It’s the end of the year, and as a business owner, you’re already busy planning your budget for the upcoming twelve months. As you meticulously (or maybe impetuously) line up just where each dollar will go, you wonder: can you afford a loyalty program?
With the widespread nature of loyalty and the rise of mobile technology and other loyalty tools, it’s a question that many business owners are asking these days. Ultimately, the answer depends on how you view loyalty in general. You know that loyalty is important, but is it worth investing in? Here are three more questions to help you arrive at an answer.
1. Can your loyalty program be a profit center?
While it’s important to be mindful of the costs of building and maintaining a loyalty program, it’s also important to set goals for the program’s profitability. There’s an unfortunate misconception that loyalty programs are necessary cost centers – they might be important to have in order to keep up with competitors, but they don’t end up generating any profit. Luckily, this perception is not reality.
According to The Loyalty Effect, building loyalty with 5% more customers leads to an increased average profit per customer of between 25% and 100%. To find out just how loyalty should affect you, let’s do some simple math, starting with some relatively modest assumptions.
Let’s say you have 1,000 customers who spend $100 a year, and you introduce a loyalty program that incentivizes 50 of those customers to become loyal to your business, spending 25% more than they normally would. That means that you’ve already made $1,250 – and we’re just getting started.
If you can create 100 loyal customers with your program, you’ll have made $2,500. If your 100 loyal customers spend 50% more than average, you’ll have made $5,000. If they spend 100% more, you’ll have $10,000.
It might seem obvious, but the truth is that a successful loyalty program is incredibly worthwhile.
2. Can you afford to effectively promote your program?
As we’ve seen, a successful loyalty program can be effective at increasing revenue. The question is, though, whether or not you can afford to make your loyalty program a successful one.
Today, businesses have access to an abundance of tools that make creating a loyalty program fairly easy. While some businesses may still question whether or not they have the capability to create a program, an equally important – and more often overlooked – question is whether or not businesses can afford to promote the programs that they create.
Fortunately, at least in terms of monetary cost, generally, the answer is yes. Promotion of a loyalty program doesn’t necessarily require any more expenditure than a business would normally designate to its marketing budget, but it does require focus and commitment. Often, the biggest barrier to promotion is the time and focus that are required to attain success. Truthfully, if you can’t bear this cost, it’s probably not worthwhile to invest in a program at all.
Check out our article on effective ways to promote a loyalty program for more insights to keep your program profitable.
3. Can you use community loyalty to keep your base costs low?
Well, you probably saw this one coming – the answer is almost always yes. Think of community loyalty as the value you get for making purchases in greater quantities. When multiple businesses are involved, it allows the local business community to access premium loyalty programs at a price that’s affordable for everyone. At LoyalTap, we take pride in helping local businesses tap into community loyalty. Check out our pricing info for full details on our affordable community loyalty program.
So, there you have it – three questions that will determine whether or not you can afford a loyalty program. If the answer is yes and you’re ready to invest in a loyalty program this year, get in touch with us. We’d love to help you and your community profit from loyalty at a cost you can afford.