Case Study: Boosting Customer Retention With a Card-Based Program

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TpumpsMerchant: Tpumps Tea Shop
Location: San Mateo, California
Platform: FiveStars
Bottom Line: When picking a hyperlocal program, merchants should consider customer preferences, along with how comfortable their employees are using new technology.

When Alex Su opened Tpumps Tea Shop in San Mateo, California, in June 2011, he knew that finding and keeping customers would be important. He tried a mobile-only loyalty program called Chatterfly, and quickly found that half of his customers either weren’t interested in using their smartphones to earn prizes and rewards, or were still using basic mobile phones without Internet capabilities. He also found that helping tea drinkers redeem mobile rewards was slowing down his shop’s cashiers, a serious problem in a fast-paced business environment.

“After two years of experience, I realized probably half of my customers have a smartphone. [The other half] keep their regular phones. There’s no Internet connection, but they want the points,” Su says. “I don’t want to bother to have two different systems.”

In September 2011, Su switched to a universal loyalty program called FiveStars. Customers are encouraged to swipe their free plastic FiveStars cards when they shop at participating merchants, and in exchange they earn points that can be redeemed for rewards at any establishment that’s part of the FiveStars network. Customers also earn points when they connect their cards to Facebook and opt-in to FiveStars’ sharing features. “FiveStars has been the key element for me to generate more repeat customers and gain more loyalty,” Su says.

FiveStars customers earn points based on the size of their purchases. After reach pre-set points thresholds, they’re rewarded with everything from drinks to tea sets to stuffed animals, all furnished by Tpumps Tea Shop. “A lot of customers keep coming back. They enjoy the prizes and they also enjoy the drinks,” Su says.

In the first three weeks after Tpumps launched its FiveStars loyalty program, more than 300 customers signed up, a significant increase from the approximately 20 who signed up in the first few weeks with his previous mobile-only program. Since then, Su has seen visits increase by 35% each month.

It takes considerably less time to manage a card-based digital loyalty program than a mobile program, both for merchants and customers, Su says. Cashiers can set up a new card or add reward points in less than 10 seconds. “That’s a pretty big, significant factor for my customers,” says Su.

Word-of-mouth marketing is critical for small businesses, and using FiveStars has encouraged customers to talk about Tpumps both online and offline. People who’ve enrolled in the FiveStars program earn bonus points when they connect their cards to Facebook and opt-in to FiveStars’ sharing features. They can also earn points for checking-in and unlocking “milestone messages.” “Our business has more than tripled since we began,” Su says.

The Takeaway
Local merchants need to keep their customer base in mind when deciding which hyperlocal loyalty platform to use. After experimenting with a mobile-only loyalty platform, Su was surprised to learn that his customers weren’t as interested in earning rewards through their smartphones as he had previously thought. The FiveStars program provided an alternative, embracing the technology Su’s customers were comfortable using — plastic cards — while still integrating with Facebook as a way to promote social sharing.

The vendor’s representatives worked closely with Su to ensure that setting up the program and bringing new customers onboard was as simple as possible. Although Su keeps track of some data from his loyalty program — like the 35% increase in visits per month — he’s much more likely to measure the program’s success based on the feedback he hears from people when they swipe their FiveStars loyalty cards.

Stephanie Miles is an associate editor at Street Fight.

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Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.