“A loyalty program is not about customers being loyal to you. It’s about you being loyal to customers. You earn loyalty by giving it.”
Managing the Customer Experience: Turning Customers Into Advocates
Configuring and running a successful loyalty program is one of the biggest challenges that dispensaries face today. In order to have a successful business, dispensaries need to have a loyal following. Loyalty programs play an integral role in building a customer base full of brand advocates. Loyal customers spend 60% more per visit, are 5x more likely to refer friends to a business, and account for 80% of a dispensary's revenue.
With the internet at everyone's fingertips, cannabis is now a buyer's market. Customers and patients can choose from an array of retailers and it is becoming increasingly difficult for dispensaries to retain brand-loyal advocates. Having an effective loyalty program is a surefire way to create happy repeat customers.
For a loyalty program to be successful, it has to bring value to both the retailer and to the customer. Too many dispensaries do not think about their customer's desires and how it impacts their bottom line. There is an important yet delicate balance that goes into configuring a program, and if one side of the equation leans too far in favor of the business or the customer, the loyalty program will fail at the expense of the retailer each time.
Retailers need to ensure that they, and more importantly, their customers see value from a loyalty program. A successful loyalty program attracts and retains the crucial, loyal customer, without hurting profits.
CHOOSING YOUR LOYALTY SYSTEM
The two most popular ways to structure a loyalty program are by rewarding customers based on how much money they have spent at a business, or based on how many times they have shopped.
Most retailers model their loyalty programs after credit card companies or high-frequency retailers such as supermarkets. These retailers are able to successfully leverage a points per dollar spent schema because of the nature of their customers' shopping patterns. A points per dollar spent schema is best suited for high frequency purchasing, when customers visit more than once per week.
The unfortunate reality is that the cannabis industry does not fall into this retail category, yet most dispensaries still reward customers based on spend. In the cannabis industry, customers visit less often: on average, loyal medical patients shop every 9 days while loyal recreational customers shop every 13 days.
The alternative is to reward customers for their patronage each time they visit a business. Rewarding for visits has been proven across retail to be a more successful tool in attracting and creating loyal brand advocates. As customers and patients continue to frequent a dispensary, they increase their lifetime value year after year. The longer a business can keep its regulars, the more valuable they become.
POINTS PER DOLLAR SPENT MODEL
Most dispensaries feel that by offering a cash back program they are incentivizing customers to shop with them, but all they are doing is giving away margins when they don't have to. Customers want to be rewarded for their loyalty, but are open to rewards outside of a cashback model. The average customer is satisfied by rewards that are more engaging than a simple % of spend. Shoppers long for experiential rewards. Many customers go into a dispensary for the shopping experience, and a premier loyalty program reflects that. A flat cashback system enables competitive pricing for a dispensary, which is important for, but it is not as important as providing a better customer experience.
Rewards based on dollars spent make the shopping experience feel transactional, which dampens the customer experience and a business's relationship with it's customers. Dispensaries should strive to provide value to each and every customer regardless of how much they spend in a given transaction, because in the long run, the happy customer will be a bigger source of profit. Retailers need to avoid making customers feel as though they are just another serial number in a database, that they are trying to extract as much revenue as possible, and that they are appreciated.
When looking holistically at a points per dollar system, there are a few key 21st century retail concepts that are neglected. Today, a loyalty program standard is showing customers how many rewards points they have online. According to INC Magazine, 69% of customers want to see their rewards points on their smartphone. Every time a customer looks at their phone they should be able to see how many points they have and what rewards are available to them. By providing this access, dispensaries will encourage their customers to visit more frequently.
Loyalty programs should attract new customers, not cause businesses to miss opportunities with current ones. As businesses mature, aligning customer desires with internal goals is the step that takes businesses to the next level.
"We were using a different loyalty system prior to Baker that was points-per-dollar based and we were afraid that switching to visit-based points would cause us to lose money, but it turned out that our loyal customers loved the new system and we actually saved money"
- Briana Burke, Manager, Jayne, Portland OR
VISITS BASED MODEL
In order to have a successful loyalty program, the system a retailer uses must be sticky. Rewarding a customer every time they walk into a business is one of the easiest ways to show a customer that they are valued.
In 2017, a successful visits based loyalty program must live online. The original visits based loyalty program, punch cards, started in the 1880s. Punch cards do not provide data or incentivize one-time shoppers to become repeat visitors.
Additionally, a digital visit-based loyalty program comes with many advantages a traditional points per dollar scheme lacks. With a program that is both transparent and accessible, businesses can provide a customer what they want: better insight into the status they gain by choosing one business over another. This coupled with an optimized experience both online and in-store, will give customers a reason to shop with that business for years to come.
In a big picture sense, a points per dollar spent system may reward your current big spenders, however it discourages the average customer. Delighting customers with each visit is an easy way to enhance their experience, boosting order size and your retention rate by 40%.
All loyalty programs need to consider a retailer's bottom line and customer desires. A visits-based loyalty program aligns business goals with what dispensary shoppers and patients want, creating a win-win opportunity.
Every customer cohort has different shopping patterns and habits. There will be a few customers that will have an average order size much larger than a typical customer, and having a flexible digital loyalty program is a great way to satisfy all customers. To set up a successful rewards structure, we suggest promoting a handful of high-value, and high-margin items from at least 5 different product categories in your program. By featuring items like an expensive glass piece, you can match your customer’s desires with your operating costs.
It is important to take stock of your current system and ask yourself if your loyalty program is generating a positive return for your business. Baker Technologies is the leading software company in the cannabis industry, helping dispensaries run better businesses. Learn how Baker's products, like Checkin, generate more revenue and produce happier customers by requesting a demo today!