A rewards program doesn't have to give a lot back to be successful. Tune in to hear the industry benchmark for how much most rewards programs give back to the customer, plus hear some quick tips on how to leverage your rewards program and some things to watch out for.
You’ve likely heard me talk a lot about using a rewards program as a way to encourage your customers to come back again and again… but you might be wondering how much you actually have to offer them in order for it to feel valuable?
Good news… there’s actually a benchmark offer in the rewards industry and it’s only 5%!
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Now, how this gets implemented and rewarded is different, but in most cases what the customer is actually earning in rewards is only about 5% of what they spend.
We'll talk through a few different point systems to see how this would break down.
The easiest way to do it is to reward 1 point for every $1 the customer spends. Once they reach 100 points, they earn a reward of $5 that they can use toward their next purchase.
Maybe that doesn’t sound super fun to you. Well, you can accomplish the same thing by rewarding more points per purchase and then just raising the threshold before they actually earn a reward.
For instance, maybe the customer earns 5 points for every 1 they spend, and when they reach 500 points they earn a $25 reward.
When deciding how many points you want to give to people, think about your average order value and the other tasks you’re going to reward points for like creating their account or joining your newsletter. In general, you want them to be able to earn their first reward within their first 3 actions, one of those being a purchase.
You can always do things like creating a tiered program where they get additional perks as they spend more, Sephora’s Rouge program is a great example of this.
One of my favorite things about rewards programs is that you can have special events exclusively for rewards members like double point days, gifts with purchase, and all sorts of fun things you can do to make those members feel special and stay loyal.
Oh, and most reward platforms also have a built-in referral option so you can make it really easy for your most loyal customers to spread the word about your business! And if you use a platform that integrates with
Some other quick notes about rewards programs before we go.
If you are going to implement a rewards program please speak to an accountant. I believe the law is at the state level, but in some cases, reward points are considered a liability on your books. And once those points are converted to a reward, they can’t expire. That last bit might depend on how you issue those rewards, whether it’s through a gift card or a coupon – or it might just be all rewards, I honestly don’t remember because it’s been a while since I was managing this directly.
So, how do you avoid having this huge liability accumulate on your profit and loss statements? You’ll want to put some sort of expiration on the points themselves. This is still allowed as far as I know. Like I said, please speak to a professional about this.
The easiest way to do this is to expire points if the customer doesn’t earn or redeem points within a certain amount of time. The length of time should fall in line with how often people generally shop with you, though a year is the general rule of thumb.
This should be easy enough to do through your chosen rewards platform, though you may be limited to specific plans if you want it to happen automatically.
