From corner sandwich shops to local sports bars, you’ve probably had the experience of receiving and utilizing loyalty cards to receive a bonus at the end collecting a series of stamps. Small business owners often utilize various forms of loyalty cards to encourage customers to return to their store and make more frequent purchases along the way. Although reward programs are very prevalent in today’s markets, extensive consumer behavior researches show that there are better ways to maximize returns on these promotional incentives. There are several key strategies to best implement loyalty card tactics for small business owners.
First, experts in loyalty program studies show that people find it easier to achieve a goal and enjoy it more when they rack up points through purchases that they like, with minimum restrictions. For instance, a student cafeteria experiment allowed students to choose a loyalty card that offered stamps for both sandwiches and sushi or just sandwiches (or just sushi). Even when students had to get more stamps (15 for the both option, and 10 for single option cards), significantly more students chose the both option and enjoyed earning rewards with it.
Second, and in relation to the first point, many successful small businesses often have a “killer product or service,” just like the famous Cronut for Dominique Ansel’s bakery in New York. Another extensive marketing study showed that offering the signature product or service as a free reward for the loyalty card produced the best results for increased purchases and profitability. Consumers consistently seek for a unique and reliable product or service that represents the local business, and love it more when they can be rewarded for being loyal.
Lastly, the Goal Gradient hypothesis has supported the idea that people accelerate their consumption frequencies as they get closer and closer to the goal. To prove that people indeed speed up their purchases, a group of behavioral scientists experimented with two types of loyalty cards with a coffee shop at a large university. One group of customers received loyalty cards with 10 blank stamps for a free drink, while another group received cards with 12 blank stamps but were given 2 “free” stamps initially. Although both had to buy 10 drinks to obtain the reward, the card with 2 “free” stamps were redeemed much more quickly- a result from the customer’s perception that they were relatively closer to the goal!
Loyalty cards can be a valuable tool to measure and motivate repeat purchases, and is relatively effortless to manage, especially with so many easy and affordable online business card companies available. Yet, less than a majority of small businesses fully utilize this simple promotional strategy. Every local business should look into the specific details above and start a loyalty program as soon as possible to boost sales and retain a core customer group within their neighborhood.