, for example), you may want to go to the opposite direction. Trading points for punches is a better way to get people in the door when accumulating points just seems too difficult. Be careful that earning the benefits from your rewards program doesn’t seem insurmountable to your customers—you may be discouraging the behavior you want to entice!

Using a card? Go digital.

Plastic loyalty cards, or even paper punch cards, can start to drain on your budget. Save on the costs of administering your loyalty program—and open new ways to upsell or collect user data—by using an app like Clover Rewards. A digital loyalty program also gives you the opportunity to tailor your rewards to specific customers, thereby saving in ways that might not have high visibility to other customers. Likewise, if you do decide to switch from points to punches (or vice versa), Clover Rewards is built to make that transition as easy as possible.

It’s true that sometimes a devaluation of your rewards program is necessary. However, if you if you redefine the program, it can seem more like you’re creating new opportunities for your customers, and right the ship in no time.


Clover is sold by leading U.S. banks including Bank of America, BBVA, Citi, PNC, Sun Trust and Wells Fargo. You’ll also find Clover at our trusted partners including Ignite Payments, Restaurant Depot, and Sam’s Club. For more information, visit us at clover.com.