How to Increase Your Coffee Shop Profits with Loyalty Programs

Coffee Shop Loyalty Programs

Increase Your Profits with Loyalty Programs

Coffee shop loyalty programs are an effective tool used by a growing number of coffee shops to drive sales.

Loyalty programs help maintain your existing customer base and attract new customers, all while increasing the number of sales you need to boost profits. Customer satisfaction is often based on the quality of your coffee, customer service, convenience, and exceeding expectations.

Most importantly, customer satisfaction and repeat business revolve around your ability to deliver high value every time. One way to deliver additional value is by allowing your customers to join your coffee shop loyalty program. Loyalty programs exist in a variety of settings and industries. From online computer games, barbershops to grocery club cards, you’ll find various loyalty programs at work.

Humans are attracted to reward systems. Any reward given for an action we take can solidify our behaviors, routine, and of course, our loyalties.

Whichever loyalty program that you decide to try, you want to hold on to the concept of driving customer behavior. You want to utilize your program to drive sales during certain times or specific products. To drive behavior effectively, you have to make your loyalty program clear, easy-to-follow and execute.

Why You Need a Coffee Shop Loyalty Program

Cultivating Repeat customers

Loyalty programs help to maintain your regular coffee shop customers. A loyalty program implies a continued on-going customer relationship that doesn’t end with the last transaction. This is important to develop trust and build loyalty to your coffee brand and business.

However, big or small, loyalty programs effectively allow you to demonstrate an appreciation for your customers’ business. They show that you are willing to give them a better deal if they return and maintain this relationship with you.

Even if the reward is small, customers can feel deeply motivated by various discounts or eventual free items that often come with a coffee shop loyalty program.

Cultivating repeat customers is a key element in driving sales every month. Along with great customer service and excellent coffee, a loyalty program is another thread that stitches together a growing customer base and ensuring your coffee shop profitability.

More Opportunities to Sell

Your regulars who know and trust your coffee business tend to spend much more over the long run. This is why winning over repeat customers is so vital to your bottom line.

For many retail businesses, including coffee shops, there are often fluctuations of slow and busy periods during the workweek. A loyalty program can serve to promote sales during off-peak times. Additionally, loyalty programs may allow you to upsell certain items that you would like to move.

For example, if you wish to generate more sales among your baked goods, your loyalty program may offer discounts or a free item with every 10^th drink.

Promoting increased customer visits during slow times or pushing slow-moving inventory is an effective way to utilize a loyalty program.

Attract New Repeat Customers

You have the opportunity to turn every new customer into a repeat customer. Delivering outstanding service, delicious coffee, and offering them a simple and clear loyalty program to return are great ways to entice a second or third visit.

Repeat customers are the cornerstone of your coffee shop profitability. Without loyal customers, your coffee shop business will struggle to maintain the customer base you need to sustain itself.

A myriad of factors works to entice repeat customers. Your location, products, friendly service, and delightful experience can be tied together effectively with a reward-based loyalty program.

Collect and Analyze Data

Many POS systems allow you to track your inventory of all the goods sold and money earned. By tracking and analyzing this data, you can determine what items sell better and when.  

The data will also tell you which products you need to promote more strongly or remove altogether from your coffee menu board. After taking a look at the data, you can decide on which products to promote and develop the best tactics in doing so.

For example, you can increase your in-house signage, send out emails of specials, create social media posts, instruct your baristas to promote items verbally and create your loyalty program to reward such sales.

Make the Most Out of Your Slow Hours

Many coffee shops experience slow hours daily and weekly. For example, common slow periods of business can often be around 10 am – 12 pm or 2 pm – 5 pm.

Loyalty programs come in handy if you want to boost your sales during slow times of the day. For example, you can offer a daily 10% discount on seasonal drinks after 2 pm. Perhaps, you’ll want to increase the discount on the slowest days of the week to say, 15%.

To ensure that you are motivating repeat business and not just rewarding random new customers who arrive during your slow times, you will want to promote and market your discounted times. You can give customers a physical punch card detailing the hours, use in-house signage, or using social media to market these special times or happy hours.

Establish a Sales Growth Goal For Your Coffee Shop

Having a sales and profit goal is a good place to start before implementing a loyalty program. Determining what a successful coffee shop loyalty program would be like for your sales numbers can benefit your efforts.

For example, let’s say your goal is to increase sales volume by 25% over the next six months. One of the ways to increase sales is to encourage repeat customer visits. This would be done by advertising or reaching out to your local community at various events. A loyalty program would play an important role in driving repeat business as part of this effort to increase sales by 25%.

Establishing a goal you can measure and a timeline can effectively deliver the sales numbers you want.

How to Create a Winning Coffee Shop Loyalty Program

Tip 1. Choose a type of coffee shop loyalty program that works for you.

Decide on the format and program delivery that is easy, convenient, and effective. There are several types of coffee shop loyalty programs that you can choose from, and you may have to try a few of them to figure out which one works best for you and your coffee business.

Below are examples of some common coffee shop loyalty programs:

Punch card loyalty program

This program is based on the frequency of purchases and is the most common program utilized by coffee businesses. It includes a well-known concept of physical punch cards that are given freely.

In this program, a customer picks up a physical business card at the counter, and they have it stamped or punched for every coffee they buy.

After reaching a certain number of coffee stamps or punches, they are entitled to a free beverage or baked item on one of their future visits.

A punch card allows your customer to hold on to your card, business information, and hours in their wallet or purse. Remember to design the number of stamps needed for the reward clearly.

Prepaid Loyalty Discount Programs

A coffee shop might offer a prepaid discounted card that allows customers to pre-purchase some coffee beverages at a discount.

For example, with this program, a customer might purchase a pre-paid card for, say, ten espressos or ten Americanos at a discounted rate.

This benefits the coffee shop (your business), which will get a larger influx of cash right away. This also benefits the customer, who will enjoy a nice discount for the next 10 purchases made.

An example of this would be: Your Americano costs $3.00 without a punch card. You will sell a punch card with 10 Americanos for $25. This means that one coffee will cost your customer $2.50, saving him $.50 for every purchase.

With punch cards, you can be sure that people who purchased them will return to you sooner or later, possibly spending even more when they arrive.

Note: Make sure you design your cards using your logo and branding, adding your address, working hours, and social media accounts.

Point-based Loyalty Programs

This type of loyalty program is based on the idea of giving a point for a minimum amount spent. For example, a customer gets a point for every $5 spent. If he/she spends $5-9 – he still gets 1 point. If he /she spends $10-14, he/she gets 2 points, and so on. This way, customers will be motivated to spend more to get more points.

Customers can exchange their points once they reach a particular threshold for discounts to pay for their purchases.

For example, a point-based loyalty program may offer something like the following:

10 points – 1 free Americano;

20 points – 1 free Latte;

30 points – 1 free coffee and muffin;

30 points – 2 free coffees of your choice;

40 points – 1 bad of coffee beans;

100 points – a T-shirt with a coffee shop logo.

Cash Back Loyalty Programs

Your customers get 5% credit from every amount spent onto his/her card or loyalty account. Like with the point-based loyalty system, you should allow your patrons to utilize the cash-back money program by applying for their accumulated in-house credit) to be used for his/her next purchase.

If you want to promote business activity during certain times for certain items, you can offer a higher cash-back for these items or drinks to motivate people to buy them at these times.

Daily Discount Promotion Program

As mentioned above, you can offer a discount at certain times during the day. Many bars and coffee shops offer Happy Hours. So, if you want to increase the number of your receipts during slow hours, think about happy hours with attractive deals:

10.00-13.00

Get a pastry for only $1.5 with any coffee

You can also launch a promotion during rush hours if you want to increase the average price of your receipt:

8-10 am
Free syrup flavor with any latte.

5-7 pm
10% off on all sandwiches

Weekly Discount Promotion Program

This program is focused on the idea of having a special deal every day. When you analyze your data and inventory and know what behavior patterns your customers have, you can support them by introducing a weekly discount loyalty program.

You might see that some items sell slowly on certain days so that you can push them on those days. You can boost profits by selling more coffee with just a slight discount or cross-selling menu items.

For example:

Monday:  Large Latte only $3;
Tuesday: Free cookie with any two coffees to go;
Wednesday: 20% off on all pastries;
Thursday: double points for all coffees;
Friday: 5% off on milk alternatives;
Weekend: 10% off for kids’ drinks.

Tip 2. Rewards that matter.

No matter which type of loyalty program you choose to implement in your coffee shop, you need to carefully think about the reward you’ll give your customers for visiting your coffee shop often.

The main idea here is that you can’t allow yourself to spend too much on a reward, and at the same time, it should be adequate and fair enough to entice action.

Rewards can’t be too costly to you (like a big bag of coffee), and they can’t be too cheap (like a small piece of candy). Your customers need to feel that your reward has value.

This means you will need to balance what you can give and what your customers expect to get.

Summing up step one, there can be several types of rewards:

• Discount on coffee or other items (with punch cards or during happy hours)
• Discount per receipt (when your customer can use points or cash-backed money to cover 20% of the next receipt)
• Free drinks (with stamp cards or points).

If you don’t know exactly what type of loyalty program to choose and what rewards to offer, talk to your baristas. They might have made some valuable observations on your customers and their behavior. Additionally, you may want to ask your patrons about what type of rewards they prefer. Finally, you may have several trial periods and see what works for you and your customers.

Tip 3. Market your coffee shop loyalty program.

If you want to maximize your loyalty program's potential benefits, make sure you make an effort to advertise it via all the channels you have.

Your channel number 1 is your baristas. Train them to approach customers in a friendly but insistent manner about your loyalty program. This can be done by highlighting the benefits and potential rewards of the loyalty programs. Having well-trained baristas can boost your sales, be your best marketers, and deliver excellent customer service.

Your second source is your coffee shop menu board. If there’s enough space on your menu board, mention the benefits of your loyalty program. You can draw or add some pictures to it – anything that attracts people’s attention.

Use your social menu accounts and your website to inform current and potential customers about your coffee shop loyalty program. Make your posts engaging, interesting, and lively every single time. Run targeted paid ads if you want to.

Don’t forget about in-store marketing by printing out posters, flyers, and signage, offering a reward for being your loyal customer.

Tip 4. Assess if your loyalty program is successful.

The easiest way to see if your loyalty program really works is by monitoring your coffee shop sales, revenue, and cost numbers. You might experience an increase in sales, but if the discounts are too high or if the rewards are going too deep into your bottom line, your profits will suffer. Your coffee shop loyalty program shouldn’t cost you too much!

If you are planning to open a coffee shop, you should know that all modern cafes and even coffee trailers run with a Point-of-Sale (POS) System that is often the brain of a coffee business. Besides securely processing your transactions, most cafe-friendly POS-systems offer loyalty programs that make it super easy for you to track and analyze your inventory, sales, and loyalty program data.

This analytical data includes:

• Average daily sales
• Discounted sales items
• Comps number
• Time of sales
• The average price to receipt
• What menu items sell the most and the least
• What days are busy or slow

The valuable data provided by your Coffee Shop POS system will help you track your general statistics and have data to create a loyalty program.

You can compare how your profits increase depending on how many new people have signed up for your loyalty program. As a result, if you see that your loyal customers come often and spend more, then your loyalty program is determined to be successful.

Using POS Systems for Coffee Shop Loyalty Programs

In your coffee business's initial stages, it’s ok to have punch cards or stamp cards. As you develop and expand your business, it makes sense to use your POS system's possibilities to maximize the effectiveness of your loyalty programs. For example, according to Square POS, customers enrolled in their loyalty program spend 37% more after signing up for it.

As you would imagine, most coffee shop POS systems offer digital loyalty programs for your coffee shop business for a very affordable price and a free trial period during which you can see if you like the system, interface, functionality, and effectiveness. You are using a POS system anyway, so why not utilize all its digital functions and maximize its potential to grow your coffee sales and profits?

Benefits of using a digital POS system loyalty program:

• No hardware is needed. You already have everything you need for your loyalty program – your POS system is ready to be used just by adding a loyalty function to it.
• Customized loyalty program. No matter what loyalty program you choose – by visits, by-products purchased, or by points earned, you can configure it through your POS system.
• Easy to sign up. Your customers can easily enroll in your loyalty program by providing a phone number or email address.
• Digital punch cards and stamp cards. You don’t need to spend extra money printing out punch cards, stamp cards, stamps, gift cards, etc. Everything is delivered digitally just by entering the customer’s contact info.
• Account status on the screen. After every purchase, your customer will see his or her loyalty account status: the number of points or cash-back for the receipt, total amount already earned, what types of rewards are available, and a possibility to redeem the points or cash-back by touching the screen.
• Order history. After a barista or customer enters a phone number (or email address), a POS system shows the personal profile that the customer doesn’t see. As a result, the profile shows all orders history, loyally level, last visit date. This is valuable information for a barista who can provide better and more personalized customer service based on this info.
• Flexible price. Most POS systems offer affordable loyalty accounts, depending on the number of loyalty accounts. The prices start somewhere from $40 and grow as you reach a certain amount of accounts. 
• Marketing opportunities. With personal customers’ information, you can send out relevant, targeted campaigns for different customer types.

Summing Up Coffee Shop Loyalty Programs

Coffee shop loyalty programs can be an effective way to boost your coffee shop sales and profitability. There are plenty of options and ways to implement a loyalty program that works for you and your coffee shop.

From old-school business punch cards to modern-day POS systems, you can implement effective loyalty programs that increase sales.  We recommend that you start with a specific financial goal and objective and create several financial benchmarks to manage your program. 

Whether you have a coffee shop, mobile coffee truck, or drive-thru coffee stand, we're here to help. Please browse through our coffee business blog for more in-depth articles. 

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