4 Important Things to Consider Before Investing in a Loyalty Program

What to consider when choosing a loyalty program system

Today, 34% of small businesses offer a customer loyalty and rewards program¹ to increase repeat business. What do they know that other businesses don’t? It can cost up to ten times more to acquire a new customer than to keep an existing one.² A return customer will also spend 67% more on purchases than a first time customer will.¹ It pays to get your current customers back in the door using a loyalty rewards program.

Luckily, there are a ton of easy-to-use loyalty programs available. These allow you to gain repeat business with a lot less work. However, choosing from one of the hundreds of systems available can be overwhelming. To help in your decision, consider the following aspects that make up successful customer loyalty program:

1. Does the loyalty program make it as easy as possible to add new members?

When investing in, or using a loyalty program, you want to ensure, most importantly, that your loyalty program makes it as easy as possible to add new members.

A loyalty program can only bring back and reward the members who belong to it. Having as many participating members as possible increases your success rate. When looking for a loyalty program, the simpler the sign up process is, the better.

2. Does the sign up process require a lot of information?

In order for a sign up process to be easy, you should initially only require one to two pieces of information, such as a name and phone number, max. It may be tempting to gather as much information as possible, however, it also creates pressure and a time burden on the customer, or yourself. Look for a system that collects a minimum amount of customer information at first, and allows you gather, and add more information over time.

3. Are you collecting the right information?

When someone signs up for your loyalty program, the easiest information to collect, aside from a name, is typically a phone number or an email address. What is the right information to collect at the point of sign up? At Fivestars, we lean towards using phone number for the following reasons:

  • A phone number doesn’t require a new member to download an app. However, the two together can be even more powerful.
  • A phone number is easier for yourself or your new member to look up or type in when signing up and/or redeeming rewards. It also prevents spelling mistakes (as opposed to a lengthy email address).
  • Participants may have multiple email addresses, including addresses they never check (and are likely to give you). Most people only have one phone number, typically a mobile phone, and a mobile phone they check often. If your loyalty program provides sms (text message) marketing capabilities, this increases the chance that your messages will be seen more often, especially considering that 98% of text messages are read.⁵ It can be hard to compete with other emails in an inbox if it’s your only form of communication.
  • Customers remember their phone numbers quickly and easily

If you have a name, a phone number, and an email address, you’re even better off. Try collecting at least two of the three initially.

4. Is the physical act of signing up for a loyalty program the best option for your business or customers?

There are an array of ways for members to physically sign up for a loyalty program such as: downloading a mobile app, typing in an email address or phone number into a touchscreen tablet, filling out a paper form, or verbally giving info to the cashier. Which one is most effective? Again, it depends on the ease of use for yourself and your potential members.

Below, we discuss five sign up options most loyalty programs provide. As we iterated above, the ability to add as many members to your loyalty program as possible will increase your chance of seeing more repeat business. To ensure this, you need to give customers at least 2-3 different, and easy options to sign up. Here we weigh in on the pros and cons of each option:

Option 1: Customer signs up on a mobile phone via mobile app

A loyalty program that purely relies on mobile app (only) is appealing because it’s cost effective, and customers handle everything on their own mobile device. However, signing up via mobile app can come with some considerable hoops to jump through.

If a customer is at check out and they’re willing to sign up for your loyalty program, here’s what the mobile app-only sign up process is like: Customer is required to pull out a smartphone, search for your app on Google Play or the App Store, wait for the app to download (1-3 minutes), open the app, fill in email and password to create a rewards account. That’s a lot to ask of someone who’s ready to leave and it’s enough for someone to say “No thanks, I’ll pass.”

You also want to keep in mind, that for every customer who downloads a mobile app, roughly only 30% of those customers open that app more than once a month.³ Though it may seem like everyone and their dog has a smartphone, only 64% of American adults own one.⁴ This means a considerable amount of people won’t be able to join your rewards program if the only way to sign up is through a mobile app.

Loyalty mobile apps have a lot of versatility when it comes to marketing features, but it can’t pack the customer sign up punch on it’s own unfortunately. If you’re leaning towards a rewards program that has a mobile app, make sure there are additional ways for customers to join it.

Option 2: Customer signs up on a touchscreen tablet or device while checking out

The obvious pro of this option is that any and every customer checking out at your cash register will be able to sign up to your rewards program.

If your loyalty program offers this kind of customer sign up, make sure the touchscreen’s user interface (the words, images, and/or buttons on the screen) is simple and doesn’t distract from the main point of the device: to get your customer to fill out one or two fields only to sign up for your loyalty program.

Something to keep in mind: even though customers can sign themselves up, don’t rely solely on the device to convince customers to join your loyalty program. Getting your employees to ask every customer to join your rewards program is crucial to an ongoing and steady amount of customer sign ups. Based on our own field testing, we found that asking either ‘What’s your phone number?’ and ‘Do you have any rewards to redeem?’ boosts sign ups since it “assumes the close” (it’s a selling tactic) and peaks customer intrigue enough to ask the employee what rewards they can receive.

Option 3: Customer signs up on a customer facing touchscreen device located away from point-of-sale

As mentioned above, a customer facing touchscreen tablet is ideal. However, some programs install the device somewhere else within the establishment, away from the cash register. This makes it much more difficult to sign people up.

Imagine this nightmare: you’re paying a lot of money for groceries and realize you could be earning points and getting discounts on that purchase by signing up for the grocer’s rewards card. You ask to sign up and the employee tells you have to leave your items at the cash register, walk 6 feet away to the designated rewards sign up iPad, and fill out your information there to join. You hesitantly walk away from your items to the iPad where it requires your full name, email, phone number, and mailing address, and then asks you to answer some other questions. Once you’re finished, you head back to the cash register, wait for the cashier to finish checking out the customer who took your place in line, then you can finally check out and get your points and discounts. The whole process takes about 4-7 minutes, which is a lifetime if you’ve already walked multiple laps around the store.

Asking a customer to abandon their transaction to go sign up on a separate device, even if it’s just a couple feet away, is time consuming, and the majority of customers will decline to join.

Option 4: Employee signs up customers on your point-of-sale or an employee facing device

As a small business owner, you’re constantly busy. Long lines form easily, and staff can get stressed. When this happens, asking staff to sign up new members may not go over well. However, having your staff involved in the sign up process can dramatically boost the amount of members you acquire. Why? It’s easier for an enthusiastic employee to convince a customer to sign up for your rewards program than a marketing display or shiny device will. If your loyalty program can integrate with your point-of-sale (whether fully integrated with your point-of-sale software or running alongside it as a separate application) it will fit in more naturally with the employee transaction process.

This option can get a massive amount of customers to sign up without the help of other sign up options, but it does require more effort. For this option to work for your business, you need to heavily train your staff. The easiest way to ensure every employee signs up new members, is to ask every customer, every time. That’s how Panera Bread’s staff signed up over 14 million customers.

Option 5: Customer signs up online

It’s a nice thought, but unfortunately people don’t tend to remember to go home and sign up for your rewards program after the fact.

Research and find a vendor with a combination of option 1, 2, and 4
At the end of the day, don’t stress if the loyalty and rewards program you can afford to implement doesn’t have every single option available for customers to sign up. As long as customers are able to sign up quickly and easily with one solid mode of contact like an email or phone number, and your employees help promote signups, you’ll be on the right track.

Fortune 500 companies spend millions of dollars building their own custom rewards marketing systems and even they can’t cover every base. Starbucks and Pinkberry ask for customer phone numbers but still don’t have text message marketing or tailored messages for customers who haven’t visited in long periods of time!

Lastly, to make sure your rewards and loyalty marketing program knocks it out of the park, offer great rewards that incentivize customers to spend more and visit faster, and communicate promotions, announcements, and reward updates regularly with customers in your newly created database. This will both delight your frequent visitors and boost your business’ revenue.

Want more information about our own loyalty and rewards program? Request a 1:1 demo here.


  1. BIA/Kelsey/Manta Small Business Report
  2. Pricing for Profitability: Activity-Based Pricing for Competitive Advantage. By John L. Daly (2002), p. 85
  3. Law of Web/Mobile Physics, Fred Wilson
  4. Pew Research Center
  5. Mobile Squared: Conversational Advertising Report


About the Author

Leave a Comment