Understanding Customer Loyalty Schemes: Why Giving Back Means Bigger Profits

For young businesses, the notion of giving anything away for free can seem counterintuitive, to say the least. When profit margins are narrow and the future rests on careful spending, the temptation can be to pull back from customers and focus only on sales. However, studies have shown that offering rewards, in the form of loyalty schemes and bonuses, is actually a great way to sustain profits in the long run.

The reason for this is very simple. Everybody likes to feel appreciated. When a new or long term customer is given a freebie, it tells them that you’re grateful for their time, attention, and money. They’re not just another number in your sales book. You care about them and you’re willing to go the extra mile to please them. Who wouldn’t want to stick with a company which treated them so well?

So, giving back in the form of loyalty schemes is a clever marketing strategy for modern businesses. Keep reading to find out more about the different methods and their benefits.

Setting Up a Loyalty Scheme

The first thing to keep in mind is that, in order to maximise its value, your loyalty scheme needs to be efficient and effective. It should not take a lot of time or resources to maintain. These days, you can invest in ‘complete’ EPOS loyalty schemes, which provide everything that you need to set up a digital rewards program.

This includes state of the art EPOS equipment or advice on how to introduce a loyalty scheme to your existing retail operation. The best EPOS loyalty schemes are fully customisable, so you can streamline the process to fit your business. You can, of course, go it alone, but you’ll need to decide on a format for your scheme. Will you use cards or would you prefer the entire process to be digitalised?

Types of Loyalty Schemes

There is more than one type of loyalty or customer bonus scheme. In fact, the options are pretty much limitless if you want to get creative and be experimental. Most business owners stick with tried and tested formats because they know that they’ll get results. For example, stamp cards and points systems are one of the most popular options. They are used by everybody from the littlest book stores to the largest coffee and fast food chains.

The customer is given a card and, every time that they make a purchase (there can be certain conditions), they get a stamp or point. Once the card is full, they get a freebie. It is one of the most effective instore marketing methods because it drives customers to make more purchases. Another popular method is the member card. Customers pay a small fee to sign up to a loyalty scheme.

By doing this, they make themselves eligible for perks that regular customers don’t get (say, a 10% discount on every purchase). The key is to find the right balance between appealing to the customer and keeping overheads low. In other words, whatever the bonus may be, it should come at minimal cost. So, a good example would be a coffee chain offering a free drink after ten purchases. The free coffee is a pleasing gift, but it costs next to nothing to produce.

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