Any retail business, indeed any business, loves loyal customers and will spend a great deal of time and money trying to lure and secure them. Once a customer feels some sense of loyalty they become a huge asset. Loyal customers come back week after week, year after year. They are inexpensive to keep and, as time goes by, bring in a great deal more custom. Often part of our coffee shop sales model has a ‘buy nine coffees, get the tenth one free' card as part of the strategy to encourage some sort of loyalty from customers. It is common among many retailers. This strategy really needs second thought about its value and its cost.

How to lose profits without trying

The ‘buy nine, get the tenth one free card' has been used to encourage customers to return and buy another of the same in many circumstances in various guises. Coffee shops suit this system well because a cup of coffee is a cup of coffee. Easy to identify, easy to give the reward for ‘loyalty'. I say ‘loyalty' in quotes because I think these are several things happening here which are wrong.

Firstly there is the problem of buying loyalty. Is this payback to the business worthwhile? After all, they have already bought nine cups. Surely giving them the tenth free encourages them to get another card and keep the cycle going? Do you think all those consistently crowded coffee shops have a better deal? Do they have ‘buy four coffees, get the fifth free'? Do they give away cake and other extras which are better than yours with their ‘free' coffee? I doubt it. It is hard to base loyalty on giving customers ‘free' product. If another establishment nearby gives more, clients who have been bought would quickly disappear if that was all loyalty relied on. It is expensive to buy customer loyalty.

Giving away profits

If you give away product it should be free or very low cost to you. A Mercedes dealership would not give away every tenth car. In fact when you give away the tenth cup, you are cutting substantially into profits. It is the cream of your sales that goes to profit after fixed costs, wages, service costs … It is your last 10% that is often the profits; the bit you are giving away when you should be keeping it.

Other smaller, yet still significant, weaknesses with this model exist when a staff might get on well with a customer and give an extra stamp here and there, reducing it to 'buy seven coffees, get one free' and so on. A considerable negative impact on profit results from a small act of kindness. Other semi-hidden costs are those involved with administering the system such as tracking how many coffees are given away, staff time making free coffee and cost of printing.

Treasure loyal customers

Let us not get carried away with our plans to give away profits with a ‘buy nine coffees, get the tenth one free' strategy and have a look at better ways to lure customers to our coffee shop and then keep them coming back for more.

Often they do not ask for anything more than good service, consistent quality of product or even just a pleasant environment where they are recognized by name. Customers such as these should be treasured. Sometimes we forget that.

Trained staff generate loyalty among customers

As quickly as possible, train your staff to pay particular attention to service, to personal interaction and to customer satisfaction. Insist on it. Know the name of each customer, engage in conversation that reveals more personal details. These details can be as simple as pet ownership, car model, holiday destination and so on. This type of information is easily and readily shared. How can you start to get it? Again, a little planning will go a long way. Why not a picture of a pet on the counter to stimulate conversation in the more quiet periods? After all, isn't it the quiet periods we want to fill?

Do not get stuck on photos of pets. Find a holiday type photo that shows a particular destination, photo of car and so on. But there are other stimuli that you can put into the mix such as: Calendar of special sporting events; memorabilia; coffee making gadgets and so on. We will look into this in later articles. We will also stimulate thinking on how to bring more customers in at low or no cost.

Know what to do with loyal customers

What should you do with loyal customers? What is a loyal customer? Every person that walks in the door is potentially a loyal customer. Do everything you can to please them and keep them. Add to their number. Be creative about your giveaways. Be careful with your giveaways.