Customer Retention Through Loyalty Programs

Customer Retention Through Loyalty Programs

Loyalty Program  concept on a paper with charts.I don’t know about you, but my wallet is stuffed with Customer Loyalty cards. My bread baker offers a free loaf for every 12 purchased (a Baker’s Dozen); the smoothie shop gives a freebie for every 10 smoothies purchased, and the supermarket offers gas discounts based on my volume of grocery spending. Virtual retailers offer loyalty programs, too – for example, dollars or points based on purchases. Or consider one of the most successful loyalty programs out there: Amazon Prime. Millions of people are willing to pay $99 a year for free 2-day shipping (and sometimes faster delivery such as same day service for some markets) and access to members-only deals, streaming video and digital book/music downloads.

At their heart, loyalty programs are really about customer retention. It’s much easier to sell to a current customer than to convert a new one, and repeat customers usually spend more money. It’s in your company’s best interests to maintain your customer base as well as grow it. And let’s be honest about effectiveness–you don’t want your loyalty program to cost you more money than it brings in sales. So how does a wholesaler of a crafts-based business build an effective loyalty program? Let’s look at some different models of loyalty programs in the craft industry.

For example, a knitting needle company offers a tiered dividends program to its retailers. They reduce the wholesale price of their needles, hooks and individually-packaged accessories based on the volume an individual retailer orders. By keeping the MSRP the same, the retailer makes a bit more profit on each item sold, giving them an incentive to keep ordering needles and notions from that company. And the more the retailer spends, the higher the discount. Since their complete product line and even shipping charges count toward the retailer’s dollar level for dividends, adding to the order offers even more benefits. Dividends earned in one quarter are applied to purchases in the next quarter, providing additional incentive for the retailer to stick with the brand.

What else might work? Consider whether your product might sell better for your retailers if it’s bundled. If you’re selling quilt fabrics, putting them together in themes or palettes and reducing the price of the complete package helps them merchandise the product, which sells it and brings them back to you for more. You could even do it as a monthly subscription, so that your retailers know what’s coming and how to promote it. It’s also a fun and creative way to present your existing products in a fresh and new light. A Good Yarn Sarasota is offering something similar (albeit, direct to consumer) with their Purl Diver Exclusive Color Club, which introduces a new colorway of yarn dyed exclusively for the shop by any number of popular indie hand-dyers. Each colorway is inspired by the photography of the owner’s husband, who shoots sea life during deep sea dives. Fun extras and a free pattern suggestion are also included with each purchase, and subscribers are guaranteed to receive the new color before anyone else, with the option to add on more skeins if they wish to make a larger project. For A Good Yarn, each subscription is an ongoing revenue stream, and for the end consumer, each monthly shipment is a mini-event of new and exciting knitting possibilities. If you’re a manufacturer, think about what product you sell that could be offered in an exclusive edition on a regular basis and make it part of a subscription program.

You may be able to team up with complementary companies for a cross-branded loyalty program. Plenti, the program started by American Express, is an example of this at the large retail level. Consumers earn points by shopping at member retailers (and they can use any credit card they want), which they can then spend the points like cash at the participating retailers. Another idea to consider is searching out other wholesalers with whom cross-collaboration would be a natural fit and work with them to create an exclusive item that incorporates each of your products. For example, Bijou Basin Ranch did this for the 2015 holiday season with their Limited Edition Bijou Basin Ranch Holiday Kit. It featured their own Tibetan Dream Yarn hand-dyed by popular indie dyer Miss Babs; knitwear designer Laura Chau’s Odyssey Cowl pattern, an appropriate set of circular knitting needles from Signature Needle Arts, stitch markers from Purrfectly Catchy Designs, and an Allure fine fabric wash sampler pack. All of these goodies were bundled in a beautiful St. Clair Designs project bag which was custom-made for the kit.

Whatever loyalty program you adopt, consider adding a component that rewards longevity as well as volume to it. It’s simple–you want to give more valuable rewards to your best customers, so give them an incentive to buy more from you. In other words, do the exact opposite of cable and satellite TV providers, who woo new customers with special offers and then gouge them as soon as they are out of contract. Reward your long-term relationships first and your new customers will see that there’s a benefit to sticking with you.

Loyalty programs let your customers know that you value them, and a customer who feels valued is going to keep coming back to you.While it may seem like price is always the basis on which to compete, service and value can mean more in the long run. Retailers don’t want to keep changing their suppliers because of the hassles involved in establishing new merchant accounts and getting used to yet another set of terms and conditions and ways of doing business. If you nurture your customer with rewards, they will remain loyal. It’s about relationships.

If you need help implementing a loyalty program or any marketing strategy for your craft company, contact Leanne@stitchcraftmarketing.com. We specialize in finding ways to grow creative businesses.

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