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How To Create The Perfect Loyalty Program – Retail and Restaurant Guide

It is well known in retail businesses that the most important step to succession is satisfying existing customers. Existing customers have many benefits attached to the business. These customers are like an important asset that the business depends on. A loyalty program can help you succeed in satisfying your existing customers. 

While many businesses keep looking for ways to acquire more customers to increase market share, it is important to know that existing customers are actually more profitable for the business. 

A Bain & Company study shows by increasing customer retention even by 5% can lead to an increase in profits of 25% – 95%.

New customers also tend to spend way more and buy more often than new customers, according to studies.

Learn more about existing customers vs. new customers: https://www.cisepos.com/blog/cost-of-new-customers-and-how-to-build-brand-loyalty-cloud-pos-software/ 

The best way to satisfy customers is to create a loyalty program. A loyalty program brings a rise to customer turnover and sales, and makes valuable customers feel valuable. A good loyalty program may even help bring in potential customers into the business.

Here is how you create a loyalty program that actually works! 

First Step: Customer Profiling & Feedback

customer data and customer feedback
The first step to creating a good loyalty program is gathering customer data. You need to know your customers well in order to incentivize them and help this.

Customer data gathering is done easily and efficiently using a good POS Software Solution. With a modern POS, you can ask for customer information at checkouts and fill in their details quickly. Doing this for a month can help you gather a good database of your customers. 

While you create customer profiles, you need to collect feedback as well. The best way to make a customer happy is to provide them with what they want. With good customer feedback, you can understand the needs of the customer and can integrate them into the loyalty program.

Retail vs. Restaurant Loyalty Programs

It is important to know the difference between loyalty programs in relation to the type of business you operate.
If you operate a retail business, most popular loyalty programs are often focused on incentivizing the customer to make heavy purchases. As most households buy groceries monthly, a retail store should create a loyalty program that enables them to have their existing customers make that big monthly purchase only from them. 

This is why retail loyalty programs can be rewarded only for big purchases. Discounts on regular big purchases can make an existing customer stay and can be the most profitable strategy for a retailer.

With restaurants, on the other hand, there is no popular trend of dining in with families monthly. Restaurant visits can be spontaneous. Customer behaviour is harder to track this way. 

This is why a restaurant loyalty program should focus on incentivizing the customer to keep coming back instead of ordering a big meal that is profitable to the business. The poor customer can only eat so much… 

The best loyalty program strategy then is to make the customers want to keep coming back, even if it is for small purchases. 

A good example of this is Subway, which provides customers with a loyalty token. This token helps keep track of customer purchases. A POS can also be helpful for this. For every 10 visits that the customer makes to the restaurant, no matter what they purchase, for the 11th time a free sandwich is offered.

Creating The Loyalty Program Framework

Once you have enough data on your customers, you can begin creating a framework. The framework requires a financial and practical approach. 

Note: To track customer purchases, a good POS system is almost needed. Register for a Free POS demo from CISePOS. 


loyalty program finance
The financial approach requires you to set a budget and a goal. View your sales and your existing customers and create a good ratio that gives a good picture of sales per customer e.g. Sales value/customers. This will help you set a goal that is better than the sales per customer value right now.

According to that value, set up a budget. If you wish to increase your sales from 30000 Rs. weekly to 40000 Rs., for example, that is an additional revenue generation of 10000 Rs. You can assign a cost relating to that. 

For your first loyalty program, your cost should be near that figure, for example, 7000-8000 Rs. This is your first week of launching a loyalty program. Later you may realize you can work with lower costs or work in loss but increase long-run profits. 

Invest in a modern POS to generate helpful reports for better decision making.

Setting loyalty rewards and points

setting loyalty program rewards and points

Once you’ve set your financials, it is time to set an operational framework. View your average sales per customer report and agree upon a number that is practical and you can achieve. This number would be a requirement for customers to be rewarded. Starting out with a loyalty program, you can assign this number to be less than the average sales per customer. 

Remember, the points system of a loyalty program should be achievable and practical. Set a points system that enables most of your customers should be able to qualify for a reward. 

The final step would be to identify the rewards. Many businesses reward the customers with products that have been on the shelf for a long time and are nearing expiry. This is a good strategy to prevent losses, however, this doesn’t ensure customer satisfaction.

To work towards customer satisfaction, use the feedback you gathered and add rewards that the customers actually want! Even if they cost higher, the benefit is usually bigger and more profitable.

Initiating The Loyalty Program

The last step to launch the loyalty program is to extract all your customers’ information from your POS and start a good Email/SMS marketing campaign that informs them of the loyalty program. 

With this, you can also invest in Social Media marketing which can also gather potential customers. 

Thirdly, make sure you have approachable staff in your business in-store. This staff needs to inform every customer about the loyalty program and should be available and accessible easily to answer a customer’s queries. 

And, that’s it! Viola! You have successfully created a good loyalty program that your customers can love and which can make your business more profitable! 

Learn more on how to make the customer experience better: https://www.cisepos.com/blog/how-to-make-customer-experience-better-using-restaurant-pos-software/