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A Simple Guide to Customer Loyalty Programs

As businesses, one of our goals is to increase our number of customers, right? As this number grows, retention also becomes a point of concern.

How do you strike the balance between gaining new customers and encouraging repeat customers? One common method is a loyalty program. If done well, these are win-win situations that encourage people coming back to your business time and time again.

Dandelion with seeds blowing away in the wind across a clear blue sky with copy space

Implementing a loyalty program can seem complicated but it honestly isn’t. It just requires thinking about how you’d like to reward your customers and deciding on how to deploy the idea in your business. Here’s a few examples to get you thinking in the loyalty direction:

Loyalty = Current Customers Getting First Dibs

An easy thing that all businesses can do- when you launch a new product or service, offer it to your already loyal customers first (it’s like a “right of first refusal”). You can even take it a step further and offer it to them at a discounted price (usually the discount price has an expiration date). This isn’t so much a “program” as a “best practice” to show appreciation for the people who already support you.

Loyalty = Rewarding (Financially) Frequent Purchasers

Probably the most common type of loyalty program is some type of number system, like a punch card. A person has to come into your store a set number of times before receiving the reward. A common example is a punch card, like a “Buy 10 get the 11th free” deal. Service-based businesses can also use this type of reward system (i.e. get five haircuts at this salon and get a free manicure). It works because customers view the reward as either something they would purchase anyway, or something of value that they are interested in but haven’t purchased for themselves.



Loyalty = Letting Frequent Purchasers Play A Game

Games are another way to reward (or create) loyalty. McDonalds is a pro at encouraging repeat customers through games. One prime example is their Monopoly game. The contest only runs for a couple months out of the year. To play, you just have to buy food at McDonalds (I think it has to be a certain size in order to get stickers). Customers are encouraged to play for the bigger prizes (which require more stickers/purchases), but there are also smaller scale prizes as an incentive (like a free Double Cheeseburger). Irving had a similar contest a few summers ago involving Monopoly (I think the prize was a lifetime supply of fuel). I won a lot of free soda that year.

Loyalty = Giving A Freebie (Bonus Points If Unexpected)

Another easy way to reward loyalty is giving your customers something they already want. Sometimes when you go grocery shopping, you get some coupons with your receipt. Frustratingly, these are usually items that you’ve just purchased. That’s because you’re not getting these coupons at random. The machines assume you purchase the items on a regular basis (which may or may not necessarily be the case), and offer an incentive to return to the same store to purchase those items again.

Online stores have a unique advantage here- they can keep track of purchases and send follow up emails to encourage customers to “buy it again.” There’s a risk of appearing intrusive if you consistently offer specific rewards- there’s actually an entire episode in the last season of Parks & Recreation involving the ethics of data mining (all the citizens in Pawnee received unique gifts that were eerily specific and pointed back to information on their phones). In other words, your loyal customers want to feel like you know them, but not like you’re spying on them.



Loyalty = Letting Customers Purchase Membership For VIP Treatment

Some of the more successful customer loyalty programs actually require a membership fee. It seems a bit counter-intuitive to make people pay to be loyal customers, but in practice it makes sense. Amazon Prime is a great example of this- customers pay an annual fee, and as a result, they get certain products free or discounted, automatic 2-day shipping, and audio/video streaming. Another example is Dunkin Donuts Perks program. This past football season, whenever the Pats won a game, DD Perks members would receive a free medium coffee the next day (I almost signed up for that very reason).

In terms of services offering memberships, at some airports, you can even purchase a pass to the “Admiral’s Club”, a lounge where you can wait in the relative abundance of electrical outlets and free snacks (and relative quiet).

Customer Loyalty Programs not only give your current customers a reason to keep coming back- they can provide incentive for new customers to jump on board.  Think about rewarding the one you’re with and you may find your customers are even more loyal than you realized.



Tech Thursday: When To Pay

With lots of ‘free’ stuff online, how do you know when to pony up? Kassie and Nicole discuss things they’ve gladly paid for, and when free was really best.



Free Reading: Why We Give It Away Online

Three years ago, I wrote a book for National Novel Writing Month. It’s been sitting in Google Drive, and I’ve been wondering what I do with it.

I’ve kind of edited about half of it but I think I’d have the motivation to finish if I knew what next. (I sometimes am paralyzed by choice. Not my best quality.)

The beginning of my terrible novel, sitting in Google Drive, wondering its fate.

The beginning of my terrible novel, sitting in Google Drive, wondering its fate.

Option 1: Do I send it to 50-100 publishers, hoping one will like it enough to rip it apart and await my rewrites?

Option 2: Do I self publish it, making my friends pay $1-$10 for the ‘pleasure’ of reading it, probably making all of a few hundred bucks?

Option 3: Or do I just format it as an ebook and give it away?

I’ve been leaning toward Option 3. Sure, it seems like the least amount of hoops to jump through but it is also the world I know best: the internet is all about giving stuff away. I’ve been writing this blog ‘for free’ since 2007 for example.

I was reading a great article about Why Give Away Your Work For Free. To paraphrase Cory Doctorow, he says people who download the free book wouldn’t have bought the book anyway. Really by giving things away for free he’s increasing his audience. To quote: “My problem isn’t piracy, it’s obscurity, and free ebooks generate more sales than they displace.”



It actually got me to thinking of something completely different I read from Elizabeth Gilbert (read the photo caption- it’s long like a blog entry). But to paraphrase, basically you can’t make creativity show up and earn you money. You need to give it room to breathe. To quote: “I adore Creativity. I love her. I have devoted my life to her, because she brings me joy. But I do not suggest relying upon her to pay the oil bill. She is not very reliable. Creativity has no idea what the words “oil bill” even mean.”

My whole life the last seven years has been building two businesses, in other words the laser focused pursuit of money. Creativity showed up and I have this kind of terrible, moderately personal 124 page story sitting in my files without a purpose. Do I demand it make me money… or put it out there for free?

(Aside, I get that I should stop calling my novel terrible. But I’m one of those ‘plan for rain, be happy when it doesn’t’ kind of people so I am just managing my own expectations- and yours- by doing that.)

So do I enter into a world of a million rejections? Do I ask my creativity to make me some money now with this novel (which you see doesn’t even have a title but ‘Novel.doc)? Or do I give this novel away in hopes that my ideas will get out there and in turn generate others?

Now I’d be a liar if I said this ‘give it away and get more later’ idea was a writing only idea. Musicians give away albums, companies swag… every industry has a ‘something for free’ component so this idea is far from original.

But somehow reading those two articles in a row made me realize why I wanted to give it away… and the gut instinct wasn’t one of general laziness! If you are similarly on the fence with something you’ve made, let me know if reading those two relatively short posts helps clarify what you should do like it did for me.

(By the way, if you want to read my yet to be titled novel, just leave a comment on here and I’ll make sure you get the information for it.)



Three Reasons Why ‘Free Domain Name’ Works

whyadomainisfreeAs part of SquareSpace’s marketing pitch, they give away a free domain.

I find this interesting because, since they continue to advertise it, it must be working.

But allow me to let you in on a little secret.

This really isn’t a big deal. Actually it’s genius of them. Here’s why:

‘Free’ is an excellent psychological term. 

I don’t need to tell you this. We all like to feel like we are getting something for free. Am I right?

Domains cost less than $10 so giving away one to a customer that’ll give you at least ten times that is no big deal. 

When you buy a domain as a consumer, you can pay anywhere from $12/year (Enom price) to $35ish/year (Network Solutions). You’ll pay this to renew your domain name too. You can chose to renew your domain for one, two, five, any number of years. But when it’s time to renew, you’ll have to pay again to be able to keep using the domain name.

Now a company is not ever going to sell you something for less than they paid for it. That would be silly. (Note from Matt Baya: Unless this product is considered a ‘loss leader’, which is a below-price product designed to get you in a store and ideally buying more other products.)

An additional cost that consumers don’t have is also at play. To be a domain reseller, you need to pay a few hundred dollars a year. In other words, the reseller needs to make $300-$400 to keep being able to be a reseller.



A company like SquareSpace (a reseller) pays a little less than $10/domain. So if they sold it to you for $12, they’d make about $2 on you. If they sell it for $35, they make $25 on you. Once you pay back your reseller fees (and at $2/domain, it might take you awhile to get to $300), you are making money on this proposition.

But if you buy, say, a year of service at $10 a month, SquareSpace gives you a domain for free. So they make $120 and give you $10 of it. Not a big loss to them to give you this small gift. I mean if you had to give a customer something and then you know you’d make ten times that off them, you’d do it right?

They can make sure it stays renewed.

This is probably the most convenient reason to let SquareSpace (or any web host) get the domain for you, whether you pay for it or get it free.

When you register for a domain name, you do so with an email address. Before it’s up for renewal, you’ll get an email letting you know.

But what happens when you ignore it or change email addresses before it gets renewed? You can guess I am sure.

If you don’t renew your domain name, it is assumed you do not want it and suddenly, your domain name is for sale again. Best case scenario: your website is offline while you buy it back for what you paid for it. Worse case scenario: Someone buys it and makes you pay $500 (or more) to get it back. (This happened to someone I know and she had me broker the deal. Painful.)

I keep track of when my clients’ domain names are up for renewal. But some developers don’t so you should know when yours is due. Here’s how you tell.

1) Go to whois.net. Type in your domain name and press go:

whoisnet

 

2) The next screen will have information about your domain name including when it expires:

whoislookupexdate

 

So I need to renew my domain before April 15, 2014.

If a company like SquareSpace has control over your domain, they can make sure it gets renewed. The flip side of this coin is you are relying on them to do this. I usually make clients register for their own domain so they know they own it. That said, I tell them if they are comfortable they should give me access to their domain registry account so if they are off in Tahiti and their domain is expiring, I can get in there and do the renewal.

The free domain? It’s genius. It’s something that doesn’t cost SquareSpace much, it prevents the disaster of an unrenewed domain name, and the customer gets to feel warm and fuzzy about getting free.

Tell you what, if you ever become a client of mine, I’ll give you a free domain…because it’s cheaper than buying you lunch.

Why You Give (Some) Information For Free

“It seems like a lot of social media people give information for free.” one of my friends mentioned today. The implied question being, why is that?

Giving some free stuff away doesn't mean your company won't make money. Mozilla in the tech world is an excellent example of sharing information to build value.

Giving some free stuff away doesn’t mean your company won’t make money. Mozilla in the tech world is an excellent example of sharing information to build value.

As people in the information business, we know it’s important to give some of our product for free in the way of blog entries, white papers, etc. Here’s why people give away something for free that they didn’t necessarily get for free:

Information builds credibility.

Does this person know what they are talking about? Do they seem like the kind of person I want to do business with? This is information people will want to figure out before contacting you.

Having free information out there for them to peruse allows them to see for themselves 1) This person is legit and 2) I may even like them as a person. These are both infinitely important in the service industry since the people you hire to provide services tend to be the people you spend time with. Information let’s people get to know you… and giving it away some for free means you are not some money hungry jerkface who’s only in it for the paycheck.

Information builds value.

You know who the best customers are in some of my experience? People who have tried to do it themselves. In trying to build a website or run a social media campaign, people will contact us saying that doing the job well is harder than they expected. They realize there is a lot to know and do, and that they need our help.

It may feel weird to think about giving away something you figured out but guess what happens when someone tries to do it? Some either succeed and love what they get out of it, becoming loyal potential customers. Others attempt and fail… but guess who the first person they think of to call is when they do?

It may seem counter intuitive but put information out there about your services or products. Having an understanding of what goes into either will show your potential customers what’s so valuable… and why they can get that value from you.

Information gives part of the story… and leaves people wanting more. 

Let’s say you read my article about Twitter hashtags (the most popular blog post I’ve ever written for no apparent reason). While it is helpful, it’s really like I’m reading you page 59 out of a book of things I know. Sure there is a topic but does reading it make you understand how to use Twitter entirely? Of course not. What someone with a deep knowledge on a topic can give you are tips and tricks but knowing that information in a context is infinitely more valuable.

What you know about what you do is more than you could write in 855 blog posts (you’re reading post 856 of this blog right now, and there are plenty more topics to cover, trust me!). And the more people know, the more they’ll want to know… if they are interested of course. But guess who buys stuff? Interested people.

Social media people are not silly people with gobs of free time on their hands. They know if they put out information, free information even, it’ll be good for their business. At least I think they are. 🙂

Marketing Monday: Standing Out Among The Email Sales

Between Black Friday, Small Business Saturday, and Cyber Monday, I’m already starting to get email sale fatigue. Bad sign huh?

All these sales are a blur, or are they? Photo by Flickr user Chris22090.

All these sales are a blur, or are they? Photo by Flickr user Chris22090.

How can you make your holiday promotions stand out among the masses? I’ve been trying to figure out which emails I open and why. Here’s what I found:

Offer free shipping. Walmart is offering free shipping this holiday season and successful online retailers like Zappos have been doing this for years.



Be a part of what’s going on locally, in terms of events and search. If 73% of all online activity is related to local search, try to optimize for your products or services locally. You can even add a coupon go your Google Places listing for free (the listing is also free). So why wouldn’t you?

Try out a group buying site, or offer group buying on your site. Websites like Groupon (coming to Portland Maine soon!) are a way to get your business in front of a lot of local eyeballs. The idea isn’t limited to local businesses; if you sell things online, you could offer a deal like this.

Create a gift list, with photos. Like everyone, I’m stuck on a few people. I can’t tell you how many hours I spent browsing the ‘Treasury’ section of Etsy this weekend looking for nice gifts for a few people on my list. If you put a nice list with photos on your website for ‘pseudo in-laws who have everything you can think of getting them’ and ‘cool girlfriends who you don’t want to accidentally impose your decorating or fashion taste on’, I will buy something from you.

What’s your favorite way a company has stood apart from the bazillion sales happening in the next week?

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