Customer Loyalty, Part 2: My Experiences with Rewards Programs
Article originally written for and featured in Square’s Seller Community:
I own and run a small neighborhood Ice Cream shop, Pesso’s Ices & Ice Cream, in Bayside Queens. From our first day open, on November 5th, 2004, we decided we wanted to have a Loyalty & Rewards Program in order to help keep our customers excited about coming back.
At the time, our only viable option was the classic paper punch card. The 14-year-old me mocked up a simple design on Word, we bought a print-your-own business card kit, a pack of perforated thick printer paper that easily pops out individual business cards, and we made our first punch cards. Once this method took off and we saw that our customers liked the program, we upgraded to getting our cards professionally printed, and we special ordered some unique hole punchers so that they would be harder to counterfeit.
Positives of Punch Cards
Our customers really loved this program from the moment we launched it. It was simple enough, customers received 1 Punch for every item that they purchased, no matter the size, and received a free Small Cup when they completed the card.
These paper punch cards were also very easy enough to use. It only took a few seconds to punch up a card, without the need to sign up for anything, or share or enter any personal or contact information. This speed and anonymity was a great feature that made everyone feel safe and comfortable with the system, and feel like getting rewards was not a burden.
And while this method worked really well for many years, there were some downsides and we started having major issues. And these problems with paper punch cards definitely outweigh the positives.
Problems with Punch Cards
First of all, because they’re paper and anonymous, your business doesn’t end up with any data. You don’t know how many punch cards are out there, how many unique customers you have, how often they’re coming in, or anything else. The goal of a loyalty program is to keep people coming, but if you don’t have any data, then you can’t even tell if it’s actually working or not. This lack of data makes it really hard to tell if they’re just coming because of your product and service, or if your Loyalty Program is worth it and if it is contributing or not.
Another issue we had with our Paper Punch Card system was the constant designing and redesigning of our cards. We’re a very agile business, and we constantly make big changes to our business based on the data and sales trends of our customers that we get from using Square. Any time that we changed our product offerings to remove low performing and low profit product lines, we needed to change our rewards program to match it.
Over the years we increased the number of punches on a card, and changed the reward from a free Small to the Dollar Amount equivalent, so that our customers could redeem it for any item they wanted, and still get the same value.
With paper punch cards, this change took time to redesign the punch cards, order, and reprint them. Depending on when we made these changes, we also had to either finish up the cards that we had left, or to throw them out and lose money, before we could make a change to our product line.
The cost and effort of constantly ordering and printing new cards was also a factor. Because they were physical paper cards, they were easy to lose or to forget to bring in, or get ruined in the rain or laundry. Since we wanted as many customers as possible to use our program, we always offered every customer a new card if they didn’t have one with them, so we were constantly handing out more cards. We ended up printing at least 20,000 cards every single year, and the cost really added up.
The expensive custom hole punchers that we ordered were very effective at preventing counterfeiting, and were pretty high quality, but they still did break every couple of years, and the costs added up there too.
While the costs were an issue, the bigger issue was the integrity and lifespan of the program. By 2016, we started noticing that fewer and fewer people were bringing in their cards, and ever fewer wanted new ones. Because customers kept forgetting their cards, getting new ones, and ended up with piles and piles of cards, they were getting annoyed with the program.
While it was easy to combine cards, people were getting frustrated with having so many cards. On many occasions, we’ve had people coming in with 30 cards at one time to combine them. While we didn’t mind doing it, customers were getting tired of keeping track of their cards and stopped using them. This definitely took a toll on our customers and they didn’t even want new cards or to continue with the program. The cycle was ending.
A loyalty program that customers don’t use is a loyalty program that doesn’t work. A rewards program only works if people use it, and people will only use it if they are excited to use it. And people aren’t excited to use it if it’s a hassle. So we decided that it was time to rethink our program in order to simplify and digitize it, and make it exciting for our customers again.
We looked at the many different options out there, and we noticed that Square, the system we use for our Point of Sale and all other business management, had just revamped their Loyalty system, and it finally had the key features that we needed.
So we took a leap and jumped onto the Square Loyalty Program. Setting up the program was incredibly easy. We were able to use the same program structure, as our paper punch cards, so the only thing that changed was going from paper to digital.
This change instantly had huge positive impacts, including giving us the data we needed, simplifying the use of the Loyalty Program for our customers and employees, and reenergizing our customers’ excitement about Rewards.
As soon as we switched over from our paper punch cards to the Square Loyalty program, we immediately started letting our customers know all about it. We made some signs to hang around the store and around our Registers, we updated our Website with details about the program and the link for customers to sign up and check their point status, and all of the fine print.
But the biggest and most effective way of educating our customers was talking to them. Already offered every customer a paper punch card, so we did the same with the new Square Loyalty Program. We write out scripts for our employees on how we want them to talk to customers, so we worked in some language about Square Loyalty. Our employees ask every single customer if they have Rewards Points with us, and walk them through the process to sign up.
Luckily right on time, the Square Register came out which was a perfect solution for Square Loyalty. With the removable Customer facing display, customers can enter in their own numbers privately and accurately, as well as redeeming their own reward. This tremendously simplified the process of using a Rewards Program, sped up our lines, and made a better customer and employee experience.
Because we had 15 years of Paper Punch cards out in the world, transitioning over was definitely a process. Rather than attempting to try and convert over all of the paper punch card to Digital, which would involve a lot of manual work, we took another approach.
We decided that anyone who brought in a Paper Punch card would keep using the Paper Card until it was completed, and that they could combine all of their paper punch cards to make that transition faster. But from that point on, we didn’t give out any new Paper Punch Cards, so anyone who didn’t have a Paper card with them, we would offer to have them start to use the Square Loyalty Program.
This approach really worked well in a couple of ways. First, it eliminated the manual work of transferring points over, which would have taken a lot of time and would surely lead to a lot of mistakes. We don’t give our employees access to our Customer Directory, because we want things to be as simple for our staff as possible. Because the whole point of adopting this automated Square Loyalty system is to simplify and reduce the manual work that our employees have to do, we didn’t want to add in the complications of training our employees how to adjust points manually again.
Second, it acted as a sort of staggered approach, where we started out with only a small number of customers using the new system. This gave us an opportunity to fully test out the program with much lower stakes. Instead of having all of our 10,000+ customers immediately trying to use the new system, it started out with only a few each day. It was a nice smooth transition, with all of us learning as we went, and getting more comfortable with the new program.
Third, even though we told customers that we were still accepting the old paper punch cards, our customers became really excited about the new Digital Loyalty program. In fact, many of them decided to not even bother using their paper punch cards anymore, and just jumped onto the new digital program.
Key Points & Summary
We started using Paper Punch Cards from our first day open, and while it worked well for many years, there were definite downsides. They were a pain to keep track of, didn’t work with our online orders, expensive to reorder, didn’t give us any data, customers kept losing them, and even worse they were getting disenchanted with our program and didn’t want to use it anymore. We started transitioning over to Square Loyalty, and have only had great experiences with it so far.
Overall, we absolutely love the experience of using Square Loyalty. It’s such a smooth and simple way to run a Rewards and Loyalty Program while using Square Point of Sale, and at this point it’s hard to even consider using anything else. Read my next article to do a deep dive into all of the benefits and downsides of each of the features of Square Loyalty.