Loyalty Programs : Do businesses need a way to turn new customers and non-frequent customers into repeat customers who frequent their stores often?

I'm sure if you asked business owners, "do you want to turn customers into repeat customers" the answer would be YES. But the question is really whether they would adopt the solution of paying those customers to become repeat customers. Businesses assign a huge value to bringing a customer in the door for the first time (thus Groupon's and Google's success). That customer might like you and become a repeat customer.  You lose money on the ads or the daily deal, but you make it up over the lifetime value of that customer. Bringing them in for the second visit has a dramatically smaller value.  Think about it this way: If the person loved the first visit, they'll be back. If they didn't, then paying them to come a second time costs you money but still doesn't buy loyalty.  Then, what are you going to do, pay them to come back a third time?  A fourth?  Most small businesses have small margins, so even if you do buy this customer's loyalty, you are losing your profits, and they still may not come back organically. Yes, there is a mushy middle, as commented, but the first resort to reach those folks is through free programs like email newsletters or, worst case, paying them after, say, 10 visits, not on visit number 2. So, instead of just validating the problem with them, validate the solution.  Sit down with 20 target customers and walk them through the solution.  They may tell you I'm wrong.  Or, more likely, they may give you some leads into other ideas. You may find that the economics of loyalty programs do not work in most markets.  You could find a market that has adopted loyalty programs and see if there is a disruptive approach to compete against the incumbents. Regardless, I'd put your time into customer validation and not into developing the solution until you have that validation.

Our business Local Flavor is in restaurant loyalty, so I have a significant amount of time invested in this space. A few truths: Not all businesses think of loyalty the same way, so it's a mistake to assume that one loyalty solution for restaurants works the same for your typical retail store. Loyalty, almost by definition, has a diminishing return as the solution increases in exposure; that is, if everyone is using the same loyalty solution with the same ask, you dilute the loyalty value and create confusion for the customer.  See GroupOn and other daily deals for an expression of this. In general, financial inducements for loyalty deliver a very finite engagement value -- it's up to the merchant to drive further. Most truly loyalty customers are looking more for intrinsic qualities in their relationship with the merchant than not; for example, visiting a restaurant where the owner stops by to say hi and to acknowledge you.  This is a powerful inducement to loyalty. The cost of acquisition for a new customer is, on average, 5x higher than maintaining an existing customer. Loyal customers spend more. Deals have saturated the market -- it's important to find a real loyalty differentiator. No form of inducement will substitute for having a great experience, so if you can't take care of your customers they will go somewhere else.  That's obvious, but it's surprising how many small business owners think that all they need to do is market more, offer more.

The purpose of a business is to create repeat customers.I took some liberties from the original Peter Drucker quote by adding the wordrepeat. Repeat customers. That is what business is all about, right? If we had to depend on new customers for 100% of our business, it really would get hard. Really hard.Customer loyalty itself is a hard job. And getting harder all the time.We all know that providing exceptional customer service is the stated goal of every business leader, regardless of how large or small the company. It’s common knowledge that customers are more loyal to companies who treat them as more than just a number. So what does it take to turn first-time buyers into repeat customers?  Consider these 10 tips I frequently use clients to keep customers coming back. They form the enablers of customer retention strategies.Be accountableDon't pass the buck. One of the most aggravating things a customer faces where customer care is concerned is being passed around like an old hat that no one wants. Impeccable service ensures that every company employee, regardless of rank, handles customers to the fullest extent of their abilities. Never refer a customer to someone else simply because you don’t know how to handle his problem. Instead, take the time to help him fix the problem, if possible. Or at the least, if you must refer a customer, find someone who can resolve their issue and provide a warm hand-off. Ensuring your customer achieves a desirable outcome will help you create a customer for life. Provide solutions Be innovative. Once you understand the customer’s problem, offer a solution. Refrain from telling the customer what you can't do. Instead, focus on what you can do to remedy the situation, and offer some options. Working to solve your customer’s problem -- even if not to the extent she may have hoped -- will help them feel as if you care. A solution focused attitude will keep customers coming back even after they’ve faced a problem with your company. Personalize your serviceBe genuine. When a customer calls with a complaint or a concern, make the time to treat them like an individual. And ensure your employees do, too. While calling a customer ma'am or sir is respectful, it doesn’t offer a personal touch. Replying,"Yes sir, I understand," is polite. And polite is good! But adding the customer’s name, as in "Yes Mr. Jones, I understand," is so much better! Using a customer’s name whenever possible helps her see you are truly engaged inserving her, regardless of the problems she’s brought to your attention. And it helps her realize she’s more important to your company than her check book. New ideasCome up with new ideas for customers. You have experience and knowledge. You know what’s happening in your industry and your customer’s needs. Make a serious effort to share your thoughts with customers. Customer feedbackSeek customer feedback early and respond quickly. Follow up the first sale with some form of customer contact soon after delivery. Try to pinpoint any problems immediately. Satisfied customers want a positive response when they run into problems or have serious questions. Be empathetic Listen, acknowledge, validate & apologize. Listen to your customers. Sometimes people really do just need to vent, and rarely should a complaint be taken personally. Learn to acknowledge the customer’s issue, and train employees to do the same. It helps your customer to know that someone understands their concerns. Let them know you understand the way they are feeling and apologize even if you don’t feel you need to. A sincere apology works wonders in creating happy, loyal customers. It confirms your willingness to take responsibility for their problem.Be responsive Prospects expect quick reaction to a request or a problem. They also expect your employees to try to make sure that problems don’t occur in the first place. Once prospects are convinced they can rely on the responsiveness of the staff, there’s a good possibility they will become repeat customers. If you make a mistake, admit it right away. Don’t try to place blame or cover it up with excuses. The customer knows what’s going on and will be looking for your reaction. Once you admit the mistake, start talking about solutions. Related material: http://digitalsparkmarketing.com/customer-focuscustomer-serviceheart-of-customer-service/Be trustworthyNever make impossible promises. Often, in an effort to appease a customer, an employee or company leader will make promises that are not only impractical, but which he or she is simply not able to honor. Instead, offer a realistic, workable solution that will allow you to rebuild your customer relationship and provide some satisfaction. It’s not necessary to “give away the store.” Just meet the situation realistically and your customer will appreciate the effort. Be reliable The ability to provide what’s promised dependably and accurately is listed as the No. 1 requirement for first-time buyers. They have no patience for employees who over-promise, don’t meet expectations or fail to inform them of possible problems. Don’t  spend months pursuing a new customer but fail to ensure that initial orders are fulfilled in a satisfactory manner. Be the expertThey expect sales people to have the knowledge and the expertise to meet all of their requirements. Prospects want to be convinced that you and your company have the knowledge to solution their current and future problems. Their first order is a trial. How you handle it will go a long way in determining whether they will become repeat customers. Take nothing for grantedDon’t take any customer’s loyalty for granted, as it is a fragile trust. The key to customer loyalty is not just by providing a quality service or product, but how you service and support it. Meeting customer expectations in a first sale may not be enough. First-time buyers want to know you care.  For loyalty to endure, it must be noticed and acknowledged over the long term. Creating repeat customers is not rocket science. It is no more complicated than giving your customers what they want. Follow these tips well and you will have them linedup. You will have made you and your business indispensable.Mike Schoultz is the founder of http://www.digitalsparkmarketing.com/, a digital marketing and customerservice agency. With 40 years of business experience, he blogs on topics thatrelate to improving the performance of your business. Find him on https://plus.google.com/u/0/b/102420440797566956191/102420440797566956191/posts, https://twitter.com/mikeschoultz, and http://www.linkedin.com/profile/view?id=44339949&trk=nav_responsive_tab_profile. 

The answers above all have merit, there certainly is a mushy middle that is the sweet spot when you are talking about the first time returning customer.  However, the mushy middle does not need to be your only target consumer.  The 80/20 rule applies to most businesses, where 80% of your business comes from just 20% of your customers.  Therefore, a coffee shop that has a pool of customers who come in 3x/week would make a ton more off of getting each of those customers to come in 5x/week than it would increasing the "mushy middle" conversion for the first return.  Businesses should focus on driving extreme loyalty among their already loyal consumers.  This will lead to higher conversion ratios for the customers who already love them, and will lead to emphatic referrals to their friends.  For example, if you go to a coffee shop 3x/week, you are probably likely to eventually take a friend there.  However, if you find a coffee shop that you go to twice a day, you are extremely likely to invite friends there often.  Fostering extreme followers will generate the most sales long-term for a business.   What are some ways to do this?   We have all seen the loyalty programs where you buy 6 and get the 7th one free.  Do you know why almost all businesses participate in these?  Because they work!  These programs are specifically targeting the extreme follower (no one joins these programs and decides to buy more from that store unless they were already going there here and there previously).  Some other great ones, particularly if you are not selling services that are needed often, are business card drop giveaways.  For obvious reasons, this type of contest drives repeat customers in businesses like restaurants and coffee shops.  But, they also have a place in longer-term items like car dealerships or appliances.  If you were to allow customers to drop a business card into a bowl every time they came and took a car for a test drive, or they came and looked at a few appliances, you would start getting customers to come in and look around often as they made their purchasing decisions.  Regardless of whether or not they won the new car, or new appliance, once it came time to finally make a purchase, your store would be the only store where that client would have already established a personal relationship with the staff and the store. The last way that I would focus on to increase the extreme followers is social media.  Using Twitter, Facebook, and YouTube, and actively promoting these sites while people are inside the store, will allow you to engage customers outside of your store and in between purchases.  The key is to make your accounts interesting and helpful, so that your customers will tune in now and again to see what is going on.  Check out some of my social media posts for info on how to use these sites effectively for exactly what you are talking about, but this post would get too long if I went into it further.  I hope this all helps you out, Good Luck out there!

Read and 's answers first.  I'll wait. Okay, so you want to address the "problem" of how to get people who are already eating at your place, to eat there more frequently. First off, your goal should be customers eating more "profitably", not necessarily more "frequently".  Just because two people eat at a restaurant, doesn't mean those meals are at all the same for the bottom line. This solution will need to be better than "serve good food, with good service", which is the tried and true method to date. See Jonas points. Odds are, if you are bringing customers back through discounts to eat the same item they ate before... your model is likely not helping.  See Michael's points. If you did want to reach customers after a meal, I think you should consider not a discount on a repeat and identical visit (loyalty program), but offers that change customer behavior. Here is an article on how one restaurant owner thought his Groupon did that: http://techcrunch.com/2011/06/18/ribman-groupon-bashing/The important bit: One consistent factor has been that Groupon customers are much more likely to add an appetizer or dessert to their check, since they know the first $20 only cost them $10.  This has been a wonderful way to not only up the ticket average on the redemption, but also has given the customers a broader taste of our menu.  When they come back without the Groupon, they are more likely to order that extra item again. In this case, for this merchant, the "sunk cost" mentality of having $20 "free" to spend (that only cost you $10 months ago) meant ordering more items than just an entree. Apparently his apps and desserts are pretty good, as people who branched out did so again on future visits. If you want to focus on restaurants expanding the value of their long-term customers, find ways to help them expand what long-term customers values from the restaurant, and target shifting orders to higher-margin items. Don't focus just on "traffic". That would be my advice. --- Also, I would spend a lot of time thinking about your delivery method: 1) Most people won't give out their phone #, period. 2) For the remainder that might, you will spend most of your limited time convincing them it will truly be "used once and deleted", time that could have been spent showing the value of your service.

It is common knowledge that selling to your existing customers is much cheaper to selling to new customers. Acquirung new customers is expensive in time and resources. Reaching out to existing customers is cheap. The best way is to upsell, sell complimentary products, release updates, etc. Selling to existing customers requires a previous positive buying experience, that is where your customer service and producting a quality product/service helps. Best of luck to you! Shannon

The fastest way to higher profits is keeping current customers (clients and patients) longer. Customers http://...services, the fastest way to do so is to approach the people that have already identified themselves as buyers, your ‘current’ customers.  Maximizing the profitability starts at the first sale.

Customer loyalty, as a marketing or sales tool, is totally bogus at every level, from concept to execution. It is the most corrupt and insidious distortion of human relationships there could ever be. The marketing people who came up with this monster should be taken down a dark alley and strangled. Let me explain about "loyalty." Many years ago, before computers and the Internet, before even touch tone phones, and before even styrofoam cups, my family made an annual trip to New York City to see plays, do the town, etc. We always stayed at the same place: the famed Algonquin Hotel, site of the more famous "round table." And when we arrived, we were instantly recognized by the desk clerk. "Oh, Mr. Geare, so good to see you again!" How'd they do that? I don't know, but the loyalty was running in the right direction. The establishment was being loyal to us. And we, as a result, were loyal to them. This took shape in numerous gestures which arose directly from the relationship. A "drink on the house" didn't show up because we had earned it with loyalty points, it appeared because we were appreciated. But today, "customer loyalty" is something which big business tries to fabricate with clubs, cards and programs. If WE, the customers, demonstrate OUR loyalty to the business, THEN we will EARN their REWARDS. Atrocious. If you don't see how wrong that is, then you've been suckered into the deal. By definition, loyalty cannot be manufactured artificially, it is, rather, the result of trust and experience which occurs independently of any agenda. Thus it is the job of an organization to first demonstrate their loyalty to the constituency it hopes to serve. The organization does NOT say, "If you do this, then I will do that." It is not a quid-pro-quo situation. Rather, the organization finds or creates every possible opportunity to act unilaterally to the benefit of its clients or constituents. If this is well and truly done, then the loyalty of the customers will occur naturally and honestly. It is something of the customer's creation, not mine. It is not bought and sold; it is earned, and when earned, it is freely given. The completely expected result of loyalty programs among hotels, for example, is that the consumer "shops" for the best deal and of course this means there is no actual loyalty whatsoever - the whole arrangement becomes a commodity. Who values my loyalty the most, in dollars and sense? Whoever it is, that's where I shall lie. Sounds very much like the world's oldest profession, does it not? Well, guess what? I don't engage prostitutes. For restaurants or anything else, it is the same. Fix a good meal, treat me well, and I might become loyal. But it is YOUR job to give me some reason to be loyal, and you can't do it by inducing me to join a club or perform some specific economic activity to YOUR benefit. But this dreadful commercial pathology has created enormous opportunity for those who truly recognize what loyalty is, and who offer it with no special inducement to do so. In my own business, I bend over backwards and turn myself inside out on behalf of my customers. Aside from their continued patronage, the actual, spoken and written message I get is this: "You really care about us." Exactly. Thus your own "loyalty program" should begin with YOU.

There are many MANY customer behaviours that result in more business other than just rewarding someone for buying something.  Really; all you've done is find a [potentially] neat way of rewarding the same kind of behaviour that Punch Cards have been rewarding people for for years and years now.Thanks to technology; modern Loyalty Programs have the ability to recognize and respond to customer behaviour that traditional Loyalty Programs were not able to.  For instance; a loyalty program can reward customers for never failing to visit (e.g. reward a customer for coming 5 days in a row; and even send them a reminder on the fourth day), for bringing a friend, for sharing store specials or events on Facebook, for visiting multiple locations, returning after a long absence (again; with a notification) or making purchases online.  QR Loyalty Cards is a Customer Loyalty Program that does a very good job at providing businesses with a means of rewarding customers for exhibiting these profitable behaviours and many others besides.  The software is entirely free to use and offers features like Business Branded Loyalty Cards (which is rare among the 3rd party Loyalty Program offerings).  If you're looking for ideas for your product offering; I'd definitely suggest checking them out:http://qrloyalty.cards