How to set up your coffee shop's loyalty program
In short: For a neighborhood coffee shop, a stamp card is usually the best format because it can be explained in one sentence. Ask for a number of stamps your regular customer can complete in a few weeks. Work out the reward by what it costs you to make. Each month, check how many members come back, how long they take to fill the card and how many cards end in a redemption.
Which format suits a coffee shop
There are three common formats, and each one fits a different way of buying.
| Format | How it works | When it fits | What to watch for |
|---|---|---|---|
| Stamps | One stamp per visit or per drink, reward when the card is full | Similar ticket size from visit to visit, like an everyday coffee | It rewards someone ordering an espresso the same as someone ordering a full breakfast |
| Points | Points based on the amount spent, redeemed for products | Very different ticket sizes, like lunches or beans to take home | Harder to explain at the register, and customers don't always know how far they have to go |
| Paid club | A monthly fee in exchange for a fixed perk, like a discount or a daily coffee | A very steady clientele, for example offices around the corner | If a member rarely comes in, they feel they're losing money; if they come in a lot, the cost is on you |
For a neighborhood coffee shop, the stamp card is usually the best place to start. It can be explained in one sentence and the customer can see how far they have to go. It's also the format used in the field studies cited below.
How many stamps to ask for
The number of stamps comes from how often your regulars come back and how long you want them to take to fill the card. If it takes months, they forget about it before the reward.
An example with hypothetical numbers: if your regular comes in three times a week, a 10-stamp card fills up in a little over three weeks. If they come once a week, that same card takes them more than two months, and for that customer a shorter card works better.
Kivetz, Urminsky and Zheng studied the "buy 10 coffees, get 1 free" program at a café on the campus of a US East Coast university, with one stamp per visit. With 949 redeemed cards and close to 10,000 purchases, they found that members bought more often as they got closer to the free coffee: the time between purchases dropped by 20% on average from the first interval to the last (Kivetz, Urminsky and Zheng, Journal of Marketing Research, 2006). Filling a card took them almost 25 days on average.
The hard stretch is the beginning, when the goal looks far away. A reasonable rule of thumb is for your regular customer to fill the card in a few weeks.
What reward you can afford
Calculate the reward by what it costs you to make. That way you know what share of the customer's spending you're giving back.
An example with hypothetical numbers: your coffee sells for USD 3 and costs you USD 1 to make. With 10 stamps, the customer has spent USD 30 and you give away something that costs you USD 1. A slice of cake that you sell for USD 4 and that costs you USD 2 comes out at double, even if the customer values it about the same.
You can also let customers choose between two rewards of similar value. At the café in the study, members could redeem either a coffee or a bakery item of the same value (biscotti, a croissant or a muffin), and 85% of redemptions were coffee. A reward the customer already buys reinforces that same habit, and giving away the large size usually costs you only a little more.
Do you also sell juices? See the juice bar guide.
Minimum purchase rules
The rules have to fit on one line of the sign. These settle almost every question at the register:
- One stamp per visit. It stops someone from filling the card with a single order for the whole office.
- Which purchases count. For example, any prepared drink earns a stamp and a bottle of water doesn't.
- The reward doesn't earn a stamp. The free coffee closes out the card and the next one starts with the next purchase.
- Expiration, if there is one. If the card expires, say so when you hand it out and write it on the sign.
How to launch it at the counter
The program is launched at the register, when the customer pays. For the first week:
- Put a sign next to the register with the rule in one sentence and, if the card is digital, the QR code to join.
- Ask for the customer's card or code with every purchase, not only when they remember.
With a digital card like Club Card, the customer scans the shop's QR code, signs up and the card is saved in Google Wallet or opened in the browser; the barista adds the stamp by scanning the customer's code with the shop's phone (see plans). The guide to Google Wallet and Apple Wallet for business explains how those passes work.
How to measure whether it works
With paper cards there's almost no data: you only see the ones that come back full. A digital card records every stamp with its date, which lets you track three numbers every month:
- Returning customers. How many members made two or more visits in the month, compared with the month before.
- Time to fill the card. If it takes much longer than you calculated, the card is too long.
- Rewards redeemed. How many started cards end in a redemption. If almost none get there, rethink the number of stamps or the reward.
Also look at what happens after a redemption. At the café in the study, the 110 members who filled one card and started another bought more slowly during the first visits on the second card, then sped up again. Those who sped up the most toward the first reward were more likely to earn the second. Those first visits on a new card are the ones that need the most care; there are ideas for that stage in how to get your customers to come back.
Frequently asked questions
How many stamps should a coffee card have?
It depends on how often your regulars come in: pick a number that lets them fill it in a few weeks. The café in the study cited above asked for 10 coffees.
Can I give stamps in exchange for a Google review?
With Club Card you can give 5 extra stamps for the member's review on Google Maps, once. Your staff adds them after seeing the published review. Google Maps has its own rules on reviews, so you decide whether to turn it on.
Paper stamps or on the phone?
Paper is cheap to start with, but cards get lost and you can't measure anything. The costs of each option are compared in digital stamp card: how it works and what it costs.
Sources
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