Amazon has always been recognized for customer loyalty, and now it might actually be costing them money. "Amazon Prime," a loyalty program rolled out years ago as a way to encourage more online purchases has been a dramatic success for e-retailer. By paying $79 a year, members get free, fast shipping for all purchases.
Recently Amazon announced new additions to Prime, including a lending service for Prime members, as well as a video service for Kindle owners. The cost of offering these will cost Amazon millions, according to analysts, but the theory is more loyal customers will mean more revenue, defraying the up front costs.
I've talked about loyalty programs for small business owners in the past, but punch cards and "simple" programs can often fall off or ineffective one shot deals. A formal program that increases loyalty (and hopefully referrals) while producing measurable results is something that every growing small business should consider. But what should that look like, how do you measure success and what sacrifices have to be made?
There are a number of small business owners in Massachusetts currently taking advantage of their own programs and have seen great results. For example, Steve Silberberg owns a hiking business in Hull, and has incorporated a "Frequent Hiking Program" that allows customers to bank dollar amounts based on the number and length of hiking trips they take. For example, a one week trip would bank $100 to use for another trip in the future. To date in 2011, the program has worked, as Silberberg calculated that over 44% of business was from repeat customers.
"Participants really like the cumulative discount program (and hopefully us as well)," he said.
Much like airlines that allow frequent fliers to take advantage of miles for free flights and upgrades, service industries like Silberberg's must be a little bit more creative to encourage repeat business, but still apply the same loyalty principles. This can often come in the form of discounts for regulars that get progressively better, according to Jill Tomich, co-founder of the Ultimate Bootcamp in Boston, which runs local fitness camps.
Tomich offers one rate for a "New Bootcamper" who hasn't yet attended any sessions, but then decreases the price for customers who have been to one or more, then three or more sessions. She has set levels, from "Newcomer" to "Junkie" and gives discounts according to rank.
"A graduate typically gets $20 off the session where a junkie is seeing a $40 to $50 savings each month," said Tomich. "60% to 70% of all bootcampers who take a four-week session take additional sessions, so they can be considered "repeat customers."
One thing for business owners to keep in mind, at some point the loyalty discount has to hit a ceiling, which means there's only so much a company can do before its starts to impact the bottom line. As Tomich points out, "I guess the only downside would be that those who reach "Junkie" status don't have that next big title to look forward to."
Increasingly repeat business isn't just tied to discounts. Sometimes fostering loyalty means delivering on the promise your business has made. In the case of Ceia Kitchen + Bar in Newburyport, ensuring that the entire staff is delivering on the experience of a five star restaurant without charging five star prices has resulted in a jump in repeat business.
Every Ceia staffer is trained via a Service Excellence boot camp by Marblehead-based etiquette expert Jodi Smith (Mannersmith) and continues in the form of secret shopping diner checks by PatronEdge. Detailed reports are provided about what is working and what isn't, then shared with staff to improve. Owner Nancy Batista-Caswell maintains this is an operations essential and has set her establishment apart from others in the area.
"In the end what we try to deliver is an exchange of confidence: our teamís confidence to leave a favorable impression that of our guests who know we will provide an exceptional dining experience worth coming back for," Batista-Caswell said. "Ceiaís small business sensibilities keep us grounded in the understanding that every guest is important, and we want them leaving as loyal as they were when they arrived. But to restaurants who donít invest in tools like etiquette training, spotting companies and constant review of customer comment cards, there is no loyalty card program in the world that will bring your diner back if their total experience wasnít at if not ahead of their expectations upon arrival.
How have you encouraged loyalty and repeat business with your customers? Have you offered anything "formal" that has had success? What do you think about loyalty programs in general?
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Jason Keith has been working for and with small businesses in the New England area for more than 10 years, specifically small, micro businesses. Born and raised in Massachusetts and a former journalist, he provides a unique perspective on the issues facing small businesses locally and nationally.To reach him directly email email@example.com.
This is a personal blog. The opinions expressed here are the author's alone.