By Dori Soukup, CEO and Founder of InSPAration Management
In the early 1980s, American Airlines’ goal was to increase retention and provide their clients with something extra special. The airline created the first frequent flyer program that allowed travelers to accrue miles and gain benefits when they flew with American.
American Airlines was one of the first companies in the country to offer a customer loyalty program. It set the standards for the entire industry. Since then, loyalty programs have gained significant popularity. According to a recent study, companies spend more than $2 billion on loyalty programs every year. Statistics show that the average American household belongs to about 14 different rewards programs.
If you want to increase your retention rate, it is a great idea to offer your clients a loyalty program that will keep them coming back.
What type of loyalty program should you offer?
There are several types of programs to offer consumers, and no matter which one you choose, it is important to keep it simple. Below are two of the most effective loyalty programs:
A. Charge a fee to join the loyalty program.
For example, Barnes & Noble charges its clients $25 to join their loyalty program. Then, its members can save 10 percent on their purchases for an entire year. For a person who frequents Barnes & Noble weekly, this type of program provides great benefits. The end-of-year savings are significant. This program keeps me loyal to Barnes & Noble, and the $25 fee to join is well worth it. You can do the same, but I recommend you charge more. For example, you can charge a fee of $150 to join and offer them the following:
- Two $25 gift cards—to be utilized one at a time
- A complimentary consultation valued at $50
- A complimentary makeover valued at $50
- A loyalty program welcome kit
- A discount of five to ten percent on every spa visit or retail purchase
You are giving them the $150 enrollment back in value. This allows you to raise cash flow, and encourages the new member to visit the spa on a regular basis. As part of the loyalty program, the client will benefit by receiving a small discount with each spa visit.
B. The second plan offers clients a chance to join for free and earn points with every visit. You can reward them by letting them earn one point for every dollar they spend. Once they reach a certain number of points, they can use them toward gifts, services or products.
You will need to determine the amount of rewards you are willing to offer. For example, if someone spends $500, they will earn 500 points. If you wish to offer them a 10 percent reward, you will need to select a $50 prize that they can have once they reach 500 points. This represents a 10 percent reward. If you are offering this type of loyalty program, I recommend you offer merchandise as a reward because your cost will be $25, but the client will receive a value of $50. This practice allows you to decrease your loyalty cost to a five percent reward instead of 10 percent.
Select gift items that you can brand with your logo. This includes robes, T-shirts, hats and water bottles, all displaying your logo. This method has many benefits:
- Provides your loyal clients with desirable, quality gifts
- Gifts are a great way to promote your business
- Shows a higher perceived retail value while reducing your loyalty cost
- Saves money and increases retention
The point system can also be used as a marketing tool. If you have some slow slots within your schedule, you can reward your clients with double points on slow days or hours. Instead of offering discounts, offer double points for promotions. You can ask your clients to write reviews to earn points. Or, let them earn points when they “like” your page on Facebook, and so on.
Keep in mind that no matter which program you offer, you have to market it, track it and deliver a great guest experience.
Offering a loyalty program is a great opportunity to promote your business and recognize your VIP clients with special value while motivating your clients to keep doing business with you. Implement a loyalty program and increase your retention!
Dori Soukup is the Founder and CEO of InSPAration Management, a firm specializing in medical spa and salon business development, advanced education, and business tools. Throughout the past 15 years, Soukup has contributed to the success of spa companies worldwide. Her passion is developing innovative, effective educational programs and business strategies leading to exponential growth and profits. She is the recipient of the American Spa Preferred Educator award and is a sought-after global speaker within the spa and medical spa industries.