3 Types of Loyalty Programs for Businesses

There are three levels of loyalty programs you can implement:

1) Basic

2) Intermediate

3) Advanced

Let’s look at each of them individually.

Basic

Just about as simple as it gets for both the business and the customers. A basic program is great for places that want to promote one or two main products or services. All you need is some type of record for purchases, like a small card. The point here is to drive repeat business, make the customers get used to buying from you. You just need to train the people who interact with these customers to offer upsells and additional products.

These types of programs work great for shops that sell products like coffee, donuts, burgers, and hot dogs. If you have a business that provides a simple service, like rug cleaning, lawn mowing, or pet grooming – anything where a client might use your service on a fairly regular basis – you could also set up a basic loyalty program.

The program is a simple equation: pay for X number of products/services, get the next one free. The salesperson just has to ask if the customer has a membership card. If not, they provide them with one, and mark the card to show a purchase. When the customer’s card is completely marked, the salesperson takes the card and gives the customer the donut/cleaning/whatever for free, along with a new, unmarked card.

Instead of a physical card, you could also invest in producing an app people can download onto their smartphone. This obviously is more of an upfront expense for most businesses, but depending on how fast you go through cards, it might be more cost effective over time.

Pros: Low cost, ease of setup, and immediacy are the three main pros for starting a Basic loyalty program. If you put it together yourself, you could start a basic program for about $20 (500 cards and a small ink stamp). Spend more money for overnight printing, and you could start your basic program tomorrow.

Cons: You’ll be relying almost entirely on your point-of-contact salespeople for everything – promoting the program and driving additional sales. You also get absolutely no information about the individuals in your program, so you cannot make customized offers. You have no contact info for your customers, so there’s no way to get in touch with them and either ask them questions (“What else can we offer you?”) or give them information (“We’ll be carrying red widgets starting next week.”).

Intermediate

These take a little effort and cost to set up, but aren’t that difficult. Most loyalty programs I’ve seen fall into this category. The main tools used here are –

1) A list with personal information (first name and email address, at minimum) from each customer

2) A contact mechanism, like an email autoresponder, or text message sending system (SMS)

3) A series of automated messages

4) Offers – discounts, buy X get more free, etc.

These programs take a little more planning, a little more time, and a little more money. Your costs in time and money will depend on how complex you want to make your program, and what you want to get out of it. You can have people self-register for the program, and then have the program make offers to members and dole out rewards (like discount coupons, etc.) automatically. Or you can make the system behind the program more complex, and segment your members into groups and sub-groups, providing each segment with different offers and rewards. If you reward people for their loyalty, they are more likely to reward you with detailed information, like important dates (birth date, anniversary, and so forth), physical addresses, and shopping preferences.

Intermediate loyalty programs can help you expand the purchasing decisions of the members, allowing you to suggest related products and services. If they know, like and trust you, they are much more likely to buy additional products and services from you than to go looking elsewhere.

Pros: Most intermediate programs can be highly automated. With just a few minutes each week, a single person can examine the statistics generated by the program, and make minor tweaks to improve the process. Most of the cost in labor and money comes upfront, and allows you to almost “set it and forget it.” The person managing the system only has to spend major time when the system parts change, or when adding new complexities like additional products, services, or list segments. Because of the moderate amount of personal information you can acquire, you’re able to offer higher-profit products and services at the right times to the right list members.

Cons: Someone has to understand the program, and be in charge of managing it behind the scenes. They’re in charge of training point-of-contact people on what to expect from program members, like coupons and so forth. They also need to regularly read the data the system generates, interpret it, and make decisions based on that information. Learning all this can take considerable time and effort at the beginning. While intermediate programs do not have to be super-expensive, a decent system is far from free.

Advanced

By their nature, advanced loyalty programs are much more complex, much more expensive, and require a recurring investment of time by a team of people. However, most advanced systems track a tremendous amount of information, and the data provided by these programs can help you almost micro-promote to each member. A lot of membership programs run by major corporations are advanced systems. Wegman’s – a major grocery chain on the East Coast of the US – knows what its members shop for down to the individual SKUs, and their automated system can offer coupons for items the customer has shopped for in the past. I regularly get the same type of coupons from BJ’s Wholesale Club. Advanced systems can offer promotions via printed coupons sent through the mail, via SMS messages sent to a member’s phone, or even through custom apps that members use to shop. A truly advanced system will know how often you make purchases, the quality of products and services you prefer, the brands, the individual items. It will be able to offer you incentives based on important dates like holidays and birthdays. They can tell how much time you spend shopping, and prompt you to come in when they haven’t seen you in a while. The more information your membership program tracks, the more you can do with that information – including aggregating it and selling it to third parties. But that’s a whole other discussion!

Pros: Tons of information, depending on how much info you collect and how complex you make the collection system. The more information you collect, the more granular you can make your promotions. Offer a discount not just on widgets, but on yellow left-handed widgets; or to people in a certain zip code who get their lawns cut only on Thursdays. Track your costs, schedule needed supplies down to the hour, plan for increased profits.

Cons: Expensive investment. Set-up costs in time and human resources are much higher than either of the other categories. Tracking the system, as well as interpreting and using generated data usually takes a team of people, and is an ongoing investment. The more data points you track, the more the program parts need to be tweaked.

Effective Internal Control Systems and Optimal Processes and Procedures

How do firms choose their strategic control systems? What is the nature and function of strategic control systems? What are the critical elements of strategic control systems? What is the nature and function of internal control systems as critical element of strategic control systems? These strategic policy questions relate to the role of optimal organizational internal control systems, processes and procedures designed to create and sustain operational performance excellence that maximizes the return on investment and shareholders’ wealth while minimizing risks exposure and the cost of operations, simultaneously.

Clearly, effective internal control system is correlated with optimal operational performance excellence and critical to sound organizational systems and strategies designed to maximize the wealth producing capacity of the enterprise. In these series on organizational performance excellence, we will focus on the pertinent strategic control system questions and offer some operational guidance. The overriding purpose of this review is to highlight some conceptual framework, quality management theory and practice, strategic relationships, and industry best practices. For specific financial management strategies please consult a competent professional.

Internal controls as integral part of the strategic control systems is interrelated series of activities imposed on the standard operating procedures of an organization, designed to safeguard assets, minimize errors, and ensure that operations are conducted pursuant to standards. While strategic control systems establish standards and methods for measuring performance, determine whether actual performance matches the standard-expected performance, and execute corrective action, internal controls are designed to mitigate the level and types of risks to which an organization is exposed.

Further, while control systems ensure operational effectiveness, control activities frequently slow down the routine process flow of business operations, which may reduce its overall efficiency. Consequently, the design of internal control systems requires management to balance risk mitigation with operational efficiency. This process can sometimes result in management accepting a certain amount of risk in order to create a strategic profile that allows an organization to operate more efficiently and effectively, even if it suffers occasional losses because controls have been deliberately reduced.

Additionally, all organizational strategies subject to constrained optimization have costs and benefits. The critical question is: Do the benefits justify the costs? In practice, executive leadership applies the net present value approach to weigh the costs and benefits of structures, systems and strategies. The optimal option maximizes the net benefit by equating marginal costs and benefits.

Some Operational Guidance

In general, no organization is immune to misappropriation, embezzlement or corruption-whether it’s inadvertent or deliberate. Many organizations don’t assess misappropriation or corruption threats until they have already occurred. Effective internal control systems should be designed to mitigate the level and nature of risk which organizations experience. In practice, as integral part of internal controls, organizations leverage technology-enabled solutions to scan across the entire spectrum of operational risks, promptly.

The ability to identify potential high-risk internal and external transactions quickly before they adversely impact organizations is critical to optimal internal control systems designed to create and sustain operational performance excellence derivative of business intelligence, risks mitigation, data analytics and evidence-based knowledge driven effective organizational systems, processes and procedures.

Moreover, internal controls should provide the mechanisms, rules, and procedures implemented by organizations to ensure the integrity of financial and accounting information, facilitate accountability, and mitigate fraud and the entire spectrum of operational risks. Besides complying with laws and regulations, and preventing employees from misappropriating assets or committing fraud, internal controls should facilitate operational efficiency and effectiveness by improving the accuracy and timeliness of financial reporting. Effective internal control objectives should include regulatory compliance, accuracy, validity, physical safeguards, and error mitigation. Control procedures should include separation of duties, access controls, random physical audits, standardized documentation, trial balances, periodic reconciliations, and approval authority.

Controls should always include policies and procedures put in place to ensure the continued reliability of accounting systems. Accuracy and reliability are paramount in the accounting systems. Without accurate accounting records, managers cannot make fully informed financial decisions, and financial reports may contain devastating errors. Control procedures in accounting should be broken into several categories, each designed to prevent fraud and identify damaging errors before they become problems or crisis.

Control system should fully address regulatory requirements, meet stakeholder expectations and protect organizations from potential catastrophic financial and reputation damages. When properly deployed and integrated, organization’s risk mitigation, anti-misappropriation, anti-bribery and anti-corruption technology-based solution should use digitally enabled analytics and advanced monitoring tools to help organizations scan across the compliance and operational risks spectrum, so they can more intelligently anticipate, mitigate and manage risks.

While smaller organizations with limited resources cannot always afford elaborate internal controls including segregation duties and decisions, system of internal controls tends to increase in complexity as organization increases in size. Establishing standards and methods for measuring performance; determining whether actual performance matches the standard-expected performance; and taking corrective action should always be integral to effective internal controls.

Finally, internal control is most effective when it is embedded and supported by a culture of assessment and continuous improvement. Therefore, effective internal control should consist of an integrated process for assuring organization’s objectives in operational efficiency and effectiveness, reliable financial reporting, and compliance with laws, regulations and policies are being met. Controls should include effective use of firewalls and encrypted passwords that limit internal and external access to critical business intelligence, proprietary, accounting and other financial information. Systematic measurement, analysis, and knowledge management require internal control results to be collected, analyzed and used for continuous improvement.

In sum, control systems should provide processes and procedures by which an organization’s resources are directed, monitored, and measured. Internal control system should include human elements such as board of directors exercising effective oversight and independent internal auditors conducting random periodic audits and unscheduled verification. Control systems, processes and procedures are critical in detecting and mitigating high risk activities and preventing various types of misappropriation and protecting the organization’s resources, both tangible and intangible resources.

Capturing the Boomer Dollar

You will have to have been residing in a cave the last few years to not know that the Baby Boomer Generation is one of the wealthiest, most active generations yet. I am proud to be counted among that number. Another truism about my generation is that if your business reaches me, it will also reach my parents, my children and my grandchildren. I stay abreast of all of their likes and dislikes so that I can use my buying power to provide travel, entertainment, clothing and dining for them as well as for myself.

We Boomers do not belong to a generation that adheres to the concept that we have never needed that type of (technology, transportation, entertainment, etc.) before so why should we invest in it now. We Boomers want to embrace the new while at the same time retain our appreciation for the old. I want to know the terminology of the younger generation but do I want to be greeted by a “Howdy” when I walk into the establishment staffed by that generation. The answer to that is a resounding “No!”

That’s why marketing to us is not only a challenge, it can be a rewarding teachable moment. Just like when I started watching the new animated films with my grandkids. Did I go into the theater expecting to be entertained? No, of course not. Was I expanding my horizon or merely pleasing my grandkids? I will be honest and say that I was merely tagging along to play the “grandma dollar card” and see the smiles. Because I have an open mind, it was blown away by the creativity, the underlying humor, the exceptional message and also by the smiles.

That’s when I started paying attention to the markets and marketers who approached me. For instance I learned when I went into a store to purchase a new computer system that I was practically invisible. Salespeople walked right by me in an attempt to go visit with either a younger customer or go back to their station to visit with other salespeople. When I did leave the store with no computer in tow and was asked if I found everything I needed, my response was that “I would have spent a lot more money if someone had actually paid attention to me!”

Boomers are not invisible, we are on the cutting edge of technology, we are stylish, we are financially savvy and we have realized that we can’t take it with us, so we are more generous with our spending power. We will pay more for good service and we will remember the server. We will cultivate new social circles that will be multigenerational. We have a healthy admiration for the younger population and know that their future will be full of change and charged with energy and success, but are very thankful that we grew up with party lines, no remotes, no GPS systems and we learned patience when ordering items because “next day delivery” wasn’t even a concept much less a realization.

So here is my suggestion for businesses who want to romance the Boomers:
• Invite a Boomer to a training session to critique the verbal interchanges that may take place within your organization.

• Stand back and actually “look” at that market. Watch the purpose in their step, the pride in the way they carry themselves and what their eyes settle on when they enter your establishment and the expression on their faces.

• Be visible and attentive but not overwhelming.

• Anticipate some of the questions they might have and have the answers.

• Be prompt.

• Be neat.

• Smile.

• No “Howdys”.

• Don’t stand in the corner on the phone where we can see you.

• Don’t gossip about people around other salespeople because I could be that person’s mother/cousin/friend or…

• Realize that my initial visit may just be a walk through or I may have a distinct purpose, treat me the same either way.

• I would not expect you to be tolerant and appreciative of my generation if I cannot extend you the same courtesy. I am not above learning how to be a courteous consumer.