Posted on January 28, 2015
Loyalty programs are used by many different types of businesses to increase the frequency an existing customer makes a purchase. I’m sure you have a few loyalty cards in your wallet right now – from your grocery store, coffee shop, favorite clothing store, or even from an airline. In this blog post, I want to discuss why loyalty cards work, how you can set up a loyalty program for your clinic to maximize the sales from your existing customers, and one secret for increasing customer loyalty by over 80%.
Loyalty programs work because it gives the customer a goal to work towards and in the context of healthcare, an incentive to book more appointments. As the customer gets closer to the goal, they can feel a sense of excitement from “winning” your incentive and become even more likely to continue to book more appointments on a more regular basis. Additionally, clients can experience what is called the “sunk cost fallacy”. In a nutshell, this means that once the customer has accumulated points towards reaching the goal they feel an obligation to reach it because they have already invested their time and money into gaining their initial points in your loyalty program.
A loyalty program reflects well on your business because it’s an easy way to recognize your best customers and show them your appreciation. But it’s also an easy way to identify which customers can be your best ambassadors. Once a client has booked enough appointments to earn the loyalty program incentive, they are clearly satisfied with the service they’ve been receiving (because they keep coming back), are feeling happy and excited because they are receiving the loyalty incentive, and therefore are perfect candidates to ask for a referral and spread the word about your business.
While you can get quite creative with your loyalty program, there are two formats I’d like to present to you. The first follows a familiar pattern – buy 10 and get 1 free. Quite simply, once the customer has booked 10 appointments they get their next appointment for free. Once they have reached the goal, they can start over to work towards another free appointment.
The second is more of a VIP program. It would follow a similar pattern in that they have to book 10 appointments, but this time the incentive is not a free appointment, but rather VIP status. With this format, once the client has reached their 10th appointment, you exchange their loyalty card for a VIP card. This card would entitle them to 10% off all products and services.
(If your area does not allow discounted/free services, your loyalty incentive can be strictly for products).
Now, here is the secret to a killer loyalty program….
When the client is paying for their first appointment, take out one of your loyalty cards, explain the loyalty program to them, and give the card 1 punch (or stamp or signature). Then let them know that because they are a new customer you are going to give them a head start and give them a second punch as a free bonus. That’s it.
Now, let me explain what’s happening here. It’s a psychological effect called “artificial advancement”. This simply means that people are more likely to finish a task if they are closer to reaching the goal. By giving them an extra punch, they are 10% closer to the goal and according to research done by Joseph Nunes and Xavier Dreze (of the University of Southern California’s Marshall School of Business), 82% more likely to reach the goal of booking 10 appointments.
The end result for you is a base of customers that book more often and likely send more referrals - a real win-win.
There’s one catch: the client has to be given a reason for the extra free punch and that’s why we framed it as a new customer bonus.
Starting your loyalty program is as simple as designing and printing 100 business cards. One side is your branding and the other side is 10 circles for you to punch and an explanation of the reward. If you don’t have a loyalty program, it’s something that deserves some serious consideration.