To “Rule” or be the “Fool” of Customer Retention
You Offer Customer Retention Programs; Awesome loyalty programs where customers receive a Free Product when they reach a set target using a punch card or maybe cash certificates for future discounts like “In Store Monopoly Money”, the coveted Gift Certificate and of course the Points that are in a Point of Sale computer; completely oblivious to the customer. Customers leave with a smile, and of course it is a sure bet they will be back to redeem the rewards and you will shatter next months revenue goals. What an amazing feeling! ….. Right? After all, A successful program can boost profit by 95% with minimal new customers!
Now the real question; Do you track these cards and what is the breakage? Who are your Customers? How long does it take you to reconcile your rewards? ARE YOUR CERTIFICATES AND CARDS ACTUALLY ONES YOU GAVE, or did someone get clever with a printer and you unknowingly were just robbed?
The questions aren’t asked to scare you or rain distrust on customers, but fact is many businesses have no idea what detriments their loyalty and gift certificate programs are having on their bottom line. Cardlis will take you through a few considerations and Calculations Every New or Experienced Business needs to review when offering customer retention programs.
What is Your Card Breakage & What is it costing you?
Breakage is a percentage rate comparing Cards, Points and Value given vs the amount never redeemed through return purchases.
Breakage is Extremely Important to your bottom line and contrary to belief, a high breakage rate IS NOT what you want. When it comes to customer engagement, a high breakage rate means that customers aren’t motivated to spend the rewards they’ve earned as a member of your program. This in turn means they’re unmotivated to earn more points in the future, which is very bad for your store’s bottom line. With customers disinterested in both earning and spending reward points, your store is left open to the Competition, putting your Customer Retention hopes on the ropes. Truth is, lost cards and high breakage drops customer Engagement by over 67% while Doubling customer turnover (a customer leaves rather then supporting you for Years)… The best way to fix a high breakage rate is to have a means of recording Every Point Given and reconciling with Every Point Redeemed, Review customer information and reach out to them periodically to keep in touch with new happenings in your store! Let customers know they have a value in your location. It may cost you 2% of your margin to reward customers…. But consider the costs of customers not returning at all.
Example: Say you offer a punch card OR a computer based point system that customers can lose or forget. Now assume you may fall into 1/2 the stated 67% engagement drop (mentioned above), Profit Margin on a product is only 15% (on a $10 purchase) and a customer must come 9 times to get the 10th purchase free. Customer Fills 3 cards/year for 5 years (length of time a customer supports a business on average *Stats Canada)
By having 33.5% of the customers come to the store 5 times then never come back, you will lose $45.00 / Customer!
- Non Engaged Customers Spend $50 and leave = $7.50 …… $7.50 profit once, then you need to find another customer
- Engaged Customers spend $90 but receive a $10 item free = $13.5 – $10 = $3.50 profit BUT in 5 years will provide $52.50 Profit
As Shown a Customer that Uses a Full Card and is engaged will provide HUGE profits for your Business! Keep customers coming, after all you have $45.00 to invest back
Gift Certificates are Crucial to a Businesses Success!
Gift Cards are gifts for more then the people receiving them as a gift; Gift Cards are a Major Gift to the Business Selling them!
Consider this. Gift Cards are sold as a “cash” transfer, meaning someone has just prepaid for items that you have not sold.. WHAT! I know that part was common sense! But in all reality it is a magnificent gift to Businesses! Instead of a rant on the HUGE benefits, I have listed the points below:
- Cash in your pocket to pay down debt or invest
- Cards sold under $50 often return 63% more then Face value
- Cards sold Over $50 often return 35% more then Face Value
- 50% of Gift Card recipients are New Customers! This means you may have landed a new Loyal Customer!
Long story short – for Every 2 customers that receive a $25 gift Card. One could become a loyal customer (Use the previous loyalty example) and both will most likely over spend by 35%. That returns $67.50 in Revenue ($50 x 1.35 = $67.50) PLUS a possible $52.50 profit from a new loyal customer! WHAT A GIFT FOR BUSINESS! $50 turned into over $100 in increased Revenue!
Who are your Customers?
I bet you can name your top 10 best customers, maybe recognize the top 20 in pictures.. You know the customers that have the “Large/Memorable Purchases” 3-4 times a year; But how about your real bread and butter, the people that come in multiple times a month and keep the lights on? It is imperative that a business giving any sort of reward also learns the customer they are rewarding. Through time learn where customers come from, their gender and age and how often they shop with you! Information is power, and after all you are paying for it with retention programs!
Engage your customers by extending birthday wishes, invitation emails to special events and of course a quick “Hi” to those who have not been in the store lately!
Are your programs “Fool Proof”? Or have you been Fooled?
When you sit down to view your program success are you just looking at the amount of tickets or points redeemed? Or do you have a method to see Every Card, Every Outstanding Balance and Every Reward or Gift Card used?
Customer Retention is great, as long as you are rewarding legit customers and not customers that are cheating life by photo-shopping their way into savings and theft using fake gift certificates. Unfortunately almost 20% of businesses realize fraud every year!
It’s hard to tell but this Card has 4 Fake holes in it. That is 4 Lost Sales but still a Free Coffee!
Reconciliation is a very time consuming and costly process so understandably is something very often omitted from management practices; So How do you offer Efficient, Safe, Affordable and Engaging programs that benefit you and your customers?
Loyalty & Gift Programs – For Locals, By Locals
Cardlis is a small business loyalty and gift card platform that provides Effective and Affordable retention programs; offering reporting and a continual growth of customer and program knowledge. Most importantly, Cardlis keeps customers Engaged and informed with their programs and can be accessed by any iOS, Android or Computer! Businesses do not need to purchase any additional hardware as they can control all programs from a tablet or smart phone!
The Cardlis Community offers a One of a Kind local perk that adds additional revenue and customer streams for all local Cardlis Partners with Cardlis Cash! Cardlis matches every point that a customer is rewarded with Cardlis Cash Credits that allows them to be rewarded in store & Buy a subsidized Gift Card in any Participating store! Think of it as offering customers 2x the points every day and as a Small business network becoming more competitive then many of the larger retailer programs!