The trap
Members spend more than non-members, so the program looks like a success. But the people who join are usually your best customers already. The program gets credit for behaviour that was already there.
What a program really costs
- Rewards, points and discounts given away.
- Software and platform fees.
- Staff time at the counter and in support.
- The margin lost when a reward goes to a purchase that would have happened anyway.
How to test yours
- List what the program costs over a year, all in.
- Work out the extra visits or spend it caused. Use a hold-out group or compare similar customers before and after joining.
- Convert the extra spend to margin.
- If the margin is less than the cost, the program loses money, even if members look loyal.
What often works better
Simple offers aimed at specific moments, such as a second visit, a lapsed customer or a quiet day of the week, with the offer sized against margin. We do not sell loyalty programs. If you have one, our Customer Retention Audit checks whether it earns its keep.
Questions
Should a small business have a loyalty program?
Not necessarily. Capturing customer details and bringing people back with well-timed offers often gets most of the benefit with less cost and complexity.
What is the best way to reward loyal customers?
Recognise your best customers with access, service or a gift rather than a blanket discount, and make sure that what you give them costs less than the value of the extra business.
Want this worked out on your own data?
The free Profit Leak Detector takes a couple of minutes. Or book 30 minutes and we will look at your numbers together.