What a loyalty programme really brings in

You have surely read it somewhere: “5% more loyal customers, and your profits climb by 25 to 95%”. The source most often quoted is a note by Fred Reichheld published by Bain & Company in October 2001. Open it and you read this: in financial services, a 5% increase in customer retention produces an increase of more than 25% in profit. Financial services, in 2001. The example from that sector cited in the document is Vanguard, an American fund manager. The top of the range, for its part, does not appear in that document.

The figure is not wrong. It simply is not about you. A saver leaves their money with a fund manager for years without thinking about it. Your customer, on the other hand, chooses afresh every morning between your shop window and the one across the street. Your margins, your visit frequency, your basket have nothing in common with those of a savings contract.

So you will find no promise of results in the rest of this article. Just a calculation you can do in ten minutes, on the back of a receipt, with numbers you already know.

A loyalty card brings nobody new into your business. That is the job of your shop sign, word of mouth and location. What a card can change is the rhythm of those who already know you: the customer who came twice a week comes three times, the one who hesitated between you and the competitor chooses your door because they have seven stamps out of ten.

The unit of measurement of a loyalty programme is therefore the extra visit. Not the “loyal customer”, which means nothing and cannot be counted. And a visit is not worth its basket: it is worth the margin you keep on that basket. A €6 receipt of which €2.10 goes on raw materials leaves you €3.90. That is the number that counts.

The question then becomes very simple, and above all verifiable: what is a visit worth at my place, and how many extra visits can this programme trigger in a month?

You need four. The first three are in your till. Your average basket: the revenue of a normal week divided by the number of receipts. Your margin on that basket: what is left once the goods are paid for. Your number of customers signed up to the programme, or the number you are aiming for in the first three months.

The fourth is the only one you estimate: the share of those sign-ups who will make one more visit per month thanks to the card. Be deliberately pessimistic. Start at one customer in ten. If the calculation already holds at that level, it will hold afterwards. If it only holds by assuming that half your customers change their habits, it is not a calculation, it is a hope.

The formula fits on one line: the number of sign-ups, multiplied by the share who come back one extra time, multiplied by the margin on a visit. An example, and these are example numbers, not trade averages: 200 sign-ups, one in ten coming back one extra time, i.e. 20 visits, at €3.90 margin, make €78 per month. Replace them with yours: with a €25 basket, the same reasoning gives a completely different result.

This is the item shop owners overestimate the most. A free coffee at €2.50 does not cost you €2.50. It costs you the beans, the milk and the cup. There is indeed one case where you lose the whole margin: when the customer would have come back anyway. For the one who comes back because of the card, you only pay the cost price of a product you would not have sold.

Count the volume, not the anecdote. On a ten-visit card, a weekly regular claims their reward every ten weeks. If 40 of your sign-ups come in once a week, that makes about four rewards a week, so seventeen in the month. At 60 cents cost price each, the reward weighs around ten euros a month. But these seventeen rewards do not all go to customers who made an extra visit: for those who would have come anyway, it is the whole margin on the free product that goes, €1.90 on a €2.50 coffee instead of 60 cents. Count them at worst, whole margin for everyone, and the €78 from the previous example drops to about forty euros. If the calculation still holds there, it will hold for good.

The common-sense rule that follows: if the cost of the rewards exceeds the margin from the extra visits, your threshold is too low or your gift too generous. You raise the threshold by one or two visits, or you change the reward, and you redo the calculation. That is also why a free product is better than a discount in euros: it costs you less and gives more pleasure.

On a free plan, there is no subscription to pay back. Digikart Free costs €0, with no bank card and no customer limit: your only expenses are the rewards and the few seconds of scanning at checkout. The threshold to clear therefore comes down to the cost of the rewards you hand out.

For a paid plan, turn the calculation around rather than asking yourself whether “it works”. Divide the subscription by your margin per visit, before rewards: you get the floor, the number of visits below which the subscription is certainly not profitable. With a €3.90 margin, the Plus plan at €17 per month pays for itself with five extra visits in the month, the Pro plan with ten at its launch price of €39, valid until 31 December 2026, and with thirteen at its normal price of €49. Over the year, €170 for Plus and €390 in the first year for Pro give the same orders of magnitude.

Put this way, the question becomes concrete: can notifications, a flash deal on a quiet Tuesday and a win-back to customers who disappeared six weeks ago bring me ten visits in a month? You know your customers, you can answer. And if you are not sure, that is what the trials are for: three days on the Plus plan, fourteen days on the Pro plan, with no commitment.

A card that is already started gets completed more often than a blank one. This is not a shopkeeper's hunch: Joseph Nunes and Xavier Drèze measured it in the Journal of Consumer Research in March 2006. Turning an eight-visit card into a ten-visit card with two visits given in advance increases the likelihood that the customer sees it through, and shortens the time they take to do so. Yet the effort required is identical. The Plus plan's welcome bonus is there to set up exactly this mechanism: you raise your threshold by two visits and you give those two visits at sign-up.

The second lever is an achievable threshold. A regular must reach their reward within one to two months, otherwise they forget the card before the end. When the cycle is long, intermediate tiers fill the gap: up to three tiers in the same cycle on the Plus plan, with the customer choosing which tier to stop at, so they always have something close ahead of them.

The third lever is the one that adds the most to the calculation, because it goes after visits that would not have happened: the win-back of inactive customers, the flash deal at a quiet hour, the birthday reward. On the Pro plan, these notifications are unlimited and with no billed SMS, so they add nothing on the expense side. They only act on the number of visits.

It will not tell you why a customer came back. Nobody can untangle the loyalty card, the weather, the competitor's price and the craving for a pain aux raisins. Your calculation gives an order of magnitude and a decision threshold, not proof. Be wary of anyone who promises you a percentage of extra revenue: they know neither your margin nor your customers.

Nor will it tell you what share of your rewards goes to customers who would have come back without anything. That share exists, it is normal, and that is why the cautious calculation counts all rewards at the whole margin: you cannot know which ones were deserved. What you look at in the end is the balance, not the perfection of the targeting.

To settle it for good, note three figures after two months: the number of sign-ups, the share of sign-ups who have come back at least once since signing up, and the number of rewards claimed. The dashboard shows the number of sign-ups and the rewards; the share of customers who came back at least a second time is the retention rate on the Analytics page, on the Pro plan, with CSV export to compare them from one month to the next. If the second visit does not take off, the problem almost always comes from the threshold or from the sentence said at the counter, rarely from the tool.

That leaves the decision, and it is yours. Redo this calculation with your four numbers. If it gives a derisory result, launch nothing, you will have saved time. If it stands up even with cautious assumptions, start with the free plan: you will replace your estimates with your real figures without spending anything.