Loyalty Rewards Programs: Build Loyalty, Control Cash Flow and Add Value
Posted Nov 16, 2011, Published 2011-11-01
A loyalty rewards program that offers rewards points usable for travel or merchandise, cash back or account credit acknowledges your top clients for their valuable business. In contrast to a price discount that can devalue your product and reputation, a rewards program supports clients' profitable behaviors, nurtures an ongoing relationship and helps them connect your brand with something positive and tangible.
Travel rewards programs, for example, allow dentists to associate your lab with a memorable vacation. Bob Savage, Vice President and CFO of Drake Precision Dental Labs in Charlotte, NC, uses the lab's Travelflo rewards program(see below) as "another communication touchpoint with our customer. We can ask them, 'How was your vacation?' and have a conversation that helps build that relationship and goes right to the point of loyalty," he says.
Treasure Dental Lab in Idaho Falls, ID, has been offering its clients a cash-back rewards program for about 10 years. The program works on a sliding scale: the more clients spend in a given month, the higher percentage they earn, up to 5%, and the cash-back check is issued at the end of the year before the holidays. "Since the percentage is based on volume, a dentist debating between sending a certain case to our lab or another might choose us to increase their earnings," says Sheri Hamberlin, Co-Owner. "Our larger accounts who regularly earn the full 5% and get a check for thousands of dollars say the cash back is definitely a motivator to working with us."
An alternative to cash back is an account credit rewards program that typically offers a 2-3% credit of the total amount a client spends in a given month or quarter. Co-Owner Marc Daichman, Asteto-Dent Labs in Maplewood, NJ, prefers this type of program because of the built-in opportunity for recurring work. "Our account credit program rewards clients and encourages their repeat business because it's not a reward they can earn and take with them," says Daichman. "If dentists want to take advantage of their reward, they need to continue their business with us."
A constant, predictable cash flow is an added bonus of a loyalty program. Since eligibility for earning rewards is dependent on the client paying by a specific date -- usually the 10th or 15th of the month -- it becomes an incentive for them to pay on time. Since Bill Thomas, Founder and CEO of Smile Science, in Cleveland, GA, instituted his TravelFlo rewards program two years ago, invoice balances paid by the 10th have nearly doubled, from about $25,000 to close to $50,000 per month. "Our loyalty program has helped us stay busy and regulate cash flow throughout the recession without needing serious collections efforts," says Thomas.
Typically, eligibility also requires a minimum monthly spending threshold. To maximize participation, some laboratories choose a low spending figure such as $100 to $250 per month so it's easy for their clients to take advantage of the program. Using a different strategy, Thomas sets his minimum spending higher --currently at $3,000 per month -- to encourage his dentists to send not only their high-end cases, but also the "bread-and-butter work" like posterior restorations they might otherwise send to a less expensive lab. Since implementing its rewards programs, Smile Science has seen a marked increase in work from accounts that were flat in the past, presumably because they're aiming to hit the $3,000 monthly threshold.
It's key for a lab to build this value-added service into its price structure, and consider a rewards program as a long-term budget investment. "Make sure that what you're offering initially you can afford to do over the long term," advises Hamberlin, "because if you ever try to do something less, it will be viewed as a price increase." In anticipation of the year-end payout, she puts the rewards dollars into a money market account each month so the funds are growing interest throughout the year.
TravelFlo Rewards Program: How it Works
"A rewards program is the best way to retain your 'A' players," says John Donnelly, Co-Founder and Managing Director of TravelFlo Group, which offers a loyalty rewards program for laboratories. "If your dentists are on the fence about switching labs, this can make the difference and help you keep your best customers." The company acts as a behind-the-scenes administrator for its 175 laboratory customers, managing a communications campaign on behalf of each lab. TravelFlo generates a monthly rewards statement for each qualifying dentist, branded with the lab's logo and information, and sends regular updates to dentist-clients about redemption opportunities. When a dentist redeems his points, TravelFlo notifies the lab so it can follow up with the client if desired. The lab's time commitment is minimal. After initially setting the parameters for the program, such as minimum spending, percentage of earnings and payment due date or type, labs typically spend an hour each month preparing a breakdown of eligible clients and amounts spent for TravelFlo. TravelFlo's fee for the service is calculated as a percentage of the monthly totals each lab sends in, but labs only pay for rewards that are redeemed, making the overall cost of the program lower than similar programs that require up-front payments for all earned rewards. For more information, contact:
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