Retailers have an infinite number of responsibilities keeping them on their toes, and often up at night. The thought of adding a loyalty program to that list can seem daunting and expensive. While most merchants are aware of the benefits of loyalty marketing, most aren’t always sureif it’s worth the cost.

As business owners and managers, we all know it’s important to weigh the costs of any new investment — and questioning the decision to invest your time and resources in a digital loyalty program is no exception. Here are a few common questions and concerns (with answers!) about the ROI of a loyalty solution.

Business is good, why do I need a loyalty program?

Competition is always around the corner, even if you can’t see it coming. You might
think you have a hard-to-beat mix of products/services, but that doesn’t mean it will be that way forever. If anything, creating strong relationships with your customers is crucial at this peak moment while so many consumers favor your brand. A loyalty program can help strengthen your relationships and fend off competition.

I’m feeling the squeeze these days – what if I can’t afford it?

Scenario: You operate a two-store business in a bustling, growing city. It’s been seven years since opening both shops, and you have pretty much gotten your buying and inventory operations downpat. You’re also keeping expenses down because you know how many hours of labor you need, and on what days.

All things considered, you’re doing everything you can to increase your margins, but you’re out of options. For many retailers, the dilemma at this point would be how to acquire more new customers through paid advertising and expansion efforts. That is, until your think about this: It costs significantly more to sell to one new customer than it does to sell to an existing customer.

Think of it this way: acquiring a new customer comes with certain costs, such as marketing and promotion, floor staff, signage, and the cost of your high-traffic retail location. Essentially, you’re spending a lot of money to bring in new customers whose relationships aren’t nearly as valuable as those of your existing customer base.

A tale of two stores: the store on the left shows many customer purchases, but not all of them reach the break-even point–the cost of acquiring that new customer. The store on the right shows fewer customers, but they’re much more valuable because they generate repeat business.

With a loyalty program, you can focus on boosting transactions with existing clients, thus yielding better profits.

I have a loyalty program–a punch card. Why do I need to upgrade to something more expensive?

My own wallet is stuffed with credit cards, receipts, I.D
cards, and more. What about yours?

Asking customers to keep a punch card is borderline burdening them, not to mention it’s one of the easiest things to lose. It’s almost not worth mentioning that a paper punch card offers you zero insight about product performance, provides no data about your customers, and doesn’t enable you to reach out with promotional offers.

As for plastic cards, you might get more data if their account is set up with your point of sale, that is, if the customer hasn’t lost their card. Cards as the only loyalty program in place? Fail.

Why do I need to encourage loyalty when my store sellsone-time purchase products?

Even if you own a vacuum cleaner store, where people might only shop once or twice in their life, you likely sell accessory products such as bags, filters, replacement parts, and cleaning products. After spending time educating your customer about a big-ticket item with a low margin (like an appliance), you’ll want them to return to purchase the smaller, but higher margin, products that you sell.

Without a loyalty program to facilitate communication, what are the chances that they will remember your store when they could easily buy the smaller more disposable products on Amazon or at a big-box store?

What if I don’t have enough time to manage a new system?

Certain loyalty solutions are configured to sync with leading point of sale systems, so they can be up and running in no time. Some solutions, such as  Thirdshelf,  come with pre-populated campaign templates that are super easy to fill in with your own copy and branding. While there’s a small opportunity cost to learning the system, creating monthly promotions or newsletters is a cinch once you get going.

How will I know if it’s working?

Being able to calculate your return on investment from a loyalty solution (or any new system) can be an issue for retailers. Using a loyalty solution to incentivize people to shop more often and to generate email marketing campaigns might seem to work, but how do you know which campaigns are really driving sales? How do you know if it’s directly increasing sales, and if the results outweigh the cost of your program?

Progressive loyalty solutions like Thirdshelf are directly tied to your POS system, making it easy to see the link between email campaigns and individual transactions. For example, a customer might receive a 15% off birthday promotion, and redeem it in-store. That 15% discount is added to the sale at checkout and will clearly show the link to the campaign. Because the loyalty solution and POS aresynced, you’ll be able to easily see how successful each campaign is in terms of sales – not just email open and click-through rates!

If you’d like to know more about Thirdshelf and how it can help you drive more sales, increase loyal relationships, and deliver great ROI — contact a Marketing 360 Payments Account Executive now!

Written by: Stephanie Braun

If you enjoyed reading this article you may enjoy reading:

13 Customer Appreciatio Ideas to Show Your Customers Some Love

Turning New Customers Into Regulars Using a Loyalty Program