I’m currently two orders away from a free coffee at one of the drive-through coffee places around here.
You bet your ass I’m going to keep coming back. I’m going to fill up that card, get my free drink, and then start all over again on a new card.
Because that little reward has turned me into a loyal customer. (Well, that and the great coffee.)
There are 3.3 billion loyalty programs in the U.S. alone, which comes to an average of 29 programs per household.
We all know that first sale to a new customer matters but, if you really want to make your dispensary successful, you need on getting them to come back for a 2nd sale, 3rdsale…and so on.
It’s 6 to 7 times more expensive to gain a new customer than it is to keep customers coming back. In fact, increasing customer retention rates by just 5% boosts profits up to a staggering 95%.
And existing customers tend to spend nearly 70% more than new customers do.
Customer loyalty programs work – but only if they’re done right.
You’ve undoubtedly put in some hard work to make sure your customers’ experiences are top-notch.
But, there’s more to keeping a customer coming back than making them happy during that first sale.
You need to compel them to return to your dispensary. That’s where customer loyalty programs come in. They’re easy to launch, easy to measure, and easily successful.
Keep reading to learn:
- What a customer loyalty program is and why you should have one
- The different types of customer loyalty programs
- How to create a customer loyalty program that keeps customers coming back
- How to launch, promote, and measure your customer loyalty program
Let's get started!
What is a Customer Loyalty Program?
A customer loyalty program builds a relationship between a customer and a business. Basically, a business offers customers exclusive products, promotions, and prices as long as promise to keep coming back. This promise is generally made through punch cards, store cards, point systems, or other similar methods.
It needs to be designed with a correct focus, though. If you design a customer loyalty program that focuses on discounted prices, all you’re going to do is get cheapskate customers coming back to take advantage of that system. In fact, nearly 80% of these types of customer loyalty programs crash and burn within the first 2 years.
Instead, you want to focus on attracting the right type of customers, and grow a customer-brand relationship that will boost your profits. You also want to make sure yours is scalable, because customers who are frequent spenders will expect larger customer loyalty program rewards.
Why you need a customer loyalty program
As a brick-and-mortar retailer, you have some pretty significant advantages that eCommerce businesses wouldn’t have.
In order to get those reward points racked up, customers have to sign up for your customer loyalty program and become a member. Or, at the very least, need to take one of those punch cards – and not lose it.
Not all customers will want to do this. However, at a dispensary, there is a real-time interaction and consumer-brand bonding experience taking place.
That, for one, is something internet retailers have a super hard time emulating. It’s a little hard to create that experience when you’re way on the other side of their screen.
It’s also hard for big box stores to create this experience, because there is far less of a personal feel.
But, for a dispensary, this works perfectly.
Just check out some of these benefits of having a customer loyalty program in place:
Repeat customers who keep spending
By having a customer loyalty program in your dispensary, you stand to gain more repeat customers, which gives your business’ revenue a boost. As this post mentioned earlier, it’s far cheaper to retain a customer than it is to find a new one.
By providing customer loyalty programs to your customers, you are not just thanking them, but also getting them to become fans of your shop. People talk, and you want them to talk about your shop. Give them a reason to buy from you, rather than one of the other hundreds of shops around. Get them to Snapchat about it! Get them to tell their friends about the sweet deal they got on great flower from YOUR shop.
Outshine your competition
Which brings us to the next benefit – blowing your competition out the water.
It can be hard for a dispensary to compete with the others, especially when it’s a smaller one going up against those big stores. This is especially true because big stores have a larger budget for marketing, and can afford to have lower prices.
And in this industry, your customers are going to want cheap prices.
However, having a customer loyalty program is a highly effective way for smaller dispensaries to really connect with their customers on a personal level, something that the big stores don’t tend to offer.
For example, I know several people who aren’t really a fan of Starbucks, but they do love earning points, getting free drinks, and getting special discounts on those tasty pastries. The customer gets to save money, and the store gets to sell more product.
But, this is also something a smaller coffee shop with better coffee could easily do – if they knew how – without breaking the bank.
Customer loyalty isn’t expensive
That’s because customer loyalty programs don’t have to be expensive.
Sure, some of those huge stores throw thousands upon thousands of dollars into their loyalty programs, but smaller dispensaries don’t have to do that in order to achieve great results.
Considering how big mobile technology is (Nearly everyone has a phone these days), it’s pretty easy to create a cost-effective digital customer loyalty program that doesn’t cost a fortune.
There are several great apps that can help you out. Belly, for example, is a digital rewards app that allows small business customers to earn points when they buy something – and all they need is their phone!
PunchTab is a similar service with a subscription price as low as $50/mo. With this one, you don’t need to worry about paying for (or printing, which still costs money) punch cards for your customer loyalty program. Plus, you don’t have to worry about them losing that little card!
Types of Customer Loyalty Programs
Okay, so now that you know what a customer loyalty program is and why your dispensary needs one, it’s time to delve into the different types of programs.
Point-based customer loyalty programs give customers the chance to rack up points that they can redeem for rewards, such as free product.
They’re super easy to set up, to the point where 73% of all customer loyalty programs are point-based, which makes it the most popular kind.
Now, not all of those points have to come from the customer actually buying something. They can earn points by showing their loyalty – social media sharing, email list signup, Snapchat participation, or other actions that get your customers to generate traffic for your website.
Basically, you’re rewarding your customers for helping you get more business.
- It provides some tangible value for the customer. They can actually hold their reward, which gives them more incentive.
- It’s easy to customize to fit what your current needs and goals are.
- It’s simple and straightforward, which makes it easier on the customer.
- There are plenty of customer loyalty apps available to help you out.
- Doesn’t require discount pricing.
- It can be hard to keep track of everyone’s points if you do not use one of the apps.
- You may need to have a brochure, catalog, or separate website for redeeming the points. However, this depends on how you choose to set it up.
- Customers love instant gratification, and this program does not provide that.
This one’s similar to the points-based program in that customers get loyalty credit for spending money in your shop.
It’s easy to create, launch, and explain. This is what makes it such an effective way to increase sales and get more repeat customers.
With this type, customers swipe a card at every purchase. That card keeps track of the amount of money they have spent. Each time they spend x amount (Let’s say $50), the customer earns a free item. This could be a small pack of edibles. It could be a gram of your latest flower. It doesn’t matter if the reward is big or small – it’s free once the customer racks up $50 on their card.
By measuring points in terms of dollars, and rewards in terms of product they already want, this makes the program more tangible for the customer.
- This program offers tangible value – product, smoking equipment, etc.
- Encourages repeat business
- Ability to increase transaction amounts – They’re going to WANT to spend more, so they can get that sweet, free product
- Easy to set up, run, and maintain
- It’s harder to gather data on your customers, but that can be circumvented by including an email list sign up
- It may cost your business more money, depending on how much foot traffic you receive
Spend programs are highly effective options for dispensaries, because they rely on high numbers of transactions and have products with high markups. Encourage customers to spend more – and make it feel like their own idea – by offering freebies once they hit a certain amount.
When it comes to finding a balance between offering rewards and keeping your dispensary costs down, tier customer loyalty programs reward that brand loyalty and still encourage more purchases.
Offer small rewards as a base offering for enrolling in the customer loyalty program, and then encourage customers to come back and spend more money by steadily increasing the value of the rewards as that customer works their way up the program’s ladder.
This way, customers don’t forget about their points, don’t forget to redeem them, or lose their rewards card. There is also less drop-off as a result of there being longer times between purchases or having to wait for their rewards.
- There is instant gratification upon signing up – small rewards
- Customers are more likely to come back because there is long-term value in going to your dispensary over that of a competitor
- Creates customer commitment and loyalty
- Depending on the rewards offered, this could be expensive
- You must continually offer higher-value rewards to match your customers’ loyalty.
Measuring Your Customer Loyalty Program
It’s not enough to just have customer loyalty programs in place for your dispensary, though.
You need to measure them!
It’s pretty hard to keep track of your return on investment (ROI), making sure it’s not doing more harm than good, if you don’t monitor your loyalty programs.
Measuring the success of your programs isn’t always the easiest thing in the world, especially if you’ve got multiple programs going on – vouchers, tiers, and loyalty cards.
All customer loyalty programs are different, especially because each customer is different and behaves differently. For this reason, success of can vary drastically from program to program, and from strategy to strategy.
There are multiple metrics to keep track of, but we’re going to just focus on the basic general metrics for the sake of this post.
General metrics for customer loyalty programs
First, you want to track your customer retention rate. This is going to tell you how long customers are sticking around. If your customer loyalty program is successful, this number will be increasing as the number of program members goes up. Even just a 5% increase in customer retention can bring in a 25 – 100% increase in your dispensary’s profits.
After that, you want to look at the negative churn rate. This is the rate at which customers leave your dispensary without buying additional products or upgrading their program membership. Depending on how you run your shop, this may or may not be one of your more important metrics.
Another one to keep track of is the referral rate of your customers. This measures the degree to which customers tell others about your shop. If your customer loyalty program has a referral aspect to it, you REALLY want to track this one. One of the best ways to do that is to have a landing page on your website, where customers can send others to sign up for your program. Conducting A/B split testing will help you tweak the page and its contents to maximize conversions.
If you want to gain more repeat customers – you know, the kind that spend lots of money and keep coming back – a customer loyalty program is the way to go.
The bottom line: Customer loyalty programs help your dispensary make more money. The trick is to pick the right one for your clientele, and then keep track of your metrics. The more you work on improving your loyalty programs, the more your customer base will grow.
Remember: It costs significantly less to keep your current customers coming back (and to keep them happy) than it does to find new customers.
Do you have a customer loyalty program for you dispensary? Tell me about it in the comments below and, while you're here, don't forget to share this post!