Do the Math Before You Reward
As mentioned before, what you offer as loyalty reward to your customer must be in proportion to revenue of your business. This means when you do the math, out of your profit, you should be able to pay your customer loyalty reward without running any loss. You should avoid creating anything that could lead to loss for your company. Define your incentive plans in a way that they can increase sales and revenue and you can offer them continuously.
If you can’t continue a plan, your customers may think you are in some trouble. Now, the importance of the reward you define for your customer becomes clear here. Offer a plan to consider special rewards for new customers and follow prolonged plans and some other model of commitment reward for other customers. Offering pricy gifts does not guarantee the proper results.
For example, if you pay for a travel tour in exchange for buying a TV, you need to know why you are paying such amount of money. Rewarding customers makes your business grow but it also imposes certain costs on you. All the costs of loyalty and reward system must be constantly calculated by the accounting system. For instance, declaring to customers that if they buy a product for 100 dollars, you will give them another product which costs 200 dollars for 170 dollars is an excellent way to reward the loyalty of a customer.
Here, the 30-dollar difference is a part of your costs. Note: Every point earned actually translates to money and if you are supposed to offer points or discounts in, say, special times or special events, your system must be sufficiently flexible and it also needs to be defined in the cash registering system so when a customer makes a purchase, the cashier won’t face a problem in understanding and implementing it.
Don’t forget that the points and rewards you offer cost you and at the same time, they are a means of marketing and developing your business. To offer incentive plans, you need to follow some intricate rules. For example, when you want to give coupon to customer, you should consider the laws of the country where you operate your business.
Let’s say you have received 100 dollars from a customer in exchange for a product and value-added tax is considered as well in the fund received, you must consider what the law says about the tax in that country.