“Loyalty programs cut in to already thin margins.” That’s the perception that so many independent businesses have, but the potential benefits and business generated by a customer loyalty program can greatly outweigh the costs associated with a traditional loyalty program.
If concerns about cutting into your margins are why you don’t have a customer loyalty program, be grateful you’re not in the same situation as Bloomingdales this week. A glitch in their system ended up giving loyalty members thousands of dollars (in some cases tens of thousands) of unearned rewards. Of course now they are pulling those rewards back, causing a whole different type of controversy. But rather than using this minor retail scandal as yet another excuse to continue ignoring the necessity of a good customer loyalty program, I’m hoping it can help us get the wheels turning about the right way to approach loyalty.
The traditional customer loyalty model is very similar to the program that Bloomingdales runs. Dollars spent earn you points. Once a certain number of points are accrued, a gift certificate or store credit is issued. Spend money, get money back. There’s nothing really wrong with this model. It’s the most common for a reason and I doubt that any merchant who really commits to this type of program is going to have much trouble finding at least a modest amount of success with it. But it does also have its problems. If executed incorrectly, you may not be encouraging repeat business. You could be cutting into margins and profits. Not to mention it being the same exact loyalty program that everyone, including your competition, has.
Here are some things you can do with your customer loyalty program that might just alleviate some of these common concerns, and help you to grow your pharmacy business.
- Future use rewards- I certainly don’t want to downplay the viability of the traditional loyalty program. However, if you choose this model, I highly recommend sending gift certificates for future use rather than providing at the register rewards. Sure, offering the reward to the customer right when they break that point threshold is super easy and the customer is going to be pleasantly surprised. It’s why the RMS loyalty program offers the option for immediately redeemable rewards. However, providing a gift certificate for future use offers a few distinct advantages.
- Customers will have a reason to come back to the store. Encouraging return visits is always better.
- Customers may splurge on a non-necessity that they wouldn’t normally purchase
- Customers generally spend more than the dollar amounts of gift cards/certificates
- Membership buy-in – Consider charging an initial membership fee (It doesn’t have to be much) to join your loyalty program. This does a couple of very important things
- Creates immediate value for your program. If they have an investment in the program they’re going to want to reap the benefits which means more repeat business at your pharmacy.
- It helps negate some of the cost associated with implementing and maintaining a loyalty program.
- Special events- If you host any special events at your pharmacy, you can make your loyalty customers feel a little more exclusive by offering them perks like early registration, discounted participation fees or even events that are just for them. During the holidays offer loyalty program member’s exclusive extended shopping hours either before or after the store opens so they can beat the crowds.
- Freebie items- While this may seem like just a different way of giving a currency based reward, you may actually spend less with this type of giveaway. People really like getting free stuff. It’s just part of our nature. And we also have a tendency to equate the value of items differently than a cash equivalent incentive. Your giveaway doesn’t even have to be that expensive to be something that a customer could potentially value. A free greeting card with qualifying gift department purchase or travel size hand sanitizer with the purchase of two full size bottles. Set up these giveaway’s as bundles in your pharmacy POS system.
- Special Offers – Offering discounts and deals that only customer loyalty members receive is another great option. Consider offering loyalty specials on a specific day every week or one specific day each month. For example, the third Thursday of each month could be Vitamin day where you offer BOGO specials or coupons for future purchases.
The point I’m trying to drive home here is that loyalty is certainly not a one size fits all solution. There’s no one right way to do it, but there are ways to optimize the effectiveness of your solution, especially for the budget conscious independent business. And don’t worry, with a well-managed program implemented through your POS system, you won’t have to worry about accidental 5 figure reward. Check out our free E-book on customer loyalty for a deeper dive into all of these options and more.