The coffee shop punch card. All of us, at one time or another, have had at least one of these ubiquitous cards in our wallets and handbags. The premise is a simple one – each time you make a purchase, in this case a cup of coffee, the clerk punches your card. Accumulate 10 punches (indicating the purchase of 10 cups of coffee) and you are entitled to a free coffee. And a new punch card.

Punch cards are the simplest and most effective form of a customer reward program, which is also known as a loyalty program. Coffee shops around the world have adopted the punch card system because it is easy to use and quite good at getting customers to come back to purchase more coffee so they get those punches. punch cards also show the importance of customer retention versus new customer acquisition, where repeat customers represent up to 84 percent of all customers, versus 70 percent in restaurant and 50 percent in retail.

That is not to say by implementing a loyalty program you are concentrating on customer retention versus customer acquisition. Quite the contrary. A good customer loyalty program can not only reward your longtime loyal customers for their years of support, it can also turn new and casual customers into loyal ones. Below are some tips on how to develop a loyalty program that will be welcomed by longtime customers and attract new ones to your business:

Decide on what type of loyalty program you’d like to implement. This article offers an overview of different types of simple loyalty programs and the benefits of each. The kind of program you choose depends on your type of business, but there are tips that are universal. Some experts advise against limiting your loyalty program to discounts, because programs of that type are everywhere and can get lost with all of the others. Get creative – you can still do a discount/points program but offer a bigger prize or gift as a bonus after accumulating a certain number of points/visits.

Determine your goals. The type of program you choose should be based on what your goals are – do you want to increase spend by existing customers or is your primary reason for starting the program to draw new customers in to your business? You can use the same type of program for both but the way you promote them may be different. Additionally, some programs are a little more time-consuming than others, in terms of administration and maintenance. You will need to know how much time you are willing to devote to your loyalty program before deciding on one.

Keep it simple. Don’t make your loyalty program too complicated, because if it’s difficult or takes a mathematics whiz to figure out how many points are needed to earn a freebie, people won’t use it. Using the coffee shop analogy, assign points values to menu items, with simple items like a cup of coffee earning one point, and specialty items three points, and when the customer accumulates 50 points, she gets a free coffee. Or, if you want to go even simpler, the punch card (as mentioned above) is always popular and easy to implement. All it takes is a pack of printed cards and either a stamp or a hole punch. You can’t get much simpler than that.

Promote your loyalty program. Once you are ready to implement the program, make sure you get the word out! Promote the program on your website and social media channels, through email and newsletters, and put posters up in your business. Your employees need to be ambassadors of your loyalty program – make sure they know it inside and out so they can communicate all aspects of it to your customers. Train your employees in the specifics of the program and make sure they mention it to each customer.

Use the data. Loyalty programs can provide a plethora of customer data, including purchasing information on your customer’s buying habits that can help shape your business strategy. If your loyalty program requires a registration, which necessitates just a little more effort than implementing a simple punch card system, the data can be so tremendously beneficial to your business that it’s worth the extra effort. For example, supermarkets can use the information they collect to target promotional messages to specific customers. This data can also be used to cross-promote or upsell. Additionally, it may also help to determine which items you need to keep in stock and which ones you shouldn’t reorder.

Review the effectiveness of the program. At predetermined intervals, you should review your loyalty program to see how well it’s doing. There are several ways to do this, from asking simple questions about the program’s effectiveness (are your customers participating? Do they like it? What kind of comments do they leave about it on social media sites? Is your business getting anything out of it, in terms of more sales, more customers, more traffic?) to using business analytics software. Regardless of how you choose to evaluate, the results will help you understand your program’s effectiveness. This article from CustomerThink lists several ways to evaluate loyalty programs.

Always remember that loyalty programs aren’t just about increasing your bottom line; they are about building relationship with your customers. The more you get your customers to come back to your business, the more you get to know them as individuals – and perhaps even become friends. Relationships such as this between businesses and customers can go a long way toward building vibrant business communities. And to think it can all start with a simple punch card.

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