How to set up a loyalty program for a small business

A regular customer fills your calendar without any marketing cost. Harvard Business Review sums up studies estimating that acquiring a new customer is five to 25 times more expensive than keeping an existing one, and cites research by Frederick Reichheld of Bain & Company: increasing customer retention by 5 % increases profits by 25 % to 95 %. The figures come from studies across many industries, so treat them as a direction, not a forecast for your salon.

A salon or studio cannot simply produce more. You have a fixed number of hours, chairs and people. A calendar filled with customers who come every five or six weeks is steadier than one you have to fill with new faces every month. A loyalty program gives those customers one more reason to book the next visit with you rather than with whoever has a free slot. It makes most sense for services people return to anyway; for one-off jobs such as a wedding hairstyle, points won't help.

Points per visit suit businesses with similar prices and frequent visits; points per amount spent suit a wide price range, where a €15 treatment and a €150 one should not count the same. You can also combine both. Points by spend nudge customers towards pricier services, points per visit towards more frequent visits.

Whatever you choose, the rule should fit in one sentence at the desk: "Every seventh haircut is free" or "Spend €250 and get €25 off." If you need longer than that, customers will forget it before their next visit.

Calculate the reward as a share of what the customer spends to earn it, and decide what share you can afford. Two examples:

• Per booking: a €30 haircut every six weeks. 1 point per booking and a Free booking at 6 points means every seventh visit is free: you give away one visit in seven, about 14 % of what those visits are worth. A regular gets there in about eight months.
• By amount spent: 1 point per €5 and a Discount (fixed amount) of €25 at 50 points. The customer gets €25 back after spending €250, which is 10 %.

The first reward should come within a few visits, not after two years. If your typical customer comes four times a year, a reward after 20 visits motivates nobody. On the other hand, a reward that is too generous costs you money on visits that would have happened anyway. Start lower; raising a reward later is welcome, cutting it back is not.

Points are added automatically an hour after a completed visit or stay, so you don't stamp cards or keep a spreadsheet. If a completed booking is later cancelled, marked as a no-show or fully refunded, its points are taken back.

The reward can be a Free booking, a Discount (%) or a Discount (fixed amount); for holiday rentals One night free or Whole stay free, where tourist tax is never deducted. Signed-in customers can redeem the reward themselves when booking online, if you turn on that option. At the desk you can redeem it for them with Redeem reward in the Loyalty leaderboard or in the customer detail.

In practice: a customer has 5 points after five haircuts. An hour after the sixth haircut the sixth point is added, and the portal shows she has earned a Free booking. Next time she books online, she signs in with her email and redeems the reward in the form. If she books by phone, you redeem it for her and the points for the reward are deducted.

Visits from before you switch the program on don't count. On the first day, add points by hand in the customer detail for your best regulars, so they don't start from zero next to someone who came for the first time last week. Loyalty is available from the Starter plan, for accommodation from Accommodation Starter.

Tell them where they already deal with you: at the desk, in the confirmation email and on your profile. A program nobody knows about costs you nothing, but it doesn't bring anyone back either.

• Mention it when the customer pays and say how far they are from the reward. "Two more visits and the next one is free" works better than a leaflet.
• Add one line to the info block of the confirmation email in Settings → Email template.
• Write the rule into the business description in Settings → Public profile, so new customers see it before their first booking.

Customers see their points in the customer portal. They sign in with a 6-digit code sent to their email, no password, and also find their bookings, coupons and gift cards there.

Compare the three months before the launch with the three months after, and watch how often the same customers come back. In Analytics (Starter plan and up) the New vs. returning card shows the share of returning customers, and Average value shows whether spend per booking holds.

For a longer view, estimate customer lifetime value: average spend per visit × visits per year × how many years a customer typically stays. A customer spending €40 eight times a year for three years is worth €960. If the program adds one visit a year, that is €40 more per customer per year, against the cost of the rewards.

If your business is seasonal, compare with the same months of the previous year. Otherwise you credit the program with a result that the season produced.

The Loyalty leaderboard shows who collects the most points. Those are the customers to thank in person, and the ones to ask first when you change prices or opening hours.