Loyalty programs for retail shops

Winning a new customer costs you ads, time and discounts. A customer who bought from you once and was happy just needs a small reason to come back. That is what a loyalty program for retail shops does: it rewards the customer for every purchase, so they choose your shop over the one next door. In this article we explain how to build a simple program and how to tell if it works.

Why loyalty?

In most shops, a small share of customers makes up a large part of sales. They deserve to be known by name and rewarded. A loyalty program doesn't create a happy customer out of nothing; service, price and stock come first. But it turns satisfaction into a habit of buying again.

A loyalty program also gives you something else that matters: data. When a customer is registered with a name and number, you know how often they buy, what they prefer, and when they stopped coming. Without that, all your customers are unknown numbers in a sales report.

How points work, simply

• The customer earns points with every purchase, based on the invoice value.
• Points build up on their account, and they see them on every visit.
• They redeem points for a discount on a later visit.

Link points to the customer's phone number, so there is no card to lose. At the till the cashier picks the customer and the points are worked out automatically, with no paper or stamps.

Tell the customer their balance with every invoice, out loud or on the receipt. A customer who knows their points are close to a reward will think of your shop first next time.

Tiers: reward the customers who buy most

Tiers group customers by how much they buy, such as regular, silver and gold. The higher the tier, the better the reward. That gives the customer a goal: «just a little more and I reach the next tier». At the same time you learn who your most important customers are.

Don't overdo the number of tiers; three are usually enough. Make the reward at each tier something the customer notices, such as more points on every purchase or first access to offers, not a tiny difference nobody feels.

Simple rules the customer understands

If a customer needs a calculator to understand the program, they won't care about it. Make the rule one sentence the cashier can say, like «every set amount you spend earns a point, and a set number of points earns a discount». Work out the reward's value from your margin, so the program doesn't eat your profit. An invented example: if the reward equals 2% of purchases and your margin is 30%, that is a reasonable cost for bringing a customer back.

Common mistakes

• A reward so small nobody notices it, or so large it eats your profit.
• Too many rules and exceptions that are hard to explain.
• A cashier who doesn't ask for the customer's number, so no points are recorded.
• Not telling customers their points balance, so they forget the program.
• Changing the rules often, so customers lose trust.

Most of these mistakes have nothing to do with the software itself, but with how it is run in the shop. Train the cashier on one short sentence to ask every customer for their number, and check with them every week how many invoices were recorded under a customer's name.

How to measure success

Don't judge the program by feel. Before you start, note your current numbers, then compare after two or three months:

• How many registered customers bought more than once?
• Did the average invoice value of registered customers go up?
• What share of sales is recorded under customer names?
• How many points were actually redeemed? If nobody redeems, the reward is not attractive or not known.

Remember that the effect takes time. A customer who buys once a month needs two or three months before you can see them coming back more. Don't stop the program after two weeks, and don't change its rules every month.

How CARMA HUB helps with loyalty

• Loyalty points worked out at the till on the customer's account.
• Customer tiers that recognise those who buy most.
• A profile for each customer with their purchases and balance, plus credit sales and statements.
• Sales reports and Excel export to follow the results.

Read also POS for clothing shops and customer credit tracking. See all features, check the pricing, and try it free for 7 days with no card.