How to set up your coffee shop's loyalty program
A coffee shop loyalty program is a simple rule that rewards customers who come back. The customer collects stamps or points with every purchase and, on reaching the goal, gets something on the house. In this guide you'll see which format to choose, how many stamps to ask for, what reward you can afford, how to launch it at the counter and which numbers to watch afterward.
Which format suits a coffee shop
There are three common formats, and each one fits a different way of buying.
| Format | How it works | When it fits | What to watch for |
|---|---|---|---|
| Stamps | One stamp per visit or per drink, reward when the card is full | Similar ticket size from visit to visit, like an everyday coffee | It rewards someone ordering an espresso the same as someone ordering a full breakfast |
| Points | Points based on the amount spent, redeemed for products | Very different ticket sizes, like lunches or beans to take home | Harder to explain at the register, and customers don't always know how far they have to go |
| Paid club | A monthly fee in exchange for a fixed perk, like a discount or a daily coffee | A very steady clientele, for example offices around the corner | If a member rarely comes in, they feel they're losing money; if they come in a lot, the cost is on you |
For a neighborhood coffee shop, the stamp card is usually the best place to start. It can be explained in one sentence and the customer can see how far they have to go. It's also the format used in the field studies cited below.
How many stamps to ask for
The number of stamps comes from how often your regulars come back and how long you want them to take to fill the card. If it takes months, they forget about it before the reward.
An example with hypothetical numbers: if your regular comes in three times a week, a 10-stamp card fills up in a little over three weeks. If they come once a week, that same card takes them more than two months, and for that customer a shorter card works better.
Kivetz, Urminsky and Zheng studied the "buy 10 coffees, get 1 free" program at a café on the campus of a US East Coast university, with one stamp per visit. With 949 redeemed cards and close to 10,000 purchases, they found that members bought more often as they got closer to the free coffee: the time between purchases dropped by 20% on average from the first interval to the last (Kivetz, Urminsky and Zheng, Journal of Marketing Research, 2006). Filling a card took them almost 25 days on average.
The hard stretch is the beginning, when the goal looks far away. A reasonable rule of thumb is for your regular customer to fill the card in a few weeks.
What reward you can afford
Calculate the reward by what it costs you to make. That way you know what share of the customer's spending you're giving back.
An example with hypothetical numbers: your coffee sells for USD 3 and costs you USD 1 to make. With 10 stamps, the customer has spent USD 30 and you give away something that costs you USD 1. A slice of cake that you sell for USD 4 and that costs you USD 2 comes out at double, even if the customer values it about the same.
You can also let customers choose between two rewards of similar value. At the café in the study, members could redeem either a coffee or a bakery item of the same value (biscotti, a croissant or a muffin), and 85% of redemptions were coffee. A reward the customer already buys reinforces that same habit, and giving away the large size usually costs you only a little more.
Minimum purchase rules
The rules have to fit on one line of the sign. These settle almost every question at the register:
- One stamp per visit. It stops someone from filling the card with a single order for the whole office.
- Which purchases count. For example, any prepared drink earns a stamp and a bottle of water doesn't.
- The reward doesn't earn a stamp. The free coffee closes out the card and the next one starts with the next purchase.
- Expiration, if there is one. If the card expires, say so when you hand it out and write it on the sign.
How to launch it at the counter
The program is launched at the register, when the customer pays. For the first week:
- Put a sign next to the register with the rule in one sentence and, if the card is digital, the QR code to join.
- Give your staff a set line for every sale, for example: "Want me to add you to our card? It's 10 stamps and you start today with 2 welcome stamps."
- Hand out the card with a head start. With 10 stamps and 2 free, the customer makes 8 purchases, the same as with an 8-stamp card, but starts with the card already in motion.
- Ask for the customer's card or code with every purchase, not only when they remember.
The head start has research behind it. At the same café, 108 customers were randomly given either a 10-stamp card or a 12-stamp card with 2 free stamps; both required 10 purchases. Those with the head-start card finished in under 13 days, versus almost 16 for the other group. Nunes and Drèze saw something similar with 300 customers at a car wash: a 10-stamp card with 2 stamps already credited was completed more often and faster than an 8-stamp card (Nunes and Drèze, Journal of Consumer Research, 2006). According to Knowledge at Wharton, the effect was stronger when the business gave a reason for the gift, which is why it's worth calling them "welcome stamps."
With a digital card like Club Card, the customer scans the shop's QR code, signs up and the card is saved in Google Wallet or Apple Wallet; the barista adds the stamp by scanning the customer's code with the shop's phone (see plans). The guide to Google Wallet and Apple Wallet for business explains how those passes work.
How to measure whether it works
With paper cards there's almost no data: you only see the ones that come back full. A digital card records every stamp with its date, which lets you track three numbers every month:
- Returning customers. How many members made two or more visits in the month, compared with the month before.
- Time to fill the card. If it takes much longer than you calculated, the card is too long.
- Rewards redeemed. How many started cards end in a redemption. If almost none get there, rethink the number of stamps or the reward.
Also look at what happens after a redemption. At the café in the study, the 110 members who filled one card and started another bought more slowly during the first visits on the second card, then sped up again. Those who sped up the most toward the first reward were more likely to earn the second. Those first visits on a new card are the ones that need the most care; there are ideas for that stage in how to get your customers to come back.
Frequently asked questions
How many stamps should a coffee card have?
It depends on how often your regulars come in: pick a number that lets them fill it in a few weeks. The café in the study cited above asked for 10 coffees.
Is it worth giving free stamps at the start?
Yes, and the studies cited above back it up. Keep the number of real purchases the same (for example, a 10-stamp card with 2 free) and give a reason for the gift.
Can I give stamps in exchange for a Google review?
No. The Google Maps content policy prohibits offering incentives, such as discounts or free items, in exchange for posting reviews. You can ask for reviews, just without a reward.
Paper stamps or on the phone?
Paper is cheap to start with, but cards get lost and you can't measure anything. The costs of each option are compared in digital stamp card: how it works and what it costs.
Sources
- The Goal-Gradient Hypothesis Resurrected, Kivetz, Urminsky and Zheng, Journal of Marketing Research
- The Endowed Progress Effect: How Artificial Advancement Increases Effort, Nunes and Drèze, Journal of Consumer Research
- The Lowdown on Customer Loyalty Programs, Knowledge at Wharton
- Prohibited and restricted content (Spanish version), Google Maps Help
Want a club for your business?
A stamp card in Google and Apple Wallet with your brand, a dashboard and a CRM for USD 30 a month.