While starting a business is difficult, it’s even more difficult to retain those customers after they’ve made a purchase. In any given situation, though, it’s cheaper to retain conversions than it is to turn them over.
So, what do reward systems have to do with that? How can they possibly help your business at all? Well, with any luck, you’ve interacted with a well-designed reward program and know the feeling of achievement it can offer.
Read on to learn everything you need to know about reward systems and developing one that works for you and your business.
Understanding the Psychology of It All
To design a decent reward system, it’s important to understand the psychology behind it (in truth, that’s the base of all good marketing techniques). If you’ve ever heard of Pavlov’s dogs, you know what we’re talking about.
If you haven’t heard of either of these, they were both studies that tested reward systems and found that they work well with animals, and consequently humans.
Russian psychologist Ivan Pavlov discovered classical conditioning, which means learning through association. Pavlov’s study involved ringing a bell right before dogs ate their food. Eventually, the dogs associated the bell with dinner time and would immediately get excited and begin salivating once they heard the bell.
While humans won’t salivate like a dog in response to your reward program, they do get excited about things like points, discounts, and even free rewards. Creating a system that has effective rewards is key to gaining customer loyalty.
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Which Reward Systems Work?
Before you can decide on a reward system for your business, you have to know which models are the most effective. Here are a few options to help you get started.
Punch Cards
Punch cards are simple and don’t require any tech. All customers have to do is remember their card and hand it over each time they visit.
This system is also one of the simplest to design. All you have to do is decide what you’re going to give away after customers reach the goal you set for them.
Free drinks are great for coffee shops or cafes. Free meals are great for restaurants and even bars. A free item from a store’s brand is great if you run a storefront of any kind.
This method is also great if you’re just starting out. It’s fairly low budget (just pay for the cards and whatever items you’re giving away) and simple to set in place.
Scannable Membership Cards
This is a tried and true point system, and a lot of companies across the US utilize it. Some companies, like Starbucks and Target, have apps users download instead of a card, though.
Customers can also create shopping lists in the Target app and link cards in both to pay for their orders online or in-store. Companies like IKEA still use cards as well, though, and it still works.
When you join the “IKEA Family,” you have access to exclusive rewards (like free coffee and tea) and coupons on your purchases. The same goes for the Target and Starbucks apps, but Target also offers points that turn into cash back on your purchases. Starbucks offers points that turn into free items like a drink, bakery items, or add-ons like syrup inside your drink.
The fact that you can use the app to pay for things from these stores is enough to make customers want to utilize the program, but getting rewards back is another added bonus.
Adding value to your business is important, and membership systems do exactly that.
Point Systems
For Disney’s Vacation Club, members purchase DVC points at the beginning of any given year. These points are recyclable and cover the member’s stays at certain vacation clubs throughout the parks and resorts.
Point systems like this are great because it not only guarantees customer loyalty, but it ensures that you don’t lose money if points don’t get used.
The DVC does allow customers to “rent” their points out to others on the occasion that someone won’t be able to use theirs. Including this sort of backup might be a smart idea for your reward system as well.
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A Great Customer Experience Leads to Customer Loyalty
Overall, the more effective your rewards system is the better. Providing a great customer experience — whether through free items, coupons, or even giveaways — is a surefire way to create customer loyalty.
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Marketing Works Too
Once you have an effective business model, it’s important to market it well. How much promotion and marketing you give your business and its rewards system will have a direct impact on how much utilization your rewards system receives.
If you have a trusted brand, then your customers are not only more likely to keep coming back, but they’re also more likely to recommend your business to the people around them. Word-of-mouth marketing is not only the cheapest technique you can use, but it’s also the most reliable.
People trust the recommendations of their loved ones, so having trust in your brand is a surefire way to gain that.
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Which Reward System Will You Choose?
Now that you’ve learned about reward systems, it’s time to choose one that’s going to work best for you and your business. Punch cards work well for local restaurants, and so do scannable membership cards. Those same cards also work well in stores and even online stores.
It’s important to note what’s going to work best for you and your business and to be sure you take the time to decide before implementing anything.
If you’d like to learn more about the latest in business and finance, check out the rest of our blog.
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