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Making Loyalty Profitable
A discussion of how to profit from different types of loyalty functions

Introduction
Discount Cards
Awarding Points
Redeeming Rewards
Prepaid Cards
Couponing Systems
Door Prizes
Percent to Charity
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Loyalty Systems for Profit

Awarding Points

Points systems are the most common electronic loyalty systems out there. "Airline miles" were the first points system and they have been widely copied. Points are awarded either for amount purchased, specific actions, or the number of visits. After the points are accumulated, they can be exchanged for specific rewards.

Points systems are easy to set up and often are ignored after being set up. The most common points system is where one point is awarded for one dollar spent.

However, the real value comes when the points system is managed.

For example, airlines have found that they want to manage how many points people get based on what people are actually purchasing. So, those who buy a full priced ticket get more points than those who buy the deeply discounted ticket.

Points systems can be dynamic. For example, grocery stores will often offer double points on certain days in some months.

For a small retailer, one way to allow for managed points is to start with awarding ten points per dollar spent rather than just one point per dollar spent. (And increase the points required for each reward.) In that way, you can have more options for managing the points.

Another way is to rank the customers by how much they have bought in the last six months and then, offer more points to the better customers. For example, your "A" customers might get 15 points per dollar, your "B" customers might get 12 points per dollar, and the rest get only 10 points per dollar. In this way, you reward your better customers more.

A store could offer extra points for purchasing specific items in a bundle. Other places could offer special points for liking them on Facebook or for mentioning their place in an online posting. A dental office offers extra points for arriving on time and for having a good dental hygene.

You want to make sure that the electronic system allows you to manage the awarding of points in all the different ways that you want to offer your customers.