Dispensary CRM sms marketing analytics spend-based vs. visit-based

Why The Best Loyalty Programs Use a Spend-Based Model

January 7, 2019 | Jack Ellenbogen

A loyalty rewards program is one one of the best ways to encourage repeat customers to spend more at retail businesses. This is because a loyal customer spends 67% more than a new one. And acquiring new customers costs a business 5-25 times more than keeping existing ones.

The numbers clearly indicate that every retail cannabis business should create a loyalty program by keeping your customers happy. Satisfied members are likely to promote your rewards program through word-of-mouth advertising and social media. and can be are just as important as other marketing strategies.

Like traditional loyalty programs, dispensary loyalty programs are generally structured in one of two ways.

Spend-Based vs. Visit-Based

  • A visits-based model rewards points each time a customer patronizes the business. Or a specific reward after a visits milestone
  • A spend-based model rewards a point value for each dollar spent, which can be redeemed for cannabis rewards

Rewarding for visits is the traditional structure for customer loyalty programs in retail. This is because a visits-based model is essentially the same centuries-old punch-card system that seems to have been working at both big and small business alike. But adapting this system for a dispensary loyalty program can be toxic to ROI and the bottom line of a cannabis business.

 

Points based model

 

This is because a customer’s purchase habits at traditional retail stores, especially small businesses, are not likely to change drastically over time. The average purchase amount generally remains the same over time. At a coffee shop, for example, People tend to pick their preferred drink and stick with it only switching it up occasionally.

Marijuana dispensaries, however, will have a much wider range of customer behavior than traditional retailers especially small businesses. Dispensaries may have one type of customer who buys one pre-roll a day and another who buys an ounce a week.

A visits-based model rewards both big and small spenders equally for each visit. Where a spend-based model rewards VIPs proportionately rewarding the big spenders.

If the whole point of a loyalty program is increasing the satisfaction of your biggest spenders and encouraging them to come more often, you should be rewarding them at a higher rate than the average customer.

This is not to say you should focus only on your VIP members only. In order to give all of your customers an opportunity to participate in your dispensary loyalty program springbig allows you to create a tiered structure. This rewards everyone, even low spenders for their business but still gives incentives to encourage people to reach for the highest tier.

Personalized Communications

No matter how good the structure of your rewards model is, it is only as effective as the digital communications platform provided by your dispensary loyalty software used to connect you and your customers.

Most retailers solve this problem by adding a digital communications platform because 69% of customers feel disconnected if they cannot access rewards points on a smartphone. The best way to do this, especially for a small business, is with text messaging marketing software. Some think a dedicated smartphone app is a better choice, but push notifications are actually inferior to text messages because they usually ignored at a much higher rate while SMS messages are opened 99% of the time!

Springbig’s text message marketing platform is nothing like an impersonal text-blasting engine. Our open API allows our dispensary loyalty software to seamlessly integrate with all major cannabis POS systems.

Full POS integration instantly provide dispensary managers and marketers all relevant customer data from all purchases and not just reward redemptions. And the real-time analytics available in springbig’s platform gives you all the tools you need to target customers based on interests and send personalized campaigns.

Promotions are sent directly to a customer’s phone. Each message contains a unique link which takes them to a web-based app where their account can be accessed and used. No sign-up, no download, no forgotten passwords, no hassle. All you need is a phone number, which is then permanently tied to that customer’s unique POS ID.

Spend-Based Models Increase Brand Loyalty

In today's cannabis marketplace new branded products and consumer packaged products and services are released daily. But the only a handful of brands in the cannabis industry are mature enough to have established a large base of loyal customers.

This is why it is important that your dispensary loyalty software is transactionally integrated with your POS system. So that you can see which new brands are generating loyalty using real-time analytics and adjust your promotions accordingly.

Customers who find a brand that they like at your specific location will visit frequently. But once they’ve established your location as their go-to place to get that brand, what’s encouraging them to buy more of that brand’s product with each visit?

If you only reward points for a visit, nothing!

With a spend-based model, you could create promotions offering more points the more you spend on the said product. Customers would not only visit in order to find their favorite brand but also try to spend as much possible on that visit. Because they are being rewarded for each dollar they spend, not just for just showing up.