Turning Member Benefits into Club Benefits
Member Benefits are an important way to attract people to join your club, and help to keep them returning and spending. But to ensure your scheme benefits your business as well as your members, you’ll need to pick the right reward options, manage the process efficiently and keep things interesting. If you get it right, and members see benefits as rewards – something of value to strive for – they’ll see themselves as the winners, whilst contributing more to your bottom line.
If you get it right, and members see benefits as rewards – something of value to strive for – they’ll see themselves as the winners, whilst contributing more to your bottom line.
In this article, I’ve outlined some key considerations that I discuss with my clients when they are implementing a Member Benefits scheme.
1. Discounts vs Points
Discounts are well accepted and relatively easy to manage. But don’t forget that discounts can simply walk out of the door – in other words, you give a $5 discount on a meal, the member says ‘Thank you very much’, puts the $5 in his pocket and walks out to spend it elsewhere.
Points are a powerful reward and have the additional advantage that, unlike discounts, they have to be redeemed in your venue. The other great advantage of points is that they can have a higher perceived value in relation to your cost: Think of it this way – if you offer a $5 discount, you sacrifice $5 of revenue, and the member has cash that buys him $5 of value, wherever he spends it. Your cost and the member’s value are equal. But if you give him points to redeem in your venue, which he uses, say, to buy a drink, he still perceives the value as $5, but the cost to you may only be, say $2, i.e. your cost of purchasing the goods.
2. Standard benefits vs Promotions
I always advise clients to not make the standard benefit too generous – this is to leave room to add promotional offers. Promotions keep things fresh, and also give you a good excuse for communication with your members. The more you communicate, the more you are front of mind in their spending decisions.
3. Earn and Burn rates
If you’ve decided that the points rewards approach is the right one for your club, you need to determine your Earn and Burn rates.
The Earn rate is the number of points your members receive for every dollar spent. For example, 1 point per dollar spent as standard, and 2 points per dollar spent for promotions.
The Burn rate is the value of the points when they are redeemed. For example, each point is worth one cent when redeemed in the venue.
The ratio of Earn to Burn will be determined by percentage of revenue that you are willing to contribute to the scheme. So for the example above, the standard ratio is 100:1 or 1% of revenue and for promotions it is 2%)
PS – Make sure that promotions only modify the Earn rate, and keep your Burn rate constant. If some points have a higher redemption value than others, it will confuse your members, and make managing your liability highly complex.
4. Use or Lose
Remember that unused points are a business liability and you will need to report them on your balance sheet. So it’s good practice to be able to keep them under control, with tactics such as:
Use or lose – putting an expiry date on points
Minimum Redemption Value – setting a number of points that have to be earned before they can be redeemed
5. Redemption – make it visible
Ideally your POS system will automatically deduct the points or, even better, prompt the operator to ask the member if they want use points for the transaction. The benefit of operator engagement is that the members clearly understand that they have used points, and see the value.
6. A range of rewards
As well as straight points, think about incorporating other variations into your membership system – such as vouchers, entry into a draw (with the POS system printing the member’s details onto a draw entry docket), and joint promotions with sponsors.
It’s worth a bit of thought and planning to get the right scheme for your club. Once you’ve made the key decisions, you need to implement and manage the scheme. This doesn’t need to be daunting – a good POS system will be able to manage all aspects of your membership scheme, from points and redemptions, to promotions, and managing and reporting liabilities.
7. Shout it from the rooftops
Above all, when you have a great member benefits scheme, let everybody know. It’s a good way to remind members why it is so great to be part of your club, and to encourage non-members to join up and join in.