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Open your wallet. Chances are, you’ve got a few loyalty cards in there. Some of those cards are probably low-tech punch cards—for example, you might have one from a local café to buy 10 drinks and get the 11th free. Today, loyalty programs have gone digital and are distributed by practically any company that retails anything—grocers, office supply stores, pet supply stores, and even spas.
Why are so many businesses launching loyalty programs? Because they work! A recent survey from Colloquy revealed that the average American household participates in over 21 retailer loyalty programs. Major brands have invested in creating loyalty programs, and consumers are taking advantage of them.
Creating a Spa Loyalty Program
A spa loyalty program can help you improve your guest retention and save you marketing dollars. If you’ve already done the hard work of attracting a new client and they’ve come in for a service or made a retail purchase, why not incent them to come back? Even if you offer discounts or freebies as part of your loyalty program, this is still more cost effective than paying to attract a new client to replace one who leaves.
Why Loyalty Programs Work
Multiple studies have shown that clients who participate in loyalty programs are more engaged with the business. They tend to:
- Spend more money than new clients.
- Provide more referrals.
- Visit your spa more frequently.
In addition, these regular clients typically need less care and hand-holding when they visit because they already know “how things work” at your spa. This frees up your staff to focus on educating new clients and providing great customer service across the board—another driver of loyalty.
How to Structure Your Loyalty Program
Loyalty programs work similar to frequent flyer mile programs. Clients accumulate points based on the number of dollars they spend with your business. For spas, it’s typical for loyalty points to have more zeros than in the dollars spent; for instance, spending $100 may yield 1000 points. Loyalty program software makes it easy for you to specify the number of points you want to assign per dollar spent. Having clients opt in to the program will ensure that you don’t waste energy tracking and administering enrolled clients who have no intention of continuing to do business with you.
However, just giving your clients points for purchases does not constitute a loyalty program. A comprehensive program will employ a segmentation strategy that separates clients into tiers by level of engagement. This allows you to put more money and energy into segments that deliver higher profits. Similar to the airlines model, different loyalty program tiers carry different rewards and perks; clients with lower levels of engagement don’t receive rewards or promotions that are as valuable as those who are at the higher levels.
Loyalty programs should also be designed to drive particular behaviors, with varying levels of incentive or reward for these actions. For instance, you could offer double points for the first service of the day, for treatments enjoyed on Tuesdays or other slower days, or for a particular service, technician or retail product or brand. You may even want to combine activities, such as offering extra points for having an Anti-Aging Facial with Grace on a weekday before noon.
Loyalty Point Redemptions
Once you’ve created your spa loyalty program, you’ll need to have a plan for how participants can redeem their earned points. Letting them use those points to pay for a service is an obvious option, but make sure you have the formulas set correctly.
Let’s say you have a client who enjoys an $85 massage once a month and earns 8500 points for that visit. You would want to make sure that redeeming those points doesn’t cost the business more than 5-10% of the total amount spent, similar to your marketing budget. For this example, this client would receive a free massage and use up all of her points after 14 visits, which would put the cost to you at 7%:
$85 x 14 visits = $1190 x 7% = $83, therefore client needs 120,000 points to receive a free massage
Benefits of Having a Loyalty Program
One of the key benefits of having a loyalty program for your spa is that it’s unique to your business; clients can’t redeem the points they earn in your program at any other spas, which encourages them to keep coming back to you for services and retail items.
Assessing Your Program
Loyalty programs can be very effective at retaining clients and consolidating purchases, but don’t assume that just having one means it is working. You’ll need to evaluate your program’s results on a quarterly basis to determine how to optimize your rewards and point structure. The goal is to find the sweet spot between providing compelling perks and driving repeat visits from clients.
Looking for even more ways to keep clients coming back to your spa? Read our Customer Retention guide.
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